ALEXANDRIA, VA (August 5, 1999) -- The Rule Breaker Portfolio had a day of minor recovery, rising 2.42% against a 1% gainer of a market.

The day was marked by a sizable rebound in some of our most thoroughly beaten-down investments. eBay (Nasdaq: EBAY) was tops, shooting up 23% on no discernible news. 3dfx (Nasdaq: TDFX) gained 12%, (Nasdaq: AMZN) rose 10%, and Excite@Home (Nasdaq: ATHM) stepped up 9%. On our message boards, I frequently see the bears get hungriest often when they should be rehibernating. Do you think it's happening again? Who knows. But one fellow had just stated that eBay would never see $90 again -- at least not for a few years. Following today's $17 rise and close over $92, we see the usefulness of short-term predictions once again made manifest. Foolish example #9,748.

OK, you might think -- given these -- that our portfolio was up 10%. But days like that don't happen very frequently. And, too, America Online (NYSE: AOL) actually lost value, down 5%.

A perfect segue.

You see, I like to keep up with the "birthdays" of my individual investments, as it provides me an opportunity to review them, think them through, appreciate (or, as the case may be, DESPISE) them a bit, look forward as I look back.

And five years ago today, the Rule Breaker Portfolio purchased America Online.

That statement will strike you differently, depending on who you are. It comes down to your degree of involvement with AOL, your investing beliefs in general, your thoughts about the Internet, your degree of comfort with growth stocks, by what route you're accessing us tonight, etc. The point to begin with is that this is a resonant statement, resonating with many people in many different ways. Five years ago today, the Rule Breaker Portfolio purchased America Online.

For instance, you may own it too. Maybe you bought when we did. Or you had it before we did, or you bought it a few years later. Regardless, you're way, way, way up, and even though you've watched the shares get cut in half this summer, you're still shouting, "WOO-HOO! Let's put our hands together, people, because we have moolah to BURN!"

Then again, you may only just have bought it two months ago for the first time. What's your reaction then? Those with a pleasant disposition will think: "Those Rule Breaker guys, gosh. They knew a good thing when they saw it. I WISH I HAD BOUGHT IT BACK THEN! AAAAARGH." If you're of a less sanguine disposition, you might think, "So what if you bought it five years ago? What has it done lately, Fools?" These reactions and a myriad of others are all out there. Hey, most people don't even own AOL. Some hate it. Every night, I'm writing to people from every walk of life, in every imaginable situation, who will have the motliest assortment of reactions to whatever our subject. It's quite a challenge... a flattering one.

To review: For some people, stating that you bought AOL five years ago is bragging. For others, it's a sign of credibility. For others, it's just dumb luck. "You guys got lucky with that one."

Anyway, five years ago, we purchased America Online.

It's pure irony tonight. You see, here we are on our investment's birthday and BANG -- on this very day, history has repeated itself. Today, AOL was once again on the receiving end of only the latest in a long, historic series of negative stories -- worries -- shaking the stock. If you've been a long-term investor in AOL, we know two things about you: You're happy (a $2000 investment five years ago in AOL is worth $182,000 today), and you are battling manic-depression. Either that, or you've disconnected emotions from your investing altogether.

Or, there's a third option. You're neither manic-depressive, nor phlegmatically Vulcan. You're just a student of the long term.

Today's announcement, as reported in Breakfast with the Fool, was to the effect that Microsoft (Nasdaq: MSFT) will compete head to head with AOL by offering low-priced or free Internet access. The idea is that Microsoft might provide its online service to you for free if, say, you committed to spending a certain amount of money in e-commerce with its partners.

I'm quite serious when I say that I think it's great if Microsoft manages to provide free Internet access in a compelling, cost-effective, profitable way. I own AOL stock, and it could eventually be undermined if Microsoft pulled this off in a dominating, mass-market way. But from the unselfish standpoint that admires good capitalism, I have to say that if a company can provide free Internet access to the world, more power to 'em. The societal gains in efficiency, commerce, accountability, openness -- all those things I love about the Internet -- will be astounding. To this, I say, "Go Microsoft." Or, go AOL. Go anyone who can pull this off. We should all root for it -- in the most self-interested way, really. This is why I love capitalism.

But this was the scare, so AOL was among the only "Internets" that didn't rise today.

The first scare I ever remember for the stock was when Paul Allen sold out his 10%-plus interest in the company shortly after we bought the stock. The message was that one of this decade's great investors had called it "kaput" and cashed out. The market freaked. The stock dropped.

I'm not sure what was next. Was it AOL's log-in problems? Customers couldn't get online reliably. A big suit was brewing. Or, was it Microsoft's entrance with its own online service, MSN? That was going to kill AOL, too.

If you go back to that time, you'll find us in this very space writing of our belief that BOTH companies would win. We don't view investing like sports. There aren't two teams battling. It's not the Cowboys and the Redskins. Somebody does NOT have to lose. Both AOL and Microsoft have done wonderfully.

Later, there were the tricky accounting charges, there was the "incredibly overvalued" rap (Barron's printed that AOL was worth -- in split-adjusted terms, now -- just pennies). Et cetera. If you've been a long-time Fool, you have been through all of this -- whether or not you've been long, short, or not ever invested at all. AOL is one of the great business stories of the 1990s. It's also been one of the great stocks.

AOL had dropped over 10 bucks at one point today, on the Microsoft story. It closed down several. The stock has been halved this summer -- not the first summer we've been invested in AOL in which it's been halved! Various people in various quarters are now calling for the stock's imminent collapse, and death. You know, the company that is still at the dawn of the Internet, the Internet's biggest brand name, 20 million customers, and an expanding international presence. Brilliantly managed. Et cetera.

AOL is now one of the top 50 brands in the world.

I have never made a better investment in my life; perhaps I never will. I have two points to close with. First, what is relevant now is not AOL's past, but its future. I am staying invested. I think AOL will make investors a lot more money over the next 25 years. Whenever the Microsoft scares have occurred, those have historically been among the best intermediate-term entry points for investors. That's my point of view, and we'll see how it plays out. My money is where my mouth is, and Lord knows I've been wrong before and will be wrong again. But $2,000 invested five years ago in this stock is now worth $182,000, and that's after the stock has been more than halved. I would be shocked if this stock is not higher five years from now than it is today.

My second point: What can we learn from AOL? The greatest lesson I have learned from watching the business is the amazing persistence of the company. AOL has received huge amounts of negative publicity in the past five years. It has been the victim of numerous class-action lawsuits. It has companies of all sizes in many different sectors (prominently: giants in media, technology, publishing, telecommunications, biotechnology -- OK, I'm kidding about biotechnology) -- many of the most powerful companies in the world -- gunning for it. Wanting what it has. Nipping at its heels, biting at its ears.

AOL's lesson to us is persistence. We can all use a little of that as inspiration in our own lives, whatever we're facing. The company has made numerous mistakes, and been swatted at hundreds of times. It's happening again as I write.

I was talking earlier with Erik Rydholm, our chief operating officer here at the Fool, and he likens the company to a football team that only runs the ball. Pounds it. Over and over and over. It's brutal to watch, and often easy to criticize. But just as most football teams that run the ball effectively win, AOL has won. Won like few others.

Looking to the future, AOL would be really dumb if it weren't working hard to get even stronger and more competitive. I think it has the management to do it, and my investment dollars are essentially bets on (1) the management, (2) the brand, and (3) the growth and increasing relevance of the Internet. We'll keep our eyes wide open as we, long-term investors, continue to hold onto our shares.

Fool on.

-- David Gardner, August 5, 1999