<THE RULE MAKER PORTFOLIO>
Long-time Fool -- JeanDavid
with Rob Landley (TMF Oak)
AUSTIN, TX (June 18, 1999) -- To wrap up the week, I interviewed Jean-David Beyer, a long-time contributor to the Rule Maker Strategy board and many other boards. Not only is he a Fool veteran, he's an avid participant -- as in 4,400+ posts avid, as can be seen on his profile. Let's see what he has to say.
TMF: When and how did you discover The Motley Fool?
Jean-David: Back in August 1996, I happened to notice The Motley Fool Investment Guide. I liked the attitude reflected in the title, so I took out the book. I read it, liked it, and was inspired to purchase my own copy. The book also inspired me to get a PC and an Internet connection. (I had over 25 years experience with Main-Frame and Minicomputers when working, mostly at Bell Telephone Laboratories, but never had one at home before.) After that, I chose to move my 401(k) Fidelity mutual funds to a regular self-directed IRA.
Jean-David: Of those, I started with the MoneyHeavy portfolio. By then, I already had the Foolish Four, a few shares of Berkshire Hathaway, and the "UG5" Unemotional Growth screen (a Workshop strategy), and wanted something stable to balance out the UG5. I did not want more of the Foolish Four.
TMF: To what extent does Rule Maker investing make up your overall investment style? What other styles of investing do you use?
Jean-David: I have 35% of my portfolio in the Foolish Four (RP variation) and 8% in the UG5 Unemotional Growth screen. I have been slowly reducing this percentage and moving more to Rule Makers. I have not decided whether or not to cash it out entirely and buy EMC with the proceeds or not. I have not studied EMC quite enough to take that step. I do not really care to trade every month, even though my brokerage account (Ameritrade's $800/year plan) charges no commissions provided I trade in blocks of at least 200 shares. I also have some U.S. Series EE savings bonds and bullion grade gold coins, but I do not consider them investments, just "insurance."
TMF: How do you feel about the principle of QuaVa -- that business quality is 100x more important than valuation?
Jean-David: I think it is more important than valuation, but I think 100x is too high.
TMF: Do you think that QuaVa is more important the first time you buy shares of a company than when you are making additional purchases? If so, why?
Jean-David: I am not sure it makes a difference. From a nuisance point-of-view, I would prefer to add to an existing holding rather than purchase an additional company. I have about 20 companies, and I think that is a few too many.
TMF: Which of your Rule Makers are you most excited about for outperformance in the next decade?
Jean-David: I'd have to say Cisco or Dell (though Dell is not, strictly speaking, a Rule Maker). I purchased Dell when it was in the MoneyHeavy portfolio, and I do not wish to sell it.
TMF: What's your favorite non-investment related activity?
Jean-David: I enjoy simply talking with friends. I also like playing with the 2 1/2 year-old daughter of a friend of mine. (I started a custodial UGMA account for her.)
TMF: Does time spent studying investments ever interfere?
Jean-David: No, because I do not study investments enough. If I did, I would pare down my portfolio to about 14 companies instead of 20.
After JeanDavid answered our standard round of interview questions, I fired off a few of my own, carefully targeted at the biases I know we share. :P
TMFOak: Given the number of times Microsoft has cited Linux as the most viable competitor for Windows during the ongoing antitrust trial, and its similarly ringing endorsement of Linux in the leaked "Halloween Memo" internal Microsoft research reports, what do you think of the recently announced IPO of leading Linux distributor Red Hat?
Jean-David: I loathe and detest Microsoft and its products, considering them the greatest insult to the computer programming profession ever committed. Microsoft set back naive user expectations by about 15 years compared to the quality of product they could have had from a company with greater professional ethics. I run Windows only when necessary, such as for Quicken and TurboTax. Otherwise, I run Red Hat Linux 6.0. I like Red Hat's products and might buy 100 shares for the fun of it (if the price is not too high), but I do not know enough about the company to make a serious investment. Since their sales seem to have doubled from fiscal 1998 to fiscal 1999, that is a good sign. They seem to have lost about $130,000 last year, but that is a small number compared to sales. I am concerned what happens if they offend the GNU/Linux community in some way. They will have to be very sensitive about this. Apparently, IBM did a good job with the Apache group, so I hope Red Hat will do as well with the GNU/Linux stuff.
