<THE FOOL PORTFOLIO>
3Dfx Perks Up Again
Plus, my two cents about market historians....

by David Gardner (DavidG@fool.com)

ALEXANDRIA, VA (Dec. 8, 1998) -- I want to say first of all that I had hoped to complete the latest Rule Breaker portfolio principle for you tonight, but didn't succeed. So I'll plan to publish that one later this week -- possibly with another one attached. (A twofer!) Meantime, lots else to talk about tonight so let's start Fooling around...

The Rule Breaker Portfolio (a.k.a. Fool Portfolio) ran up niftily today, even with one-sixth of its assets in cash. (More about that in a bit.)

Strong showings from Amazon.com, AT&T, @Home, and 3Dfx all contributed to a gain of 2.26%, well ahead of the losing S&P 500 (down 0.54%) and the losing Nasdaq (down 0.29%). Today's swing puts our portfolio back up over the market averages for the month of December (still early). The Rule Breaker Port currently shows a 5.00% month-to-date tally, versus the Nasdaq's 4.37% and the S&P 500's 1.53%. For the year, the contest is over. Blowout -- and let it not be forgotten. Anyway, it's nice to see that our competing major-market indices are now up over 20% -- for the fourth year in a row.

Unprecedented.

Then again, those investors looking for precedents in stock-market history are often doing themselves a disservice. A few years back, bears were crowing (supposing that bears could crow) that the market had never risen 20% three consecutive years. This had NEVER HAPPENED FOR THE ENTIRE CENTURY.

Guess what? It happened. And in 1998, we're now positioned for it to happen a fourth time.

You see what happens if you use past market numbers to draw conclusions about future market results? That's trying to make rules and follow them. That's one of the reasons -- JUST a teensy-weensy one -- why we're all about Breaking Rules in this space every night. The Rule Breaker cares not a whit about such vacuous statistics.

I shall spare you any large-scale ranting about market historians. It's worth noting their frequent inability to provide effective investment perspective and advice, due to their insistence that "there is nothing new under the sun," that what has happened before will recur. Most of them are bears, I've found, eager to tell you that the world can't quite be THIS GOOD, because back in such-and-such, when circumstances were similar (though note that circumstances never are exactly similar -- this is a will o' the wisp), the market CRASHED. OK, boy. Whatever. Glad I wasn't around back then. Though I expect that even if I were, I'd have stayed invested right through it -- just as you and I through the crash of 1987, and (yes) the crash of 1998. You remember this October? The market had dropped 30% in two months. The sky was falling! Yeah, boy.

Now, I am not naive. I'm certainly not here suggesting that we can learn nothing from history. No -- actually, I love history. I think history is the best undergraduate major of all -- I wish I had majored in it, as much as I enjoyed my studies of English literature. We can learn so many lessons from history that help guide us toward replicating past successes and avoiding past mistakes. It's just like when you read the message boards for Eyes of the Wise or My Dumbest Investment -- you learn so much from reading someone else's story.

However, market historians who isolate a few numbers and point out that at another time in the past when those numbers were like that, the market crashed -- these market historians who do so in order to suggest this will happen again -- they are not using, but abusing, history. They are conferring to History the power to CREATE, to dictate, when it should instead be used to tell didactic stories, provide us examples that we can learn from. Did I say I wasn't going to rant? I'll stop now. In fact, I haven't even really ranted. You only barely got me going!

Back to today's movers and shakers, with some new names to mention:

3Dfx has been very strong recently, and it rose another $1+ on over a million shares today, on no news. The company had a big announcement yesterday, when it celebrated the shipping of its first million Banshee chips. The release also included these relevant lines: "Voodoo Banshee is becoming a global force in entertainment technology due in large part to the company's strategic retail and OEM partners. Most recently, 3Dfx Interactive announced that Voodoo Banshee technology is featured in Gateway G- and GP-Series and Quantex Microsystems PCs, with other OEM wins expected to be announced shortly." (Italics mine.) The market generally likes such hints.

Some of the move may also be due to the popularity of some great new computer games, particularly Half-Life from Sierra (the publisher) and Valve (the creator). Many are calling Half-Life, a first-person action game that combines a compelling plot with great graphics and impressive artificial intelligence, the Game of the Year, the best ever in its genre. So I believe that this game has got to be selling mucho Voodoo cards -- to both first-time customers, and to repeat customers who were still using a Voodoo 1 or only one Voodoo 2 (and wanted to go "SLI" -- the configuration where you link together two Voodoo 2's in your computer for even more power). I haven't gotten Half-Life yet, though I'm looking forward to playing it.

