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Cash is Really King

by David Gardner

Yesterday we began dissecting one of our neglected Rule Breakers, Excite@Home. I fully intended to continue that discussion today. But then I remembered the most neglected member of our Rule Breaker port.

You see, today we had one of those days. The Rule Breaker continued its slide, falling -3.65%, but still besting the beaten-down Nasdaq, which lost a woeful -5.59%.

Sometimes you win by not losing.

It's rational to mention our holdings in direct proportion to their representation in the Portfolio. As time goes by, your better-performing investments become a larger portion of your holdings. Your winners become important to you. Your losers become forgotten.

When a holding starts out small, you might even forget it even if it's been a shining star. So before going forward with part two of our Excite@Home conversation, I want to make sure that I mention one of the best-performing members of the Rule Break portfolio this year:


That's right, Cash (OTC: CASH). When we started out the year, Cash represented less than one percent of the portfolio. My, how things change. Since we first moved strongly into Cash with the sale of the Foolish Four, Cash has grown to become the fifth largest holding in the Rule Breaker Portfolio. That 4.7% of our portfolio back in March has now grown to 6.7%, a more than 40% jump!

It's now larger than our investment in Ebay. Now larger than our investments in Excite@Home and Starbucks put together. Surely this long-neglected little Rule Breaker deserves the nurturing light of a recap all its own.

But Cash is more than just the middle child of the portfolio. No way! Check out these numbers:

Since we've held Cash (3/2/00)

Symbol 3/2 Close 5/10 Close Change

CASH 1.00 1.00 0.00%
AMGN 65.31 59.81 -8.42%
AMZN 62.56 53.31 -14.79%
AOL 56.13 54.00 -3.79%
ATHM 31.69 18.88 -40.42%
CRA 230.00 82.31 -64.21%
EBAY 150.13 111.00 -26.06%
SBUX 33.25 32.56 -2.08%

Cash is clearly king. It's outperformed all of our other holdings. This Fool and his money aren't soon parted. What a Rule Breaker!

Sure, Cash has been a great performer. But has it had its day? After the tremendous run over the last two months, is Cash still a good investment value?

Cash looks mighty expensive with a P/E of infinity (1/0). But a Fool cares not about prices, as long as the reasons we went into an investment are still there. Is Cash still a Rule Breaker? Let's look at the tale of the tape...

The top dog and first-mover in an important, emerging industry: No doubt about it here, Cash is the one. Is it in an important, emerging industry? Well, how about the entirety of all commerce? Much as the competition might hate it, it all comes down to money. And Cash is the top dog, all right. Since the dawn of civilization, Cash has been the number one medium of exchange.

Sustainable advantage gained through business momentum, patents, visionary leadership, and/or inept competition: Hmmm...let's check out Cash's competitors. Salt? Not since the Fall, baby. Spices from the East? You try buying your next home with a load of paprika, M. Polo. General barter and exchange of physical goods? Hardly. And the barriers to entry are enormous - you can't just start printing more Cash in your garage.

Excellent past share appreciation, measured by a relative strength of 90 or higher: This one's hard to measure, but with the markets they way they are, a YTD return of 0% is looking pretty sweet.

Good management and smart backing: Our Cash is in dollars. Management: can you say "Alan Greenspan"? Backing: can you say "full faith and credit of the United States"?

The greater the consumer brand, the better: Is there anything more widely recognized, the whole world over, than Cash?

A significant constituent of the financial media is recently on record for calling it overvalued: Again, we keep our Cash in dollars. Ask the folks trying to hold up the Euro or the Yen whether they think it's overvalued.

So, why would we ever get out of so wonderful an investment? Not these Fools - we only sell when we find something better to invest in. And for the last two months, we haven't.

Ah, Cash. Our oh so legal, oh so tender little Rule Breaker. Fool on!

David Gard...I mean, Albaby
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