Yesterday, Rule Breakers pick aQuantive (Nasdaq: AQNT ) did the unthinkable: It more than doubled from our initial buy-in price, thanks to a $66.50-per-share buyout offer from Microsoft (Nasdaq: MSFT ) .
Turns out, thanks to our subscribers, that there's a name for this phenomena and the action that creates it. Let's listen in as David Gardner explains.
Tim Beyers: Hey, David. Describe a daybagger, and why on earth does it go spiffy-pop? Seriously, it sounds like a guy hooked on popcorn. "He's got a four-daybagger habit. He's hooked on spiffy-pop."
David Gardner: Yeah, well, have you ever seen a stock's share price rise more in a single day than you paid for it originally?
Here's an example: Say that four years ago you bought a $10 stock. Through yesterday, the stock had risen to $50, up five times in value. And then today, it happens: The company reports great news and the stock rises $11, to $61. See what happened? The per-share gain for the day was $11, when you originally paid only $10. We long-term investors at The Motley Fool needed a term for that, because even though it's a wonderful phenomenon that long-term investors should all be shooting for -- Fat City, baby! You didn't do a lick of work, and you made more in one day than you originally paid! -- no one had ever put a label to it before.
So we did just that. In Foolish style, we opened up a community contest on this. We took in 256 submissions, and we voted our way to a Final Four. And on May 16, 2007 (my 41st birthday, by the way, but let's please not be counting), we named our two winners -- one is the noun version; the other is the verb. We like 'em both, but perhaps history will accept one term -- if so, we'll just let them battle it out in the marketplace.
The words are "daybagger" and "spiffy-pop." The word "daybagger" is an allusion to Peter Lynch's "two-baggers" and all the "multibagger" talk that goes on around here. "Spiffy-pop" was just a magical, energetic word that seemed to describe perfectly, to my ear, this phenomenal action.
So in that example above, when that stock went up $11 that day, it became a daybagger for you. Break out the champagne, girlfriend, because that stock spiffy-popped!
TB: Easy, Dave. I'm not a girl, OK? More to the point, why are Rule Breakers much more prone to go spiffy-pop?
DG: The question is well timed, Tim, and you know it better than most. That's because just two days after coining those new terms, after loosing our neologisms onto this green planet, aQuantive, a stock you picked for Rule Breakers in our January 2007 issue, shockingly spiffy-popped! In fact, it's the first daybagger for our service. It came a lot sooner than I think any of us -- including you? -- expected.
I wouldn't necessarily say that Rule Breaker investing -- which looks for the most dynamic stock-market winners among today's up-and-coming companies -- specifically leads to more daybaggers. What leads to daybaggers is long-term investing.
In fact, one of the 256 submissions we got for our new term -- this one didn't win but, it made me laugh -- was "UnCramer." Short-term thinking, here-today-gone-tomorrow investing, changing your mind four times in a given year on a single stock -- these are the things that will flat-out kill your chances at spiffy-pop investing.
Day trading may have its uses and will certainly always have its adherents. And some will actually be good at it. But for most of the rest of us, the clear road to riches is paved with daybaggers -- patient accumulation of shares in great companies that are held for years, not days.
TB: My wife wants to know when tickets for our all-expenses-paid Hawaii trip will arrive in the mail. What can I tell her?
DG: My brother Tom is the CEO of our company. Tim, I am simply not personally authorized to disburse company funds in such circumstances. Please, please, talk to Tom.
TB: What should investors do when a stock they own goes spiffy-pop? Besides, that is, enjoy a touchdown dance?
DG: Probably just sit tight! Most daybaggers, passively held, if they are stocks of strong companies, spiffy-pop again and again. May I brag for a sec, in a way that only a long-term investor can?
Our cost on Amazon.com (Nasdaq: AMZN ) from our original purchase on Sept. 9, 1997, is $3.19. When it went up $12 in one day after earnings last month, it triple-spiffy-popped. The next day? Amazon spiffy-popped again when it jumped another $6.
Lemme see: Did I see it go up about $2.60 on Wednesday, when the company announced a new digital-music shop? It almost spiffy-popped again. Patience, dear Fools. Patience.
Spiffy-pop! AQuantive just became the sixth stock in the Motley Fool Rule Breakers portfolio to at least double. Want to find out the names of the other five? Click here to test-drive Rule Breakers for 30 days. There's no obligation to subscribe.
Fool contributor Tim Beyers, who is ranked 6,759 out of more than 28,900 rated players in Motley Fool CAPS investor-intelligence database, is a sucker for growth stocks and a regular contributor to Rule Breakers. Tim owned shares of aQuantive at the time of publication. His portfolio holdings can be found at his Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. Microsoft is an Inside Value pick. Amazon is a Stock Advisor selection. The Motley Fool's disclosure policy has a three-bagger-a-day spiffy-pop habit.