AT&T (NYSE: T) bought IBM's global phone network today, in a cash deal worth $5 billion that also saw IBM "trade" 5000 of its employees over to AT&T (awakening memories of great sports trades of the past like Herschel Walker for half the Minnesota Vikings -- that thing seems like nothing now, compared to this latest swap). The market liked the deal, boosting our shares of T a full $2 1/4.

Amazon rose $13 1/16. So what else is new?

And @Home rose $2 1/4, now up 12.56% from our purchase at market close Friday. Not bad for a two-day return. Lemme see, if we can keep that rate up for another month, our newest holding will be our biggest holding! (Yeah, right...)

Speaking of new holdings, we're hard at work on our next Rule Breaker purchase announcement, out this week or next. We don't like to sit on cash too long, so we'll look forward to getting some more of that $64,000 to work for us shortly. Meantime, if you enjoy this little section of cyberspace each night, you should definitely drop by and read our Rule Breaker Portfolio message board, one of the liveliest and most informative message boards at fool.com, in only its second week. My first stop every night.

And finally, please remember that for every post put up on The Motley Fool message boards at http://boards.fool.com we'll donate another 2 cents to Share Our Strength, our charity partner. This is all part of our Holiday Charity Drive, in which we're asking Fools around the world to join us as a community in contributing anything from $1 to $10,000 to the Fool Charity Fund. You can read more about this and our beneficiary partner simply by clicking this link. And do remember that the best, smartest, and most Foolish way to give is to give away shares of stock on which you show a profit. No one pays any taxes! Do yourself a favor that'll last you all your life by reading this simple Foolish article on the subject, if you're not already aware.

The Motley Fool, as all our longtime Fools know by now, exists to help you SAVE money, to help you GROW money, and to help you GIVE money away. Our Holiday Charity Drive and the "Here's My Two Cents" initiative are the latest examples of our mission in action. Spread the word. Tell your 117 best friends!

Foolish best wishes on another grrrrrreat market day for those who Break Rules.

-- David Gardner, December 8, 1998

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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Bookmark Live Fool Port Quotes

12/08/98 Close

Stock Change Bid ---------------- AMZN +13 1/16204.06 AOL + 3/4 90.31 T +2 1/4 67.00 ATHM +2 1/2 63.13 DJT - 3/16 4.25 DD - 7/8 54.88 XON + 3/16 73.19 IP - 7/8 42.81 IOM - 1/8 7.31 LU - 52/87 99.13 SBUX - 1/16 49.75 TDFX +1 5/16 16.31
Day Month Year History Annualized FOOL +2.26% 5.00% 117.38% 629.52% 58.04% S&P: -0.54% 1.53% 21.74% 157.72% 24.36% NASDAQ: -0.29% 4.37% 29.57% 182.53% 27.02% Rec'd # Security In At Now Change 8/5/94 1100 AmOnline 1.82 90.31 4868.50% 9/9/97 440 Amazon.com 19.74 204.06 933.87% 5/17/95 1960 Iomega Cor 1.28 7.31 471.11% 10/1/96 84 LucentTech 23.81 99.13 316.35% 8/12/96 130 AT&T 39.58 67.00 69.29% 4/30/97 -1170*Trump* 8.47 4.25 49.82% 2/20/98 200 Exxon 64.09 73.19 14.19% 12/4/98 450@Home Corp. 56.08 63.13 12.56% 2/20/98 215 DuPont 59.83 54.88 -8.29% 2/20/98 270 Int'l Pape 47.69 42.81 -10.23% 7/2/98 235 Starbucks 55.91 49.75 -11.02% 1/8/98 425 3Dfx 25.67 16.31 -36.45% Rec'd # Security In At Value Change 8/5/94 1100 AmOnline 1999.47 99343.75 $97344.28 9/9/97 440 Amazon.com 8684.60 89787.50 $81102.90 5/17/95 1960 Iomega Cor 2509.60 14332.50 $11822.90 10/1/96 84 LucentTech 1999.88 8326.50 $6326.62 4/30/97 -1170*Trump* -9908.50 -4972.50 $4936.00 8/12/96 130 AT&T 5145.11 8710.00 $3564.89 12/4/98 450@Home Corp. 25236.13 28406.25 $3170.12 2/20/98 200 Exxon 12818.00 14637.50 $1819.50 2/20/98 215 DuPont 12864.25 11798.13 -$1066.13 2/20/98 270 Int'l Pape 12876.75 11559.38 -$1317.38 7/2/98 235 Starbucks 13138.63 11691.25 -$1447.38 1/8/98 425 3Dfx 10908.63 6932.81 -$3975.81 CASH $64208.05 TOTAL $364761.11

</THE FOOL PORTFOLIO>

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