Rule Breaker Portfolio
Ring out Holiday Shopping, Ring in 2000
Plus, Celera's software and Foolmania

By By Jeff Fischer (TMF Jeff)

NAPERVILLE, IL (Dec. 23, 1999) -- Not too surprisingly, leading e-commerce stocks rose as we approached the holiday season, and then began to deflate as the year-end shopping bonanza came and went. (It already went?) Yup. Today, America Online (NYSE: AOL) already announced the launch of a post-holiday sale. Why? Because it is essentially too late to order a product online that must be shipped and still receive it by December 24. Online, your best bet now is an electronic gift certificate.

So, what's done is done; and the online commerce winners this season were... ?

Well, established e-commerce leaders continued to deliver the most goods. No newcomers rose into the imagination of the buying public on a scale the likes of Amazon.com (Nasdaq: AMZN) -- instead, Amazon was on the tip of almost everyone's finger as they shopped. Amazon wasn't alone, however. "Yahoo! (NYSE: YHOO) Shopping" received many favorable reviews (I used it for large ticket items and found it excellent), and eBay (Nasdaq: EBAY), well, eBay had, in my opinion, an "OK" season from the looks of it, but not a blowout.

eBay's site peaked at about 3.7 million items for sale a few weeks ago, then it began a slow descent because sellers placed fewer items for sale as time before the holidays ran out. Recently, eBay offered a free listing day, but the number of new items placed for sale didn't soar as they did last summer on a free day. eBay clears about 300,000 to 400,000 items daily, so at least that many new items must be added daily for the site to keep its item count steady. eBay generated enough sellers to keep its item count above 3 million all month, which was great -- until it recently dipped to 2.8 million. Can we expect another surge in January as new computer owners pile online?

Y2K Investments?
All eyes are turning to Y2K now, but not this column. Let's look further ahead. Looking beyond January 1, the year 2000 promises to be even more volatile for stocks than this year. This isn't a prediction based on the stars, moon, or stock charts. It's a prediction based on past results and the growing demographics of an investing nation. The speed at which information (and mere ideas) is now shared is helping cause stocks to zig and zag more quickly, and more profoundly, than in the past. Focusing on volatility alone offers an investor little benefit, however. Instead, we want to focus on finding stocks where most of the volatility will be upward volatility.

For 2000 and beyond, we think upward volatility will favor promising biotech leaders. As David touched on yesterday information technology is merging with the bio sciences to make the biotech industry what it has always promised to be: revolutionary, powerful, mind-blowing. Celera (NYSE: CRA) itself is as much a technology company as it is a science entity. Case in point: today Celera purchased a software tool, called Panther, from a company called Molecular Applications Group (MAG).

Panther is designed to complete a rapid and accurate determination of gene and protein functions, but Celera didn't obtain the software alone. As part of the agreement, a key group of the bioinformatics experts who developed Panther technology will transfer to Celera. This makes the acquisition complete. It is not just about acquiring technology. In this industry, perhaps more than any other, intellectual capital is equally essential.

From the press release:

"As Celera continues sequencing the human genome, an important next step is the understanding of both gene and protein function. The sophisticated Panther algorithms developed by MAG scientists allow Celera's subscribers access to crucial information derived from the genomic sequencing data.

"This should ensure that medically significant gene targets are chosen, potentially reducing the time and cost of drug development. Using evolutionary analysis across species, Panther technology provides a very accurate classification of protein function."

Celera's stock rose 30% on today's news, which is good for the BreakerPort, but there's no great reward in it for you or me if we don't own the stock. There shouldn't be a rush, however. If the company is to succeed, it will succeed long term. If you're thinking of owning a piece of the company, frequent Celera's message board as part of your research. One recent post to read is ElricSeven's summary of his tour of the company's facilities. Read about the Celera tour here.

Whether your plans include Celera or not, as a Rule Breaker investor planning for future investments, I would consider focusing on three key areas for new ideas. We can call them the "Three Big Bs":

1) bio sciences
2) business-to-business e-commerce
3) broadband equipment

In my opinion, leading companies in these three areas promise to have very strong five-year periods of growth (five years being a minimum length for a long-termer). In the Fool's review of 1999, we touch on these industries and offer some investing prospects.

We'll talk about these industries in the weeks ahead. One thing to keep in mind: when you consider biotech companies, don't forget the pharmaceutical giants that stand to benefit tremendously. If your tolerance for risk is low, consider buying a company like Pfizer (NYSE: PFE) to capitalize on a coming biotech revolution.