TMFOak: How important is understanding the nature of the business you invest in compared to understanding the financials?
Jean-David: In principle, I would say about equally important. In my own investing, I rely more on emotions than I would advise others to do.
TMFOak: How do you think our pick of Yahoo! stacks up against other Internet princes like eBay and Amazon.com?
Jean-David: I do not care for Yahoo!, but I do not care for eBay, either. I do business with Amazon more often than is good for me, although I think they are diversifying a little too quickly and hope they do not go the way of Boston Chicken. I have invested in none of them. If compelled, I would invest in Amazon.
TMFOak: Thanks, Jean-David.
All of this week's interviewees are regular contributors to our Foolish message boards. All three of the Rule Maker boards are linked below. We hope to see you there soon.
- Rule Maker Strategy Board
- Rule Maker Companies Board
- Rule Maker Beginners Board
- Rule Maker Ranker Spreadsheet (Excel 97, 68k)
- Rule Maker Ranker Spreadsheet (Excel 95, 41k)
Day Month Year History R-MAKER +0.29% 1.53% 6.30% 34.51% S&P: +0.22% 3.16% 9.83% 35.86% NASDAQ: +0.76% 3.76% 16.91% 55.09% Rule Maker Stocks Rec'd # Security In At Now Change 2/3/98 48 Microsoft 39.13 85.00 117.20% 6/23/98 34 Cisco Syst 58.41 119.38 104.37% 5/1/98 55 Gap Inc. 34.37 69.25 101.49% 2/13/98 44 Intel 42.34 54.94 29.76% 2/3/98 22 Pfizer 82.30 99.25 20.60% 5/26/98 18 AmExpress 104.07 124.63 19.75% 2/17/99 16 Yahoo Inc. 126.31 144.44 14.35% 2/6/98 56 T. Rowe Pr 33.67 35.00 3.94% 8/21/98 44 Schering-P 47.99 45.91 -4.35% 2/27/98 27 Coca-Cola 69.11 63.50 -8.11% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 64.34 80.38 24.93% 3/12/98 20 Eastman Ko 63.15 71.13 12.63% 3/12/98 15 Chevron 83.34 93.19 11.81% 3/12/98 17 General Mo 72.41 62.81 -13.25% Rule Maker Stocks Rec'd # Security In At Value Change 2/3/98 48 Microsoft 1878.45 4080.00 $2201.55 6/23/98 34 Cisco Syst 1985.95 4058.75 $2072.80 5/1/98 55 Gap Inc. 1890.33 3808.75 $1918.42 2/13/98 44 Intel 1862.83 2417.25 $554.42 2/3/98 22 Pfizer 1810.58 2183.50 $372.92 5/26/98 18 AmExpress 1873.20 2243.25 $370.05 2/17/99 16 Yahoo Inc. 2020.95 2311.00 $290.05 2/6/98 56 T. Rowe Pr 1885.70 1960.00 $74.30 8/21/98 44 Schering-P 2111.7 2019.88 -$91.82 2/27/98 27 Coca-Cola 1865.89 1714.50 -$151.39 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Exxon 1286.70 1607.50 $320.80 3/12/98 20 Eastman Ko 1262.95 1422.50 $159.55 3/12/98 15 Chevron 1250.14 1397.81 $147.67 3/12/98 17 General Mo 1230.89 1067.81 -$163.08 CASH $70.09 TOTAL $32362.59
Note: The Rule Maker Portfolio began with $20,000 on February 2, 1998, and
it adds $2,000 in cash (which is soon invested in stocks) every six months.