Warning: This article is from the Shameless Commerce Division at Fool.com. I'll not be talking about emerging industries, top dogs, or great management, though I will be talking about learning about those things in our upcoming seminar, Quest for Rule Breakers 2001. If you want to leave now, I understand. Here's a link to a fine Fool Portfolio article from 1997 that puts me in the Christmas spirit. Happy holidays!
If you're still around, you must want to know more about the seminar. Let me tell you what it's about.
The Rule Breaker strategy has evolved over the lifetime of The Motley Fool. When the portfolio started as the Fool Portfolio in 1994, it used a different set of criteria for stock selection. It was in those days that the portfolio bought America Online (NYSE: AOL). AOL didn't really fit the criteria that the Fool Port used, however. There was something else about it that appealed to David and Tom Gardner, something that needed further definition.
As time passed, the portfolio moved further away from its previous strategy. When it bought Amazon.com (Nasdaq: AMZN) in 1997 at a market cap below $1 billion, the separation from the old strategy was more pronounced. It became necessary to redefine the criteria that the portfolio used to select investments. Thus, the Rule Breaker Strategy was born.
The strategy described six criteria, which you've heard us reiterate over and over: top dog in an important, emerging industry; sustainable advantage; good management and smart backing; strong consumer appeal; strong price appreciation; and bearish media reviews.
The strategy has not ceased to evolve, however. It's a continuous learning process. We constantly question our assumptions and examine new possibilities for our stock selection. For example, we recently added a new consideration to our strategy: Our stocks should have the potential to appreciate ten times in five years.
In the seminar, we'll present our latest thinking about the strategy in a complete, coherent, systematic package. It will come in a five-week, twelve-lesson series of emails, with lots of board participation. We'll separate all the seminar participants into teams (of many people -- no specific pressure on you). At the end of each lesson, we'll present you with a matter for investigation and, if you choose, discussion. Your team's discussion board will carry the responses from all the team members. In effect, we'll be working together to think through the technologies, business models, and possibilities of the next decade.
We'll then select from these a handful of companies that, by the end of the seminar, we pinpoint as potential Rule Breakers. Some will sink and some will swim, no doubt. But within that group of companies we may well identify a few of the best performers across all stock markets over the next 10-15 years. The Rule Breaker approach swings for the fences, as you know.
"Why should I take the seminar?"
I know what you're thinking: "Why should I listen to you guys? Look at the bloodbath in your numbers! You guys are down almost 50% this year! That's horrible!" Yes, indeed, it is tough. Nobody likes to see that. There is no question that focused portfolios are volatile, and that our strategy focuses on the most volatile stocks. Rule Breakers (and Fakers) rise precipitously and fall precipitously. If you don't like roller coasters, if you can't take stomach-churning drops like the one we're in now, Rule Breaker investing probably is not for you.
But, honestly, market drops are a time for hope, not despair. This year's sell-off has created a lot of great buying opportunities. Because of the fall in the market, Rule Breaker investors can reduce the level of risk they take. Things look dark now, but the economy will not cease from long-term growth. In the seminar, you, together with thousands of other investors, will be kicking the tires on a bunch of companies with high potential for future growth. Now is the best time to find diamonds in the rough.
That's not to say that the seminar is just about finding new investments. The main point of the seminar is to add a stock selection strategy to your investment arsenal and to make you a better investor in the future. For you, as for us, the art of investing is a continuous learning process. You won't come out of the seminar with the answer to perfect investing. You will, however, think carefully about a different way to approach it. In doing so, you'll become a better-rounded investor.
Join us for the Quest for Rule Breakers 2001 to learn from one another, to amuse ourselves and our teammates, and, ideally, to enrich our investment lives.