It's not easy to beat the market as an investor -- most mutual-fund managers don't, and they're professionals. But using Motley Fool CAPS, people can try their hands at stock picking, and get ranked over time based on how well they do. One early CAPS stock picker -- he began when he was eight, back in 2007 -- was Motley Fool co-founder David Gardner's son Zack.
In this segment of the Rule Breaker Investing podcast, Zack is his dad's special guest, and they review his hits, his misses, and why he chose the stocks he did. One of his biggest losers: Lumber Liquidators, which he now realizes he liked for all the wrong reasons.
A transcript follows the video.
This podcast was recorded on July 5, 2016
David Gardner: Now the next one I want to talk about with you, Zack, is Lumber Liquidators (NYSE:LL).
Zack Gardner: Oof!
David: So the day was September 21, 2012. Your comment at the time, as you put a green thumb saying this stock will beat the market was, "After an outstanding performance in Olympia 1," which I'll explain in a sec, "this stock has convinced me it is really worth buying."
Now, Olympia 1 is one of the missions in Motley Fool Supernova, and it's a game mission. For those who are in Supernova, you'll know this. We're running Olympia 4 here in 2016. But [for] Olympia 1, the goal was, from the day we started that mission, [to find] what stock will be the first to double. [From] all the stocks in the Supernova universe, all my picks in Stock Advisor plus Rule Breakers -- it's a contest -- each member can [pick] five different companies [to select] which one will double, and Lumber Liquidators, shockingly, was the first one to do it. It was the first winner of Olympia 1 in 2012. It doubled, and I think that impressed you at the time.
David: Yes. So the stock, at that moment, was $52.14 a share. Again, September 21, 2012. Zack, do you know where it is today?
Zack: A lot lower than that.
Zack: About half, maybe?
David: Let's go with from $52 a share to unlucky $13 a share today...
David: ... and you've left that one open, so we're looking at a 75% drop for you. The stock market up about 42% over the time, so you're sitting 117 score minus in the hole. Have you checked in with Lumber Liquidators in recent years?
Zack: Well, I think the lesson here is do your research. I couldn't tell you what Lumber Liquidators did at the time. I still don't think I can.
David: All right.
Zack: I know so little about the company, but really do your research. Don't pick things based on hype.
David: Good. I like that lesson. And you know, hardware flooring is the business, and at different points, it's been a very good stock; but it's gotten in some trouble, even with the authorities in recent years, and it's been not such a good stock. In fact, in Motley Fool Rule Breakers, where we had picked it in 2009, we did eventually sell at around this time last year. It was a gainer for Rule Breakers. It was up 7% overall, but that was after having earlier doubled and given almost everything back, and well losing to the market.