We're down 3% with the market up 1%? WHAT?! This is outrageous. I take umbrage. I'm looking around for someone to blame, or to fire.
Seriously, though, this happens some days. It happens over more meaningful periods of time as well. It happens some years, sometimes for years. One's particular stocks, one's investment style, can fall out of favor in one era or another. Stocks or styles that have fundamental truths at their core, however, will always come back into favor. Those that do not may eventually be discarded as irrelevant.
The Rule Breaker approach is predicated on finding the most relevant companies of one's time. RELEVANCE for us is synonymous with success. I don't think you can be highly relevant on a national or international scale today and not be successful, so by focusing on Amazon.com, eBay, Starbucks, et al., we're going to be finding successful entities.
Do they all work out? We may be in the black on all our Rule Breakers today, but that does not mean they do all work out. We're admittedly living through a great market. Sometimes, the market bombs, and hurts your successful companies with it. And some other times, the market does fine but your relevant company ends up bombing.
Why?
Because that very relevant company lacked good management, a focus on the customer, or a workable long-term business model. It flashed, we saw it, but only later did we realize that flash came not from a bolt of lightning, but rather a brief burst of light reflecting off a pan. Pffffffft. Fzzzzt. Sayonara, Breaker-san.
Is Celera (NYSE: CRA) one such company? Time will tell. There are few stronger performers across all markets since our purchase of Celera shares on December 17th. The company has entered the media spotlight. Related to this, there are few brighter prospects in business today than the use of genetic insight to create revolutionary solutions. Celera is in the spotlight, and it is flashing! But... is that light a beacon to guide our way into the brave new world of the next few decades? ("O brave new world, that has such people in't!" said Miranda as she gazed wonderingly at the shipwrecked Italian court in The Tempest -- which Aldous Huxley then gave an ironic turn to in his famous dystopic vision. I side with the Shakespearean view -- hopeless humanist that I am.)
Or... is that light in a pan?
Celera has filed for a secondary offering of 3.8 million shares at $225 each. This secondary offering will raise $820 million after fees. Consider this: The company had a market cap of just $400 million when it came public as a tracking stock less than a year ago! Celera is raising cold cash that is twice the amount of the value of the entire enterprise not too many full moons ago.
The company follows what may be becoming a well-traveled path of star-shot upstart companies that announce secondary offerings a couple months after the Rule Breaker portfolio adds them. Just as Celera may be using that to its advantage, so too did eBay (perhaps this is merely coincidental) raise $800 million in a secondary offering a few months after our 1999 purchase. These companies are, very simply, being validated by the extended Fool community worldwide -- more valuable given the longer-term commitment such validation always implies. One cannot help but look at Celera's move as opportunistic, raising a TON of money to fund its efforts at a crucial time. Now, is "opportunistic" bad? Nay, dear Fools. The word is too often burdened by a negative connotation.
The world is to the opportunists. O brave new world, that has such opportunists in't! Without opportunism, in my parlance, we are without significant value creation. We would live in a world that is destitute, devoid of the Breaking of Rules.
So take that money, Celera, and use it to bring to market -- with the help of worldwide partners -- better solutions, better healthcare, possibilities yet undreamt, than would have existed otherwise. The company has already sped up the Human Genome Project's efforts by five years, as the race continues. If Celera were to flash all too briefly in the public spotlight -- if that's the way this tale should end -- we will always at least proudly point to the results of the company's participation in the decoding of the human genome. "Celera" is aptly named. It is Speed. And that is Speed for all of us.
Fool on,
David Gardner, March 1, 2000
