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An Embarrassingly Bearish Pick on a Company With a Family Connection

By Motley Fool Staff – Jul 8, 2016 at 3:21PM

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Motley Fool co-founder David Gardner’s son, Zack, has been choosing stocks on the Motley Fool CAPS platform for almost a decade -- since he was eight. Could the reasons a kid thinks a stock will outperform or underperform lead to better returns than the rationales of adults?

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. Years ago, he gave a thumbs down to this well-known company's stock, without knowing his grandfather was on the board. But was he right to be pessimistic about it's prospects?

A transcript follows the video.

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This podcast was recorded on July 5, 2016

David Gardner: Another stock I find on your CAPS scorecard is a company -- and I don't think you know this -- when you picked this stock at the time, your grandfather was sitting on the board of directors of the company.

Zack Gardner: Which stock is it?

David: We'll hold off on that for a quick sec. Not only that, Zack, but little eight-or-nine-year-old Zack put a red thumb on this company. You didn't know this, but you thumbed down and said this stock will lose to the market for a company where your grandfather was sitting on the board.

You obviously don't know. I'm going to give you three company names. I'm going to let you guess which one of the three we're talking about, and in alphabetical order so there's no bias, here. Best BuyRuby Tuesday (RT), or Safeway?

Zack: Oh, man. I would have no regret about shorting any of those, but I'm going to go with Ruby Tuesday.

David: And that is the correct answer. Now again, you did not know this when, on January 25, 2007, at the age of eight, you had thumbed down your grandfather's company. You've left this one in, ever since. Ruby Tuesday that day was at $28.08. At recent prices, Ruby Tuesday is below $4 a share. The stock has declined 86% in value since you put a red thumb on them, and the stock market is up 53%. You have made few better picks on your CAPS page than that pick. That is your single-best red thumb. There is no stock that you were more bearish on that has done better than Ruby Tuesday for you. Would you like to apologize to anyone?

Zack: No.

David: [Laughs] I think the correct answer is, "I'm sorry, Pop-pop."

Zack: [Laughs]

David: I will say, to his credit, what a wonderful grandfather you have. He's been off the board for quite some time. In fact, probably sometime right around when he left, maybe Ruby Tuesday's never been the same since.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Ruby Tuesday, Inc. Stock Quote
Ruby Tuesday, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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