Before we begin today's recap -- the first of a two-part series -- let me give you my heartiest plug for a good read of yesterday's recap, if you haven't yet read it. Paul Commins encourages us all to abandon the phrase "buy and hold," and comes up with a new term we can use to describe the way most Fools invest.
In the past I have used my preferred alternative phrase -- "buy-TO-hold" -- to show that as an investor I purchase a stock in order to become a part owner of a company, and I hope to be one for the foreseeable future. Paul's phrase, which is at least as useful as "buy-to-hold," is well worth reading, considering, and ultimately (I think) using. I won't give it away here, though, because it deserves his Foolish explanation.
It is either human nature or it is my nature -- take your pick -- to tend to focus on what is doing well for us, and notice less what is NOT doing well. From an emotional standpoint, most of us maintain healthy attitudes by accentuating the positives and tending to forget the pain and sadness of the past.
I think it's fair to say that this element of human nature, or my nature -- take your pick -- is visible in the coverage we give to our Rule Breaker entrants in this space each day. I know I've spent a lot more time writing about AOL, Celera, and Amazon than I have spent on Excite@Home, for instance. And in the past, we'd have dog stocks (ATC Communications) which would rate barely a mention for a month or more.
Are we "hiding" our mistakes? Certainly not -- it's all right there in the black-and-white of the numbers appended to every single daily portfolio recap we've ever written. Available to the public's eye and scrutiny, 24 hours a day, 7 days a week.
Rather, what is happening with our coverage is one part emotional (as I have pointed out) and one part rational. What's the rational part? Quite meaningful, and easily communicated: The more a given stock declines, the less it represents of one's assets. And the more a given stock rises, the MORE it represents of one's assets. America Online and Amazon.com represent 34% and 22% of our portfolio, respectively. Excite@Home is 3%.
OK, so 34 plus 22 equals 56. And 56 is over 18 times more than three. So, for every 18 mentions of AOL and Amazon.com, Excite@Home proportionally rates just a single mention. That probably about mirrors the attention given these various companies in past recaps....
But obviously, we DO believe in learning from our mistakes and we do NOT shy away from letting people know we make them. In fact, we say this frequently, and shall continue to do so. As long as we invest in dogs, you'll be able to see them yap.
And because I have not written about Excite@Home (Nasdaq: ATHM) in recent memory, I want to devote space to it today and tomorrow to do a general checkup. And this is timely, because while the Nasdaq skidded another 2.3% today, for some strange reason, Excite@Home rose 14% -- and at one point today it was up 56%! Whoa... what happened? And, is that why I'm talking about it today? Just because it's up? Heck no. Check out these numbers:
Since we've held Excite@Home...
Excite@Home -29%
S&P 500 +23%
This has been a very poor investment, since our December '98 purchase of what was then called just "@Home." Here's a look at the two-year chart. See how it went up to $100? See Fool make money? See Fool lose profits? See Fool lose money? Run, Spot, run.
So what's up with Excite@Home? Well, today we'll look at what has just happened. Tomorrow we'll look more at future implications.
Excite@Home's shares shot up today after Comcast stated publicly that it would be willing to "flip" its agreement with AT&T. You'll recall that AT&T restructured its arrangement with fellow Excite@Home participants Cox and Comcast (both AT&T cable competitors). Rather than allow those companies veto power over Excite@Home's moves, AT&T restructured to allow Cox and Comcast either to buy larger chunks of the company (forgoing control), OR to sell their shares back to AT&T for a price of $48 per share.
Today, Comcast proposed the idea of a different deal. "If AT&T would allow it," Comcast effectively said, "we'll buy THEIR interest in At Home for $48 a share." Given that the stock closed yesterday below $18, zoom-uh-zoom-uh-zoom. Within an hour, the shares had shot up to $28 before selling off over the course of the afternoon to their close just below $20. That was still a 14% gain. Meanwhile, earlier this morning, a Prudential analyst reiterated a BUY rating with a target price -- not of $48 -- but of $80.
It's easy to get caught up in the short term. But for a better look at the intermediate-to-longer-term prospects for the company, what I suggest for starters is to go to the "Best Of" feature of our discussion boards and use that screen to find the 5 most recommended posts of the past couple of months. The results are on this screen. If you take the time to then click in and read each one, you find yourself immediately more educated and sophisticated about your thinking on Excite@Home beyond just Comcast's latest rumor/bid.
Indeed, in preparation for tomorrow's report, and/or if you own shares in the company or are considering it as an investment, I insist you DO read those 5 postings, because they will tell you a lot more in the time that you read them than I have space and time, here. The value I will add tomorrow is to try to boil it all down into a few truths that we can learn from. But inevitably, some very good stuff is lost in the vapor, as I boil Excite@Home down.
But for now, I will leave you with this primary thought: The market hates uncertainty. It's as true for ATHM stock as it is for any uncertain prospect in any uncertain industry. And Excite@Home has some gunmetal-gray clouds hanging over it. The issue of closed versus open access, mired in the courts, remains critical; will AT&T and other cable operators be forced to allow others the use of AT&T cable lines to do competitive business?
Playing into that uncertainty, the company's most recent quarter showed red ink at the bottom line, one cent per share of losses. This was following a profitable quarter, and many had expected Excite@Home to show another profit (though, granted, consistent profitability is not expected until 2002). Anytime you have a jittery external situation (with government intervention possible, and a bunch of large players with their hands in the piggy bank), and then you compound it with a shortfall quarter, the market is REALLY not going to be happy.
The hope for Excite@Home shareholders (a group in which we continue to number ourselves) is that the company continues to fulfill on its long-term plan to become the dominant "full-service online broadband company." Or how about: a dominant one? Excite@Home does not have to "win it all" in order to improve on its present market cap of $7.7 billion.
But more of that, for tomorrow. And if, by the way, you have a specific question you'd like me to address or point for me to consider, drop by our Excite@Home discussion board, which I'll fully peruse tonight. Fool on!
David Gardner
