Renovation Begins
Exxon goes shopping

by Paul Larson (TMFParlay@aol.com)

CHICAGO, IL (Nov. 27, 1998) -- You've been hearing about it for weeks, and the renovation of the Fool Port to the Rule Breaker portfolio has finally begun! As in real life, the first process of remodeling is junking the old, and three of the stocks in the portfolio that do not conform to the new Rule Breaker strategy are in the process of being jettisoned. Those three are 3Com (Nasdaq: COMS), KLA-Tencor (Nasdaq: KLAC), and Innovex (Nasdaq: INVX). For complete details on the reasoning behind the moves, click here for the sell announcement released on Wednesday before the holiday.

Actually, while we could have started the demolition work today, David and Jeff decided to take it easy and leave the three stocks alone until after the weekend. Be assured that those three positions will be sold no later than Thursday of next week when our self-imposed deadline of acting within five days of an announcement expires. Our policy of the relationship between trading and announcements is clearly laid out here, for those that are interested.

Reading the sell announcement one might have noticed that we are also planning on selling fractional portions of both America Online (NYSE: AOL) and Amazon.com (Nasdaq: AMZN). As our sell discipline dictates, we only sell when we have found a better place to put the money or when a stock starts to occupy an outrageous portion of a portfolio. The AOL and Amazon decisions are clearly being sold for the latter reason. Just what exactly is an outrageous portion? Let's look at the asset values as of today:

% of Portfolio   11/27/98   After Trades (approximate)
America Online   35.4%      27.9%          
Amazon           30.8%      23.2%

Combined         66.2%      51.1%

We won't know the exact figures until after the trades are executed, but these are good thumbnail numbers to go by. Even after a combined $56,000 or so is raised from trimming these two positions, roughly half the portfolio will still be invested in these two stocks alone. Both stocks came to own such large tracts of Fool Port real estate by pure and simple appreciation. Needless to say, having to occasionally realign the portfolio due to stellar performance is a nice problem to have. People have been telling us to sell these positions for many moons, and they have been clearly in err if you look at the charts of both AOL and Amazon. These same folks are probably going to harp that we're not selling enough of these two speculative stocks, but so be it.

All five combined sales will raise somewhere near $75,000 that is earmarked towards buying new Rule Breakers in the near future. Exactly what stocks do we plan on decorating the portfolio with this Christmas season? If you like, we have an email service that will quickly zap you a note when a buy or sell announcement is made. Click here for more information on the trade alerts product available for a nominal fee. The cheaper alternative is to add this page to your favorites and check back often over the next couple of weeks as the new stocks are revealed.

I think it's worth reminding that we DO NOT recommend you follow blindly what this (or any) portfolio does. Look at our reasoning, learn a thing or two, and make your own decisions. Only then will you truly own a Foolish portfolio.

In news concerning the stocks in the portfolio, another one of our companies looks like it is in a shopping mood. Earlier today Exxon (NYSE: XON) confirmed that the company was in merger talks with its estranged sister company, Mobil (NYSE: MOB). Combined, the reunited portions of Standard Oil would be the largest publicly traded corporation in the U.S. Make sure to check out this morning's Breakfast With the Fool for more information on the planned merger.

Of course, this monster deal follows fast on the heels of the AOL and Netscape (Nasdaq: NSCP) deal announced earlier this week that will dramatically change the landscape of the Internet. In the interest of not repeating what has been published before in this forum, let me suggest checking out either Monday's Breakfast With the Fool or the special feature we ran on the story.

The performance of the portfolio on this holiday-shortened trading day gets the thumbs up as the Fool Port rose 1.95% against moves of 1.57% and 0.46% for the Nasdaq and S&P, respectively. As has happened in so many days before, the twin towers of AOL and Amazon were behind most of the strength today. Good thing we did not start selling this morning! Thanks to merger mania, Exxon also had a relatively good day, up $1 11/16 to close at $74 3/8. On the week, the portfolio's performance numbers look like this:

Fool:       +9.45%
Nasdaq:     +4.58%
S&P 500:    +2.47%

Make sure to check back next week when the real fun begins. In the meantime, we'll be acting like Dennis Rodman on the basketball court and hitting the boards. (Heaven help us if we act like him off the court!) Have a great weekend, Fools!

-- Paul Larson

Order your copy of David and Tom Gardner's new book, Rule Breakers, Rule Makers, in advance. This Simon & Schuster beauty doesn't arrive until January, but you can reserve your copy today! The first half of the epic book, on Rule Breakers, elucidates the Fool Port's investment style; the second half, on Rule Makers, further explains Cash-King investing.

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11/27/98 Close

Stock Change Bid ---------------- AMZN +6 5/16 216.63 AOL +2 9/16 94.75 T - 1/8 63.06 DJT - 1/16 4.94 DD + 1/8 60.00 XON +1 11/16 74.38 INVX - 13/16 15.00 IP + 1/16 43.13 IOM - 3/16 7.38 KLAC - 3/16 36.94 LU -1 1/4 88.44 SBUX + 1/2 46.75 COMS + 1/2 40.63 TDFX - 3/16 13.25
Day Month Year History Annualized FOOL +1.95% 38.72% 121.91% 644.74% 59.30% S&P: +0.46% 8.52% 22.86% 160.10% 24.82% NASDAQ: +1.57% 13.83% 28.41% 179.99% 26.97% Rec'd # Security In At Now Change 8/5/94 1420 AmOnline 1.82 94.75 5111.15% 9/9/97 580 Amazon.com 19.11 216.63 1033.52% 5/17/95 1960 Iomega Cor 1.28 7.38 475.99% 10/1/96 84 LucentTech 23.81 88.44 271.46% 8/12/96 130 AT&T 39.58 63.06 59.34% 4/30/97 -1170*Trump* 8.47 4.94 41.70% 2/20/98 200 Exxon 64.09 74.38 16.05% 2/20/98 215 DuPont 59.83 60.00 0.28% 2/20/98 270 Int'l Pape 47.69 43.13 -9.58% 8/13/96 250 3Com Corp. 46.86 40.63 -13.31% 7/2/98 235 Starbucks 55.91 46.75 -16.38% 8/24/95 130 KLA-Tencor 44.71 36.94 -17.39% 6/26/97 325 Innovex 27.71 15.00 -45.87% 1/8/98 425 3Dfx 25.67 13.25 -48.38% Rec'd # Security In At Value Change 8/5/94 1420 AmOnline 2581.87 134545.00$131963.13 9/9/97 580 Amazon.com 11084.24 125642.50$114558.26 5/17/95 1960 Iomega Cor 2509.60 14455.00 $11945.40 10/1/96 84 LucentTech 1999.88 7428.75 $5428.87 4/30/97 -1170*Trump* -9908.50 -5776.88 $4131.63 8/12/96 130 AT&T 5145.11 8198.13 $3053.02 2/20/98 200 Exxon 12818.00 14875.00 $2057.00 2/20/98 215 DuPont 12864.25 12900.00 $35.75 8/24/95 130 KLA-Tencor 5812.49 4801.88 -$1010.62 2/20/98 270 Int'l Pape 12876.75 11643.75 -$1233.00 8/13/96 250 3Com Corp. 11715.99 10156.25 -$1559.74 7/2/98 235 Starbucks 13138.63 10986.25 -$2152.38 6/26/97 325 Innovex 9005.62 4875.00 -$4130.62 1/8/98 425 3Dfx 10908.63 5631.25 -$5277.38 CASH $12005.75 TOTAL $372367.63


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