The A-Team Smokes (Rule Breaker) February 11, 1999

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The A-Team Smokes

by Paul Larson ([email protected])

CHICAGO, IL (Feb. 11, 1999) -- I was beginning to think that I brought a curse to the Rule Breaker portfolio. The last four times I've scribed this column the portfolio experienced significant declines, including a 6% loss on Tuesday. I even thought that maybe Jeff, ever the superstitious one, was going to ask me to stop writing due to the bad luck I seemed to bring along.

Today, however, put to rest all of my fears as the Rule Breakers had an excellent day and, like the S&P 500, managed to get back into the black for the year. The daily gain amounted to a whopping 8.17% for the Rule Breakers against "only" 2.49% for the S&P. In almost a mirror image to what happened on Tuesday, the "A-Team" (What you lookin' at, Fool?) was the main source of strength:

           Change    Closing Bid
Amazon    +12 7/16     109.88
Amgen     +8           124.75
AOL       +13 5/8      164.25
@Home     +13 3/4      109.88

Are we struck with glee? Hardly. We're just going along with our daily business, looking for ways to deploy the excess cash sitting in the portfolio. Good days happen, but they are always followed, at some point, by bad days. Volatility to the upside is just one of the short-term benefits you get when exposing yourself to the potential gains stocks have to offer.

As is always the case when the market takes off, some very wise prognosticators came out of the woodwork to say, "We're seeing a bounce. We should heat up in the next few weeks." Perhaps they're right this time, perhaps not. True Fools know that today is just one day of many, and fortunes are made in the market over years, not days or weeks. We're Fools, and we humbly know that we can't accurately predict the market's movement. Save, invest, be patient -- that's what we're best at.

Hopefully, some of the regular readers have a bit of Deja Vu at this point. It's going to take a lot more than a few volatile days or strange coincidences to change how we feel about the market and our stocks. We are long-term buy and hold investors. We preach that gospel on both up days, where it might not seem as important, as well as on down days.

Beyond some news from @Home (NYSE: ATHM), discussed briefly below, and a few inconsequential announcements from Foolish Four holding AT&T (NYSE: T), there wasn't a whole heck of a lot going on today. All of the Rule Breaker earnings are in, and it will be another several weeks before the current quarter even ends. However, you certainly couldn't tell from looking at the volatility and trading volume that these are relatively quiet times on the news front.

Getting back to that @Home news, the company's CFO Ken Goldman had some interesting guidance at an investment conference today. He said to expect set-top TV boxes to be available from the service by the end of the year. He also restated that the company's goal is to be profitable by the fourth quarter. More importantly, Goldman said to expect margin improvement over the next few years, a key thing to look for in "late" Rule Breakers. With little doubt, this news was partially behind the stock being up a smart 12% today.

@Home also announced earlier an initiative to develop international content that is optimized for its high speed Internet connections. No immediate impact should be felt here, as the company merely appears to be trying to "fertilize" the supply side of the content equation in hopes of stimulating more demand for its service. Rule Maker and DRiP portfolio member Intel (Nasdaq: INTC) has been doing something similar for years by investing in companies whose products will spur demand for higher and higher speed computers.

Finally, the Rule Breakers, Rule Makers book tour flies into Dallas tonight. If you're going to go chat with Tom and Dave, let me suggest getting there early. For more information, check here.

Stay Foolish!

--Paul Larson

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