Last week, eBay (Nasdaq: EBAY) reported results well above expectations, earning $0.07 per share before onetime charges, compared to an expected $0.04 per share. This, however, isn't why eBay is my favorite investment among all companies (that I know) valued under $20 billion. It is the growth potential, the business safety, and how well eBay is managed that would make me purchase this stock if I could buy only one stock valued under $20 billion to hold for the next 10 and 20 years.

eBay's model is highly profitable, offers ever-growing and wide inventory selection without eBay carrying any of it, and it scales without eBay needing to increase staff or other resources, except marginally. Plus, through, eBay may revolutionize consumer commerce yet again, this time in fixed-price retail.

A boom
In August, became the fourth-most-visited consumer commerce site on the Internet, behind only eBay, (Nasdaq: AMZN), and CDNOW. And, to its credit, so far only offers products in four categories: books, music, videos, and games. Beginning in 2001, will begin to offer more product lines. First additions will likely be electronics, computers, and palmtops. is easy to use: to sell, you only need to enter the ISBN or UPC code (whichever is appropriate) and then name your price. (To buy, you basically just click!)

In fact, I'm going to place a book for sale right now. I bet that it'll take me all of two minutes to list it, and within hours I'll have a buyer. I'm going to sell a guide book on Italy (not because I'll never visit again -- I hope otherwise! -- but because I have two copies of the same book).

There we go. It's listed. (Note: An hour later, the book sold.) It took me three minutes to list the item and to register as a member (this was my first sale). The site automatically displays a picture of the item and promotional text. It also recommended a selling price to me, based on my stated condition of the book. Finally, it shows everyone what the book sells for on other sites and, before I listed it, it told me how much the last copy sold for on

Very neat! I'm going to start selling many books and old CDs that I don't want on The only legwork will be running to the post office to ship it. (Meanwhile, talk about cash flow! collects on every sale immediately and pays sellers the commission about one month later, on average.)

Q3 highlights
Rex Moore (TMF Orangeblood) succinctly covered eBay's third-quarter numbers, including the eight-point jump in gross margin to 79%, and the 80%+ gross margin expected next year. And Rex told everyone why he believes in the company's business.

Other key points from the conference call include the following: eBay is now 2.2 times larger by gross merchandise sales than the number two company in the U.K. It is several times larger than the number two company in Germany. Also, eBay is now in six of the 10 largest markets in the world. eBay's Billpoint payment service recently saw a 35% rise in use, while its main competitor began charging fees in October (thus giving up a competitive advantage). has more than 6 million items listed (eBay has more than 5 million) and eBay sees great opportunity for Half's format internationally. Half's margins will be as profitable or more so than eBay. Ultimately, both Half and eBay will be seamless global trading communities. By making its services global, eBay expects to eventually lead in every world market by offering the largest community overall. Its strategy will unfold systematically. "This is a marathon, not a sprint," CEO Meg Whitman reminds everyone. Smart.

eBay worth more than Yahoo!?
I've long believed that eBay would eventually have a larger market value than Yahoo! (Nasdaq: YHOO). I began to doubt myself as Yahoo! soared to more than $120 billion in value last year and eBay stopped at $20 billion. Today, eBay is worth $16 billion and Yahoo! is at $33 billion. I believe eventually eBay will surpass Yahoo! in value, because eBay has a much more defensible business model. Meanwhile, it doesn't rely on ad revenue. (I wrote much more about eBay's advantages in value creation in our initial Motley Fool Research report on the company, which, although I wrote it in February, still stands true today.)

eBay wants to be the largest e-commerce trading host in the world, meaning that it will host the largest trading community anywhere. So far, it does. It continues to profitably distance itself from the also-rans. This -- along with the protective moat around its business (meaning the community!) -- is why eBay is my favorite long-term Rule Breaker.

Human Genome Sciences
Another favorite Rule Breaker of mine, but one that presents considerably more risk, is our recent purchase, Human Genome Sciences (Nasdaq: HGSI). The company made several positive announcements last week. You can read them on the company website and talk about them with Fools on the Human Genome Sciences discussion board.

Finally, Amazon (Nasdaq: AMZN) and Excite@Home (Nasdaq: ATHM) announce results tonight. A loss of $0.33 per share is expected for Amazon, while Excite@Home should lose $0.10. We'll discuss the results this week, but you can find a Foolish take on the after-hours reports tonight on the News page.

Fool on!

--Jeff Fischer, TMF Jeff on the boards.