Consider Giving
Many Rule Breaker investors have achieved tremendous returns on investments the past years. Please consider giving something back to the society from which you've benefited. The Fool, which promotes charity every year, is making it very easy to give online to Foolish, efficient and effective charitable organizations. Please consider giving, if you can and haven't. As a bonus, when you give this week, every dollar that you give is matched by one of two generous Fools. So, whatever you give, it doubles immediately. To easily give online, please follow this link.

Play Foolmania!
When's the last time you played a stock market game in which you could kidnap a garbage man named Melvin?

We've just finished producing our first ever card game, and we're giving away copies to the first 300 Fools who sign up! The game is called Foolmania, and it's a simple, sassy, strategic game centered on building a Foolishly diversified investment portfolio. It can be played by 2-4 players and is a great way to spend time with the spouse, family, best friends, neighbors, or inmates of your choice.

The only catch is that this is a limited-edition trial run of the game, and we'd like to solicit your feedback so that we can revise and tweak the game before it hits the stores. For more information on the game and how to get your free copy, go to http://games.fool.com.

Have a great, healthy holiday!

Something we do care about: The Motley Fool's 1999 Charity Drive. Have you donated yet?






Rule Breaker Portfolio

12/23/99 Closing Numbers
Ticker Company Dly Pr Chg Price
AMGNAMGEN INC1/4$54.19
AMZNAMAZON.COM-7 11/16$90.00
AOLAMERICA ONLINE-1 1/8$81.63
ATHMAT HOME CORP CL A-1 11/16$44.00
CATCATERPILLAR INC7/16$44.81
CHVCHEVRON CORP11/16$86.44
CRAPE CORP - CELERA GENOMICS GRP32 7/8$144.00
DDDU PONT (EI) DE NEMOURS1$64.38
EBAYEBAY INC-7 3/16$142.31
GTGOODYEAR TIRE & RUBBER CO-1/16$27.13
SBUXSTARBUCKS CORP-1/4$25.25

  Day Week Month Year
To Date
Since
8/5/94
Annualized
Rule Breaker -.63% 1.57% 11.70% 72.58% 1,635.49% 69.88%
S&P 500 1.56% 2.62% 4.99% 18.64% 218.14% 23.97%
S&P 500(DA) 1.56% 2.62% 4.99% 19.22% 232.39% 24.99%
NASDAQ .82% 5.77% 18.98% 81.03% 451.17% 37.29%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
8/5/944020AOL0.460$81.6317,659.49%
9/9/972640AMZN3.188$90.002,723.52%
12/16/981160AMGN21.444$54.19152.69%
12/17/99630CRA79.513$144.0081.10%
12/4/98900ATHM28.040$44.0056.92%
2/26/99300EBAY100.527$142.3141.57%
2/20/98260DD58.844$64.389.40%
2/23/99180CHV79.169$86.449.18%
2/23/99300CAT46.964$44.81-4.58%
7/2/98470SBUX27.955$25.25-9.67%
2/23/99290GT48.715$27.13-44.32%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
8/5/944020AOL$1,847.65$328,132.50$326,284.80
9/9/972640AMZN$8,415.03$237,600.00$229,185.00
12/17/99630CRA$50,093.00$90,720.00$40,627.00
12/16/981160AMGN$24,875.50$62,857.50$37,982.00
12/4/98900ATHM$25,236.13$39,600.00$14,363.88
2/26/99300EBAY$30,158.00$42,693.75$12,535.75
2/20/98260DD$15,299.44$16,737.50$1,438.06
2/23/99180CHV$14,250.50$15,558.75$1,308.25
2/23/99300CAT$14,089.25$13,443.75($645.50)
7/2/98470SBUX$13,138.63$11,867.50($1,271.13)
2/23/99290GT$14,127.38$7,866.25($6,261.13)
  Cash: $359.36  
  Total: $867,436.90  



Note
The Fool Portfolio was launched on August 5, 1994, with $50,000. It was renamed the Rule Breaker Portfolio in October 1998. The investing strategy began with the first investments of the Fool Port and has evolved with time and experience. In July 2001, the portfolio began adding $12,500 each quarter (We missed Jan. 2002, so we added $25,000 in April 2002). We skip a quarter if we have enough uninvested cash or cash available in stocks we would prefer to sell to make new investments. All transactions are shared and explained publicly before being made, and returns are compared in each week's column to the S&P 500 (including dividends where noted) and the Nasdaq composite. For a history of all transactions, please click here.