<THE RULE BREAKER PORTFOLIO>
AOL and Netscape Cleared for Takeoff
by Jeff Fischer (TMFJeff)
ALEXANDRIA, VA (March 17, 1999) -- "Ladies and gentlemen, this is your captain speaking. On behalf of everyone at Fool Airlines, I welcome you aboard this RuleBreaker 8/94 model airplane. Today we'll be flying you away from Wisdom and into Foolishness. The weather in Foolishness is a constantly sunny, warm, perfect 78 degrees in the daytime, and a pleasant 68 degrees at night. If there is anything I can do to serve you better during this flight, please tell me."
You take your seat on the Fool Plane and look out the window. You wonder, not without some interest, who will sit beside you. The plane is almost full. It's time to pull away. The captain emerges and closes the door. You're alone in your aisle. You stretch out.
"This is your captain speaking again. Everybody, we'll be rolling away from the gate as soon as I get clearance. While we're waiting, I want to report that America Online (NYSE: AOL) got the go-ahead from Netscape (Nasdaq: NSCP) today, so the two companies are merged as of this moment. This is relevant to you. Let me explain.
"Here in the land of Wisdom, America Online was said to be overvalued for several years. It was only recently embraced, and at record high prices, by the investing professionals living in Wisdom. In the land of Foolishness -- just so you're not shocked -- many people have been investing in America Online for several years. You might surmise this by the homes they live in. Now, please buckle your seat belts."
The people on the plane shuffle about.
The captain's voice returns. "You'll notice on today's flight that we don't have any stewards or stewardesses on the plane. You also may have noticed, if you looked in the cockpit, that I don't have a co-pilot. That's Fool Airlines policy. We have our reasons. Drinks and snacks are in the small refrigerator in each aisle. We ask -- or I ask -- that you kindly refrain from snacking until we're, oh, in the air a few minutes. And if you don't know how to buckle your seat belt, ask the person next to you. Odds are pretty good that they know how."
The person behind you asks how to buckle the seat belt. You show him. In return, he gives you useful information. He says, "I heard the Rule Breaker Port gained 0.87% today while the S&P lost 0.65%. Their portfolio is up nearly 30% for the year against the S&P at under 6%."
That's good to know for when we land in Foolishness, you respond. He nods and continues, "The portfolio has gained 1,200% since 1994 while the S&P has gained 197%."
You ask if he's been to Foolishness before. He says no, but he's read about it extensively to prepare for this trip. He's moving there, he tells you. Forever. He read the 13 Steps to Investing Foolishly. After that, he sold his house in Wisdom and dumped all of his Wise investments, dropped his full service broker, cut up all but one credit card, and he's now ready to begin the Foolish Four when he lands.
The plane rolls down the runway and begins to lift into the sky. "Folks, this is your captain speaking again. We should have a smooth flight today. The only thing we need to watch for as we leave Wisdom is a lot of hot air."
You get a Coca-Cola from the small refrigerator in the aisle. Looking down upon Wisdom, you see scores of ivory towers.
"Ladies and gentlemen, I've got her on auto-pilot up here, like an index fund you might say [the plane is ascending steadily], so I'm free to talk with you. I might walk about the plane's cabin, but the last time I did that the passengers went into hysterics. They were residents of Wisdom, after all.
"The big news today as we fly into Foolishness is the AOL-Netscape merger, which is of interest to many people living in Foolishness. AOL is hoping to mix Netscape's technology with AOL's consumer-friendly savvy to capitalize on global e-commerce and the Internet's possibilities in general. Working as both a positive and a negative in the merger is the fact that, in the past, these companies have each had a different focus. Netscape caters to daytime users, many of them office or businesspeople, and it focuses on the technology side when helping businesses. AOL, despite being as technologically sophisticated as the next guy, strives to make its technology very friendly and it focuses on the mass market. Many of its users are nighttime home users.
"The two companies must merge these qualities together to make a company that excels and leads in both fields. Doing so could create one of the most influential, if not the most influential, companies of the information age. And they're not alone. They have support. AOL and Netscape are working with Sun Microsystems (Nasdaq: SUNW). They'll use Sun's technology in a multi-year pact. When any business wants to sell online, AOL wants to be able to put them in that position, not only by giving them real estate (and eyeballs) on AOL and Netscape properties, but by offering the technology to easily setup storefronts and then conduct e-commerce. As AOL executives said, the three-company team will create 'the ability to offer a seamless end-to-end commerce solution.'"
"Add this ability for easy commerce to a friendly, mass market, multimedia powerhouse, and you have a virtual community of not only users, but businesses, all of them (both consumers and businesses) paying AOL to be present in its online world. Microsoft (Nasdaq: MSFT) gets paid to put its operating software on individual computers. AOL is getting paid to put people and businesses on, essentially, its software. Over the long term, which business scales better? That answer seems obvious."
You take in the captain's words and look forward to some of the things you'll find today once you land in Fooldom: In the Fribble, Chris Rugaber (TMF RFK) has posted an open letter to NationsBank, asking for the interest rate on his credit card to be lowered since the bank recently told him "interest rates have reached unprecedented lows."
Also, today's Dueling Fuels is on eBay. Is the online auctioneer just a passing fad, or is it here to stay? Finally, on the Amazon message board, Fools are contemplating what an Amazon/Yahoo! merger would look like.
Day Month Year History Annualized R-BREAKER +0.87% 14.10% 29.59% 1200.69% 74.39% S&P: -0.65% 4.80% 5.90% 196.68% 26.58% NASDAQ: -0.42% 6.16% 10.78% 237.27% 30.15% Rec'd # Security In At Now Change 8/5/94 2200 AmOnline 0.91 108.69 11858.79% 9/9/97 1320 Amazon.com 6.58 131.00 1891.11% 5/17/95 1960 Iomega Cor 1.28 5.25 310.03% 12/4/98 450 @Home Corp 56.08 120.63 115.09% 12/16/98 580 Amgen 42.88 74.63 74.05% 2/26/99 300 eBay 100.53 155.75 54.93% 4/30/97 -1170*Trump* 8.47 4.19 50.55% 7/2/98 235 Starbucks 55.91 60.63 8.44% 2/23/99 180 Chevron 79.17 85.63 8.15% 2/23/99 290 Goodyear T 48.72 51.44 5.59% 2/23/99 300 Caterpilla 46.96 46.25 -1.52% 2/20/98 260 DuPont 58.84 55.44 -5.79% 1/8/98 425 3Dfx 25.67 13.75 -46.43% Rec'd # Security In At Value Change 8/5/94 2200 AmOnline 1999.47 239112.50 $237113.03 9/9/97 1320 Amazon.com 8684.60 172920.00 $164235.40 12/4/98 450 @Home Corp 25236.13 54281.25 $29045.12 12/16/98 580 Amgen 24867.50 43282.50 $18415.00 2/26/99 300 eBay 30158.00 46725.00 $16567.00 5/17/95 1960 Iomega Cor 2509.60 10290.00 $7780.40 4/30/97 -1170*Trump* -9908.50 -4899.38 $5009.13 2/23/99 180 Chevron 14250.50 15412.50 $1162.00 7/2/98 235 Starbucks 13138.63 14246.88 $1108.25 2/23/99 290 Goodyear T 14127.38 14916.88 $789.50 2/23/99 300 Caterpilla 14089.25 13875.00 -$214.25 2/20/98 260 DuPont 15299.43 14413.75 -$885.68 1/8/98 425 3Dfx 10908.63 5843.75 -$5064.88 CASH $9924.87 TOTAL $650345.50Note: 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>