On this episode of Motley Fool Answers, Alison Southwick and Robert Brokamp are joined for a very special podcast crossover event by Motley Fool co-founder (and host of Rule Breaker Investing) David Gardner. The hook? The Brothers Gardner will this week release the third edition of their now-classic tome, The Motley Fool Investment Guide, updated and revised for the world we're investing in today. And one fundamental idea in that book is that much of the conventional wisdom in the market is wrong, especially, as David notes, the old saw "buy low, sell high."
A full transcript follows the video.
This video was recorded on Sept. 5, 2017.
David Gardner: So I think being an investor is contrarian. I think most people aren't investors, for two reasons.
The first is that a lot of people don't have capital yet, and I think one great thing about Motley Fool Answers -- and there are other great things, too -- are that you're often speaking to people who are preparing to become investors or have just started becoming investors. For my own podcast, which is Rule Breaker Investing, I'm generally speaking to people who are probably already investors. So the reality is most of the world is not investing because it doesn't have the capital. That's reason No. 1.
Reason No. 2 is that even for those who do have the capital, a lot of them are, in my mind, too happy to kind of give it over to somebody else. Even things that we like, like index funds. To just mail it in, not connect with it, and not really choose into a company like NVIDIA or Netflix.
So I think you're a contrarian if you're listening to this podcast. I think you're a contrarian when you purchase, which I know you will, for friends and family as well, The Motley Fool Investment Guide. You're definitely a contrarian if you're putting on a Fool cap and talking about money. So I think being contrarian is very natural to Alison Southwick, Robert Brokamp, Rick Engdahl, and so many Fools here at Fool HQ, and so many of our members, which far outnumber us here in Alexandria, Va.
So I think you all get it, but just to close on this one, maybe one of my most contrarian principles is the Rule Breaker approach that I take to investing. Trait No. 3 of the six traits that I'm looking for in stocks that I pick are companies that have already done very well. Strong past price appreciation.
And I think that, again, flies in the face of what most people think, because most people think it's about buy low, sell high, the old saw goes. So they're looking for the discarded cigar butts in the gutter or a stock that's down. Something nearer the 52-week low than the 52-week high if they're even thinking about stocks. And yet I think you should be looking at the 52-week highs, especially for the kinds of companies that we're focused on, which are the world-beaters. The Rule Breakers. So I think that's very contrarian on its own.
And I guess I would be remiss if I didn't mention the final principle of Rule Breaking, which is that we're looking for stocks that are "grossly overvalued," according to the media. And that is about as contrarian as you can be -- for us to make that a buy signal. When "Amazon.bomb" is the cover of Barron's and we're like, "That is great news, not bad news," that so goes against the convention that I think that's also contrarian, too.