<THE RULE BREAKER PORTFOLIO>
by Rick Aristotle Munarriz (TMF Edible)
MIAMI, FL (March 22, 1999) -- Foolishly tweaked anecdote number 241: Two mutual fund managers are camping when they hear this fierce sound outside of their tent. They step outside and find themselves face to face with the huge S&P 500. It ferociously towers over the startled managers. One of the managers bolts into the tent and comes out with his cellular phone and a pair of Timberlands. As he's lacing up his shoes he is barking out buy and sell orders into the phone.
"What are you doing," the other manager asks him. "You can't beat out the S&P 500."
"I don't have to beat out the S&P," he barks back. "I only have to beat you."
Oh the joys of the campfire. It's the right time of year, with March mellow and all. Today our collection of Rule Breakers was roasting hot -- that perfect combination of a barely singed outer coating with a chewy hot soft center. It all started when the fourth largest cable company asked the third largest cable company if it wanted to get married. Comcast (Nasdaq: CMCSK), the cable operator on bended knee, has @Home (Nasdaq: ATHM) as its high speed Internet access best man. MediaOne (NYSE: UMG), the one trying on the engagement ring, has Road Runner as its maid of honor.
If you've been to weddings before you pretty much get the picture of what is going on here. @Home and Road Runner are a bit skeptical. They are losing their best friends. The future seems uncertain. But halfway through the reception funny things begin to happen. The best man raises his glass to make a toast and eyes the maid of honor. The maid of honor blushes. Before you know it, they are dancing and swept up in the moment, watching their newly conjoined friends, swept away in wedded bliss.
They talk synergy. They have so much in common -- the same dreams and aspirations. A drink and a date or two later, they eventually propose. The combination of @Home and Road Runner makes sense. Wall Street has cleared a path to make sure Road Runner catches the bouquet. Market momentum won't get in the way of @Home snagging the garter.
Love is contagious. The Net stocks seem to be taking Roberto Benigni's offer of a Jupiter lovefest seriously. It looks like Yahoo! (Nasdaq: YHOO) is getting goo-goo eyed over Broadcast.com (Nasdaq: BCST) by the swan ice sculpture. And, while apparently leaving the party alone this time, America Online (NYSE: AOL) walked away with a nifty flower arrangement centerpiece and $11 1/2 a share richer on consolidation excitement and ING Barings raising its price target on the leading online service to $180 from $100 previously.
Dowries are being made on the Internet stocks. There is inertia. There are more splits than a cheerleading competition on ESPN3. And, if Road Runner and @Home eventually exchange vows, the rollout of high-speed Internet access will have a concerted push towards faster loading content, too. I see a much more exciting online world in the future.
However, as excited as I am with the 3.6% rise in the Rule Breaker Portfolio on a day where the S&P 500 and Nasdaq Composite were down I am left wondering if David and Jeff are going to take out the shears again? When David and Jeff decided to sell a wee fraction of both Amazon.com and America Online back in November David wrote that, "in fact, this sale is the second in what may be an ongoing tradition of occasional rebalancing we have to do should our portfolio continue to prosper so!"
They made up just 60% of the portfolio at the time. But there had to be room made for new buys like eBay (Nasdaq: EBAY), @Home, and today's Daily Double feature Amgen (Nasdaq: AMGN). Yet, prune away as they did four months ago and it has grown back and then some. I guess it's the hermit crab theory. They lose an appendage, it regenerates. Sometimes they appear lifeless for a few days but they are merely molting -- shedding an exoskeleton and coming out bigger and seeking a larger shell. Aha, you didn't think I had a degree in Crabology now did you?
But I don't hear the ocean in the seashells this time. I don't hear the snip of scissors either. I hear wedding bells. I see @Home and Road Runner sitting by the tree.
Gee, how time flies as the campfire flames grow low.
- Rick Aristotle Munarriz (email@example.com)
Day Month Year History Annualized R-BREAKER +3.61% 24.75% 41.69% 1322.12% 77.49% S&P: -0.18% 4.74% 5.83% 196.50% 26.48% NASDAQ: -1.06% 4.72% 9.27% 232.68% 29.67% Rec'd # Security In At Now Change 8/5/94 2200 AmOnline 0.91 130.19 14224.42% 9/9/97 1320 Amazon.com 6.58 132.00 1906.31% 5/17/95 1960 Iomega Cor 1.28 5.13 300.26% 12/4/98 450 @Home Corp 56.08 140.00 149.64% 12/16/98 580 Amgen 42.88 79.06 84.40% 2/26/99 300 eBay 100.53 155.13 54.31% 4/30/97 -1170*Trump* 8.47 4.06 52.03% 2/23/99 180 Chevron 79.17 88.38 11.63% 2/23/99 290 Goodyear T 48.72 52.44 7.64% 7/2/98 470 Starbucks 27.95 29.69 6.20% 2/23/99 300 Caterpilla 46.96 46.94 -0.06% 2/20/98 260 DuPont 58.84 57.25 -2.71% 1/8/98 425 3Dfx 25.67 13.56 -47.16% Rec'd # Security In At Value Change 8/5/94 2200 AmOnline 1999.47 286412.50 $284413.03 9/9/97 1320 Amazon.com 8684.60 174240.00 $165555.40 12/4/98 450 @Home Corp 25236.13 63000.00 $37763.87 12/16/98 580 Amgen 24867.50 45856.25 $20988.75 2/26/99 300 eBay 30158.00 46537.50 $16379.50 5/17/95 1960 Iomega Cor 2509.60 10045.00 $7535.40 4/30/97 -1170*Trump* -9908.50 -4753.13 $5155.38 2/23/99 180 Chevron 14250.50 15907.50 $1657.00 2/23/99 290 Goodyear T 14127.38 15206.88 $1079.50 7/2/98 470 Starbucks 13138.63 13953.13 $814.50 2/23/99 300 Caterpilla 14089.25 14081.25 -$8.00 2/20/98 260 DuPont 15299.43 14885.00 -$414.43 1/8/98 425 3Dfx 10908.63 5764.06 -$5144.56 CASH $9924.87 TOTAL $711060.81Note: 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>