It's not every day that one of your stocks rises 54%, but then again, it isn't every day that the President of the United States comes out essentially to make a clarifying statement about your stock.
Which is what happened to the Rule Breaker Portfolio, Celera Genomics, and President Clinton today, all of which resulted in shares of Celera zooming 54% (all-time one-day Fool stock record move), and the Rule Breaker portfolio coming back up 7%. By contrast, our market index the Motley Fool NOW 50 dropped 0.76%. The Nasdaq and S&P 500 made fractional moves in opposite directions.
Yep, El Capitano Clin-TONE had met with Britain's Prime Minister Tony Blair a few weeks back, and they together made a statement about biotechnology that was dramatically misreported by most media, misconstrued (by the markets as well) to suggest that the government was going to undercut or pre-empt the efforts of private sector biotech genomics firms to own the intellectual property of their discoveries. We have watched -- if you've been with us -- Celera Genomics lose about 3/4 of its value in six weeks, as I mentioned yesterday, and the catalyst for that drop was the so-called Clinton/Blair Witch Project.
Unless you read the Fool! Because the single dead-on correct interpretation of that announcement came at the time from Jeff Fischer right here at Fool.com, who penned this column on the day of the announcement. It was entitled, quite contrarily, "Government Supports Gene Patents."
Which would have been a very good title for President Clinton's announcement today. "People finally read the whole article and not just the headline," Mr. Clinton stated, reiterating and reaffirming that companies SHOULD be able to patent their gene-based discoveries.
Boom. In a matter of hours, Celera up 54%.
Who says the market's efficient?
Every time I begin to think it might be, firmly so, along comes another story like this one. President speaks. Media misinterpret President (though a Fool does not). Stocks in our "efficient market" get whacked. President reiterates, which some take as a clarification. Stocks go opposite direction like, well, a moonshot.
Fifty-four percent in one day? 'Scuse me?
I mentioned Celera only briefly last night, by way of writing a brief essay on Risk. Little did I expect my convictions about the company to be rewarded so quickly. And yet, for this long-term shareholder, what of it? One day, even when your stock gains half of its value again, is nevertheless one day. Congrats to anyone who bought this morning, when the stock was actually down a few bucks.
My column yesterday brought me many kind notes (including from the waiter who served us supper in Aspen), for which I am always grateful. But rather than dwell on those I do get criticisms, constructive and otherwise, which I find useful to acknowledge. A Fool relentlessly invites criticisms -- it is part of Foolishness, to my way of thinking.
First off, I'd like to apologize to those of you who noted I had the incorrect distance from here to the moon. Among that bunch of astronomically inclined readers were more than one NASA engineer providing the correct figure (around 238,000 miles). I also read this post from Cranord, who actually worked on the early Apollo missions, who takes me to task for suggesting that our initial walk on the moon wasn't all that risky in the first place: "We never felt the astronauts were truly at risk.... We'd built redundancy. Tested everything. Prepared contingencies. Trained everyone until they were just plain sick of it. The risk was minimal." Fair enough, and thanks for your viewpoint, which is treasured. I hope my overall point stands up, anyway.
Just as crossing the street is supposed to be more risky than flying an airplane, perhaps managing a Rule Breaker stock portfolio is more dangerous than a moonshot?
Which would jibe with the feelings of "BetteDavis," a participant on our Rule Breaker Strategies discussion board who suggested the column glamorized risk in a bad way. "There are columns like yesterday's," she wrote, "where taking on risk is presented as glamorous and even heroic. And investing in risky stocks is presented as a significant act, important enough that it can be analogized to exploring space. The problem is that the emotional appeal of the second is much stronger than the first. Who wouldn't rather be a hero, an astronaut in their own life, instead of a fussbudget fretting over the future? And so the second message overrides the first. Seems to me that in a site aimed at the novice investor, this might be bordering on irresponsible."
To everyone, please do remember what you are reading. This is the RULE BREAKER PORTFOLIO. We have many diverse (I say "motley") areas here at Fool.com which, by the way, is not "aimed at the novice investor." We have many resources for people new to investing (our 13 Steps, our Fool's School area for buying cars, houses, insurance, etc.), but then again we have many resources for people who are experienced hands at investing -- of which this column is a prominent example.
Maybe we can never say it enough, but if we always said it, we'd never have time to say anything else: The Rule Breaker portfolio is for experienced, aggressive investors who can afford to lose the money they are investing. Have you read our very first management principle for this portfolio, frequently referred to and included in the link up top called "RB Info & Principles"? It says: "We consciously take on lots of risk, believing that for experienced and Foolish investors, high risk will lead to high reward."
We can't state it much more plainly than that, but if you're new to Fooldom and want further elaboration, read the entire text of the principle (and the others too).
Some places in Fooldom are for rank novices who are so deeply in debt that they will not be investing in stocks for years. They must focus, focus, focus on tackling and removing that debt, prior to doing their "Happy Dance" in our popular Credit Cards discussion. For others, the index fund is all they should and ever will invest in. For some, their first stocks are the Foolish Four, or a Rule Maker. Virtually all of this is extremely good and mostly very conservative for most people.
The Rule Breaker Portfolio is different. It is NOT for those who cannot afford to take risk, or those whose psychologies do not tolerate it. The Rule Breaker Portfolio is for people who are themselves in many ways Rule Breakers. This is not everyone. This is, in fact, not even most people. We are a minority.
If you wish to read a single community posting from someone who beautifully understands who we are and what we are doing, please read this one from lacow on the Rule Breaker Strategies message board.
So, if you see an occasional column celebrating the taking of risk (particularly when it's being mis-measured), understand that in context. Understand the context of The Motley Fool at large. If you don't know it, read our trilogy of investment books (which gives you grounding), or go to the various "Start Here" and "Click Here First" and "13 Steps" sections that draw attention to themselves across Fool.com.
This is not written to Bette Davis, President Clinton, or a NASA engineer. This is written to YOU. Our investment principles, stated simply, are:
- Know thyself.
- Know thy companies.
- Know thy time horizon.
That begins, you'll note, with exactly what was scrawled on the Greek oracle at Delphi: "Know thyself." That's up to YOU.
David Gardner, April 5, 2000