<THE RULE BREAKER PORTFOLIO>
Pre-Announcing Dow 27,000!
Plus, news and a new board
by Jeff Fischer (TMFJeff)
ALEXANDRIA, VA (March 16, 1999) -- Breaking rules left, right, forward, backward, sideways, and diagonally, this portfolio continued what could be a record-long winning streak with another gain today due to America Online (NYSE: AOL), the portfolio's ballast position. AOL -- sturdy, old AOL. Four years ago it was our high-risk small cap. Now it's valued as highly as AT&T and it has a future, most believe, at least as bright. Today Merrill Lynch reiterated its buy rating on the stock. We'll reiterate that you didn't need Merrill Lynch to tell you that.
Amazon.com (Nasdaq: AMZN) declined following word that it'll authorize a much higher share count in order to finance growth and defend against hostile takeovers. Whether this news felled the stock or not is up to you. Amazon didn't actually announce that it was increasing its share count immediately, but obviously, as was assumed, it will in the future. An interesting question is: is Amazon really moving to fend off takeovers? Is any company interested in slurping up this giant ant at the current $24 billion price? Another fun question: what line of business will Amazon attack next? Certainly more rules will be broken in the near future.
A milestone that was broken today, of course, was the Dow 10,000 -- for about one minute. This really is a non-event, but with a lack of real news to report, it'll be one focus of the media. It's a blip in history. In 3,650 days, it'll be the year 2009 and the Dow, if it grows at an average of 10.5% annually, will cross 27,000. (That is, if we still follow the Dow.) Dale Wettlaufer wrote Foolishly on the Dow 10,000 topic: click here.
It's also worthwhile to note that if the Dow hadn't recently been changed, adding Wal-Mart and Hewlett-Packard among others, we wouldn't have reached this milestone yet. And if it hadn't been changed in decades past (deleting IBM at one point) the milestone could have been reached much sooner.
Whatever amount of over-coverage the Dow 10,000 receives, it is impressive to recall that the Dow was at 4,000 just four years ago. More than being impressive, however, this fact reiterates an invaluable Foolish lesson: The market is more unpredictable than even Fools care to admit.
When 4,000 was crossed, if you'd said 10,000 would be reached in four years you'd have been flogged to humiliation by paisley ties. And just because the Dow hit 10,000 today doesn't mean it won't trace back to 6,000 in the next two years (a 40% decline!), before running up to 13,000 the following three years for an above-average 5 year gain.
Anything can happen. In fact, the future allows only that anything will happen, and it doesn't allow for specifics until they take place.
Also in the news, 3Dfx (Nasdaq: TDFX) announced a $20 million marketing campaign that initially reminds me somewhat of Iomega's admittedly much larger and ill-fated marketing campaign. 3Dfx is already the leading upper-end 3D graphics company, by a mile, but management probably wants its name to be known better among new computer buyers so that consumers know why they want to pay extra for 3Dfx rather than accept a chip that's already installed on a computer by Intel or another company. The fact that 3Dfx's name is on most computer game boxes certainly helps 3Dfx sell to the gaming enthusiast. It's the "sometimes gamer" who's buying an inexpensive computer (or not) that must be convinced in the years ahead.
@Home's (Nasdaq: ATHM) stock regained recent loses. It announced a partnership to offer fax services to @Home subscribers. It's one small step to add services. In 3,650 days, how will we watch television and movies, answer e-mail, talk on videophones, turn on and off our appliances, secure our homes, surf the Internet, shop, learn, work and play? All through one appliance? All through one high-speed connection? Where will AOL and @Home be in all of this? They certainly aim to be in the middle of it. AOLTV. Imagine the giant partnerships to take place the next five and ten years as the new media world upsets and removes the old, installing new multimedia leaders. Imagine where AOL and @Home will be.
Now imagine where the Fool's portfolios might be. Where would you like them be, and what would you like them to offer? How can we help you get wherever you want to be in ten years?
We opened a new message board today called "Improve Our Foolish Portfolios." Please post any thoughts you'd like to share regarding how to improve the Fool's six real-money portfolios, the columns, the daily numbers, the layout and the design -- even the writers. If you want TMFJeff ousted, say so. It will immediately be done. If you'd like "SmokinPopsicle" from the message boards to write every single column, that can be arranged, too. Sincerely, we appreciate any feedback now and any day. Please bookmark the new message board and add it to your favorite message boards so whenever you have a thought on improvement you'll share it and we can try to act on it. Here it is: Improve Our Foolish Portfolios.
Because your feedback is what we're most interested in right off the bat as the message board opens, we'll end here in hopes that you'll have time make any suggestions you wish.
But not so fast, Fool!
Before you depart from this page, definitely play Oscar Wildness!, the Fool's Oscar Awards game that gives prizes that are ten times better than a golden naked man statue. And don't miss TMF Puck's article titled The ABCs of IPOs. If you've ever had a question about initial public offerings (and there will be dozens more IPOs out this month, not to mention this year), read, bookmark, print, xerox (don't tell our lawyers), memorize and share Yi-Hsin's article.
Be Foolish -- Fool on!
Day Month Year History Annualized R-BREAKER +0.12% 13.11% 28.47% 1189.48% 74.12% S&P: -0.07% 5.49% 6.59% 198.54% 26.77% NASDAQ: +0.32% 6.61% 11.25% 238.70% 30.29% Rec'd # Security In At Now Change 8/5/94 2200 AmOnline 0.91 104.94 11446.18% 9/9/97 1320 Amazon.com 6.58 133.81 1933.86% 5/17/95 1960 Iomega Cor 1.28 5.25 310.03% 12/4/98 450 @Home Corp 56.08 119.50 113.09% 12/16/98 580 Amgen 42.88 74.50 73.76% 2/26/99 300 eBay 100.53 157.81 56.99% 4/30/97 -1170*Trump* 8.47 4.31 49.08% 7/2/98 235 Starbucks 55.91 60.75 8.66% 2/23/99 180 Chevron 79.17 85.38 7.84% 2/23/99 290 Goodyear T 48.72 51.13 4.95% 2/20/98 260 DuPont 58.84 55.25 -6.11% 2/23/99 300 Caterpilla 46.96 44.00 -6.31% 1/8/98 425 3Dfx 25.67 13.44 -47.65% Rec'd # Security In At Value Change 8/5/94 2200 AmOnline 1999.47 230862.50 $228863.03 9/9/97 1320 Amazon.com 8684.60 176632.50 $167947.90 12/4/98 450 @Home Corp 25236.13 53775.00 $28538.87 12/16/98 580 Amgen 24867.50 43210.00 $18342.50 2/26/99 300 eBay 30158.00 47343.75 $17185.75 5/17/95 1960 Iomega Cor 2509.60 10290.00 $7780.40 4/30/97 -1170*Trump* -9908.50 -5045.63 $4862.88 7/2/98 235 Starbucks 13138.63 14276.25 $1137.63 2/23/99 180 Chevron 14250.50 15367.50 $1117.00 2/23/99 290 Goodyear T 14127.38 14826.25 $698.88 2/23/99 300 Caterpilla 14089.25 13200.00 -$889.25 2/20/98 260 DuPont 15299.43 14365.00 -$934.43 1/8/98 425 3Dfx 10908.63 5710.94 -$5197.69 CASH $9924.87 TOTAL $644738.93Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.
</THE RULE BREAKER PORTFOLIO>