**This trade is being made under the regular portfolio policy, namely, once The Fool announces an intention to trade, that trade will be made within the next five trading days. For more detail, please read the New Trades section of the Rule Breaker Portfolio.
At some point in the next five market days, the Rule Breaker Portfolio will SELL approximately $32,000 worth of America Online (NYSE: AOL). Please note that this sale represents only about 8.4% of our current $380,000 stake in America Online.
Transaction Stats: On December 17, 1999, the RB Port sold 380 shares of America Online at $84 3/4 per share, plus an $8 commission. The RB's cost basis per share sold was $0.46, after several stock splits since 1994.
Short and Sweet, Because There are No Issues
As we have done in the past, we are merely selling a small sliver of our America Online position in order to buy something new; something that we think is at least just as promising an investment over the long term. Because the BreakerPort doesn't add cash to its coffer, it always must sell something in order to buy something new. The portfolio has grown to such a size, now, that to buy anything new in a meaningful percentage (at least 5% of the port), we need to sell not only some laggards (in this case, we're also selling Iomega and 3dfx at the same time), but we need to sell stakes in our biggest winners, too.
The $32,000 that we're taking from America Online will work alongside the nearly $12,000 that we're taking from the two laggards, and our $6,000 in current cash, to total the $50,000 that we're investing in our new buy, Celera (NYSE: CRA). This sale doesn't signify any change of opinion regarding the stock of America Online. We merely need to raise funds for a new purchase, and AOL is by far the portfolio's largest position.
We almost treat our AOL stock as an incubator of funds now -- as the venture capital wing of our portfolio, in some ways at least. This is the third time that we've used AOL-generated funds to buy new stock. In the past, we bought Amazon, Amgen, Excite@Home, eBay and others, all at least partially with AOL profits. In the long run, we hope that our new investments as a whole will at least match AOL's performance, if not top it. In the nearer-term, we can't miss the opportunity to buy some exciting new Rule Breakers, and our disproportionate position in AOL is serving as the logical funding mechanism to do so.
Thanks AOL. Here's to many more happy returns.