<THE RULE MAKER PORTFOLIO>

The Profits of Patience
Forty-seven years' worth

By Tom Gardner (TomG@fool.com

ALEXANDRIA, VA (Feb. 22, 1999) -- The Rule Maker Portfolio chugged ahead of the market today, like the big train that knew it could. Our stocks finished up more than 3%, re-extending our lead over the S&P 500 to five percentage points.

That gap was once broader, but it's still a delight for us given that we only pay one fee to be in our investments -- $7.95 per trade. As stock investors, we don't have to cough up the ongoing management expenses of a mutual fund. We expect that avoiding mutual-fund fees will add tens of thousands of dollars to this portfolio over the next twenty years.

On the leader board for us today, Yahoo! took the blue ribbon, rising more than 7%. Gap was up 5.5%. American Express and Cisco each rose 5%. And now, for the first time in many months, we have a new overall leader in our portfolio. Today, Gap (NYSE: GPS) became our largest holding. It now accounts for 11.24% of our total account, having risen more than 90% since our purchase in May 1998. Microsoft had been our frontrunner -- both in percentage returns and percentage of total assets. Not anymore.

If you're wondering where I got all those statistics about our account, take a look at the newest features added to The Motley Fool Portfolio System (You must be registered to use this new portfolio tracking system. Registration is free.) Our upgraded portfolios application, which has just about fought its way through beta, allows you to track your returns against any market index -- on a daily and historical basis. It also gives you the customizing tools to slice and dice your holdings to your heart's content.

I'm addicted.

But the obsession only goes so far.

As a business-owning investor, I couldn't care less about the short-term returns of my investments. I'm not swayed by the guy trying to make market calls on CNBC. And I'm not the "expert" trying to call six-month target prices for all of my stocks. And I'm not studying the pace of Alan Greenspan's gait in an attempt to determine the direction of interest rates. And I have no interest in trying to beat the market on a daily, weekly, or monthly basis.

I hope you are not, either. I hope (and expect), instead, that you're using time as your greatest advantage in investing.

Because time truly is the greatest ally of the investor in Rule-Making companies. Time compounds growth, doubling an investment, then tripling it, then doubling it again, one generation at a time. And if we just take the time initially to find the right companies to invest in, we can then let time extend the value of those investments -- making us and our families very happy, indeed.

On the flip side of all that, time is the mortal, villainous, brutish enemy of the trader of stock certificates. Time closes the market each afternoon and opens it again at 9:30 in the morning. It expires options worthless. It delivers margin calls. It creates the sense that trains of possibility are forever leaving the station without us. And in the capital markets, time shoots down gamblers and borrowers, like fish in a barrel. The 25% market gain of the past year is dismantled in the next. And twenty-four months after, stock prices are still off 30%. Those investors who play against time on average lose.

With this as our backdrop, consider a few of the excellent posts that Fool member "692738" has lately posted to the boards. In this case, consider two notes about our Rule-Maker holding, Schering-Plough (NYSE: SGP). Over the past fifty-two years, it has compounded 19% annual growth. But between 1971-1984, it posted 0% total growth (in a market that collapsed, then spun sideways for years).

Take a few minutes to look through these two posts:

  1. Schering-Plough's Business Direction
  2. SGP's Growth in Shareholder Value

There are some great lessons to take in here about patience, perseverance, and the ascending value of the best businesses in America.

Back tomorrow with some words about Yahoo!

Tom Gardner, Fool

02/22/99 Close

Stock  Change    Bid
AXP   +5 5/16  108.50
CHV   +1       77.94
CSCO  +5 1/16  102.06
KO    -1 3/8   64.44
GPS   +3 1/2   65.88
EK    +2 1/4   68.44
XON   -  5/16  68.19
GM    +2 1/16  87.50
INTC  +4 3/4   132.81
MSFT  +1 5/16  149.00
PFE   +4 11/16 133.00
SGP   +  1/16  53.06
TROW  +1 3/16  31.75
YHOO  +9 5/8   145.00
                   Day   Month    Year  History
        R-MAKER  +3.12%  -2.40%   5.82%  33.90%
        S&P:     +2.66%  -0.59%   3.81%  28.46%
        NASDAQ:  +2.56%  -6.54%   6.81%  41.69%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    5/1/98   55 Gap Inc.      34.37     65.88    91.67%
    2/3/98   24 Microsoft     78.27    149.00    90.37%
   6/23/98   34 Cisco Syst    58.41    102.06    74.73%
    2/3/98   22 Pfizer        82.30    133.00    61.61%
   2/13/98   22 Intel         84.67    132.81    56.85%
   2/17/99   16 Yahoo Inc.   125.81    145.00    15.25%
   8/21/98   44 Schering-P    47.99     53.06    10.56%
   5/26/98   18 AmExpress    104.07    108.50     4.26%
    2/6/98   56 T. Rowe Pr    33.67     31.75    -5.71%
   2/27/98   27 Coca-Cola     69.11     64.44    -6.76%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo    72.41     87.50    20.85%
   3/12/98   20 Eastman Ko    63.15     68.44     8.38%
   3/12/98   20 Exxon         64.34     68.19     5.99%
   3/12/98   15 Chevron       83.34     77.94    -6.49%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    5/1/98   55 Gap Inc.    1890.33   3623.13  $1732.80
    2/3/98   24 Microsoft   1878.45   3576.00  $1697.55
   6/23/98   34 Cisco Syst  1985.95   3470.13  $1484.18
    2/3/98   22 Pfizer      1810.58   2926.00  $1115.42
   2/13/98   22 Intel       1862.83   2921.88  $1059.05
   2/17/99   16 Yahoo Inc.  2013.00   2320.00   $307.00
   8/21/98   44 Schering-P   2111.7   2334.75   $223.05
   5/26/98   18 AmExpress   1873.20   1953.00    $79.80
    2/6/98   56 T. Rowe Pr  1885.70   1778.00  -$107.70
   2/27/98   27 Coca-Cola   1865.89   1739.81  -$126.08

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo  1230.89   1487.50   $256.61
   3/12/98   20 Eastman Ko  1262.95   1368.75   $105.80
   3/12/98   20 Exxon       1286.70   1363.75    $77.05
   3/12/98   15 Chevron     1250.14   1169.06   -$81.08

                              CASH    $185.03
                             TOTAL  $32216.78

Note: The Rule Maker Portfolio began with $20,000 on February 2, 1998, and it adds $2,000 in cash (which is soon invested in stocks) every six months.

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