<THE RULE BREAKER PORTFOLIO>
The Internet Show-Show Days
Plus, Amazon books 10 million
by Rick Aristotle Munarriz (TMF Edible)
MIAMI, FL (June 7, 1999) -- True or False: Last month, Israel tired of Netanyahu while, over here, investors tired of Net and Yahoo! (Nasdaq: YHOO). If you are filling in the "T" bubble I suggest you reread Jeff's great Perspective Recap and then snap your #2 pencils in half and toss them into the bonfire.
As tonight's substitute teacher, ye of spitball-studded hair, I have the good fortune of tapping the chalkboard to announce a great day in the market. The Rule Breaker Portfolio rose 2.4%. The Nasdaq and S&P 500 came trailing after with gains of 1.9% and 0.5% respectively. Don't worry there Standy, I don't grade on a curve. Class dissed. Missed.
Today was stellar even for last week's fallen child, @Home (Nasdaq: ATHM). While the company was trading as low as $87 early on it stormed back to close at $103 3/4, up $9 1/4 on the day. The fallout from Friday's news of a federal judge in Oregon demanding that AT&T (NYSE: T) open up cable Internet access beyond @Home's broadband offerings appears to have been contained. Now, I don't want to brush off the incident as petty. This country's urge for independence was sparked the moment the first tea leaf crumb hit the Boston Harbor. The wave of tobacco litigation started with the smallest of cases. The judicial world thrives on precedent -- even though the precedent is often without one.
What is @Home to do? The solution is obvious. The company execs should head on out to the judge's home, with a frozen TV dinner in hand, and demand the right to use the magistrate's microwave. "I know you paid for this kitchen, Your Honor, but why should access to your opulence be limited?" I'd pack a sleeping bag and a toothbrush, too. If you've got cute little bunny slippers, bring 'em.
I was only kidding. Really. The last thing I need is to be held liable for random acts of gourmet judicial nukings. Besides, I smell the unmistakably sweet scent of turnover -- the treat often served up at controversial cases. Either way this is not the end of @Home, or even @Home alone. There was always competition, and a little more in a segment with explosive upside is healthy and expected.
Nobody seems to mind the fact that America Online (NYSE: AOL) has a stable of competitors. However, it has muscled its way to the top based on brand, skill, and karma -- qualities @Home isn't necessarily running low on, either. On Friday, shares of AOL shot up more than half of @Home's entire market cap. Think about it. Is the market saying that AOL is going to come in and immediately gobble up more than half of @Home's subscribers or is it an indication of the segment's upside for everyone, pioneers like @Home included?
Put your hands down. That question was rhetorical. Or was it? Anyway, with two solid days of rallying secondary stocks, maybe that is indeed a turnover I'm smelling. Like the start of fishing season, the 'Nets are back! Mania redux? I doubt it. The go-go days of the dot-com-panies may be at an end.
What did he just say? Now, before you run off and TP my house and key my car in the parking lot (and I know that's what you were thinking so get back into your seat right this instant) hear me out on this. Until recently we lived through a glorious time of wired long-ball. Even if it was a dud, like K-Tel (Nasdaq: KTEL) or Books-a-Million (Nasdaq: BAMM), if the company put up $70 to register a domain name the stock was off to the races. It was like a hungry patron at a $2.99 buffet -- quantity over quality. Surface over depth. Online anything over offline everything.
Yet the market proved relatively efficient even in the zaniest of times. There was just a shortage of supply at a time when demand ran insatiable. Times have changed. Over the last year, a lot of the popular websites that one couldn't buy into, like eBay (Nasdaq: EBAY) and Priceline.com (Nasdaq: PCLN), have become buyable. Either as an exit strategy or as a means to survive against their publicly traded capital-intensive peers, the online beauties have come out to play. Every new IPO tinkles on the ever-shrinking supply drought. As a self-fulfilling prophecy, with more reasonable returns given the wide selection of online money magnets, demand has also settled down.
Does this mean the fork is in for good? No. Of course not. What it does seem to indicate is that Wall Street will now be more discriminating. Quality first. It's the end of the go-go days. It's the dawning of the show-show days. Earn the right to be online and you will earn the right to be rewarded on Wall Street. That is why it's comforting to know, that even if the valuations run into the billions, that the Rule Breaker is dedicated to the online heavyweights like Amazon.com (Nasdaq: AMZN), which just happened to hang out its "Ten Million Served" sign today.
Wow. Ten million customers. It's the first exclusively e-commerce venture to hit that milestone. The company's press release indicates that the amount is bigger than the population of Greece. I believe it. I saw the musical of Grease and there weren't nearly that many people there. Fool is the word... is the word... is the word.
- Rick Aristotle Munarriz (firstname.lastname@example.org)
Day Month Year History Annualized R-BREAKER +2.41% -2.71% 30.21% 1206.89% 70.11% S&P: +0.51% 2.51% 8.88% 204.69% 25.90% NASDAQ: +1.85% 2.17% 15.12% 250.50% 29.60% Rec'd # Security In At Now Change 8/5/94 2200 AmOnline 0.91 114.50 12498.34% 9/9/97 1320 Amazon.com 6.58 117.38 1684.02% 5/17/95 1960 Iomega Cor 1.28 4.25 231.93% 12/4/98 450 @Home Corp 56.08 103.75 85.00% 2/26/99 300 eBay 100.53 183.25 82.29% 12/16/98 580 Amgen 42.88 60.69 41.55% 4/30/97 -1170*Trump* 8.47 5.00 40.96% 2/23/99 300 Caterpilla 46.96 63.25 34.68% 7/2/98 470 Starbucks 27.95 36.16 29.34% 2/23/99 290 Goodyear T 48.72 62.94 29.20% 2/20/98 260 DuPont 58.84 72.81 23.74% 2/23/99 180 Chevron 79.17 92.06 16.29% 1/8/98 425 3Dfx 25.67 17.94 -30.12% Rec'd # Security In At Value Change 8/5/94 2200 AmOnline 1999.47 251900.00 $249900.53 9/9/97 1320 Amazon.com 8684.60 154935.00 $146250.40 2/26/99 300 eBay 30158.00 54975.00 $24817.00 12/4/98 450 @Home Corp 25236.13 46687.50 $21451.37 12/16/98 580 Amgen 24867.50 35198.75 $10331.25 5/17/95 1960 Iomega Cor 2509.60 8330.00 $5820.40 2/23/99 300 Caterpilla 14089.25 18975.00 $4885.75 2/23/99 290 Goodyear T 14127.38 18251.88 $4124.50 4/30/97 -1170*Trump* -9908.50 -5850.00 $4058.50 7/2/98 470 Starbucks 13138.63 16993.44 $3854.81 2/20/98 260 DuPont 15299.43 18931.25 $3631.82 2/23/99 180 Chevron 14250.50 16571.25 $2320.75 1/8/98 425 3Dfx 10908.63 7623.44 -$3285.19 CASH $9924.87 TOTAL $653447.37Note: 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>