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Do You Have the Guts to Buy?

Paul Elliott
October 11, 2008

It was Christmas 1999. I was on the phone with an old pal. A few months back, he'd tipped me to a local scientist who claimed he could crack the human genome. There was an IPO. I bought in and forgot all about it.

What the heck is going on here?
You'll recall that the genome story was hot, but this was nuts. By Christmas, the stock was doubling every week. Turns out, some Fool named David Gardner bought it for his Rule Breaker portfolio.

Rule Breaker. I'll never forget the day I heard those two words. In December 1999, I had no idea what they meant, but these Fools were moving the market.

If you're a regular here, you may have heard that Rule Breaker investing is back. But it's probably not what you think. It's certainly not what I thought when I heard those two words on the phone.

For one thing, it's not all tech
Sure, there was some tech in the original Rule Breaker portfolio. David Gardner told his readers to buy AOL way back in 1994. Another well-timed play on Lucent, now called Alcatel-Lucent (Nasdaq: ALU  ) , and a gutsy short call on Sirius Satellite Radio (Nasdaq: SIRI  ) followed.

But Rule Breakers was never all tech. ExxonMobil (NYSE: XOM  ) was in the original portfolio. So was AT&T. David is still a big fan of FedEx (NYSE: FDX  ) , and he insists that low-tech Starbucks is the perfect Rule Breaker.

So, what makes Starbucks a Rule Breaker? There's no second fiddle, according to David. Where's the Pepsi to Starbucks' Coke? That's what makes Starbucks a Rule Breaker. If you bought Starbucks along with David in 1998 -- I wish I had -- you're one, too.

So just what makes a Rule Breaker investor?
To find out, I caught up with David Gardner and asked him. His reply? "It's an investor who can embrace the contrary nature of paying up for great growth stocks."

This is important. After all, great growth companies rarely look "cheap" to value-oriented investors -- witness Adobe Systems (Nasdaq: ADBE  ) , king of the PDF and a 10-bagger. Like David says, you had to pay up for a company like Adobe in