Motley Fool co-founder David Gardner regularly recommends sets of stocks on the Rule Breaker Investing podcast -- essentially giving us all a free taste of the choices he and his team make in Motley Fool Supernova's portfolio universe. And this week, he gives us his 14th batch of five.
Now, Gardner has thus far managed something pretty remarkable: For every five-stock set, at every annual review, he has beaten the S&P 500's performance over the same period -- often by a wide margin. And recognizing that he can't keep batting 1,000 forever, if he misses on this set, he's going to be feeling it personally, because every company in this group is one he has in his own portfolio. In terms of time frame -- we're long-term investors, but even so, it helps to set mid-range benchmarks -- he sees these as stocks that will pay off over a minimum three-year period.
A full transcript follows the video.
This video was recorded on April 18, 2018.
David Gardner: If anybody ever wants to interview me about these five-stock samplers [you might be a journalist wondering whether people could pick stocks that do beat the market that consistently], I'll be the first to say, by the way, 100% is not a hit rate I will ever be able to maintain, but thinking back, now, over three years, that is a pretty remarkable record of consistency. But whether or not we're right 100% of the time or 75% or 50% of the time, what I really look at are the percentage points of alpha that would generate over and above the market, and that is a remarkable story. So, I hope you enjoy the series as much as I do, and now it's time to pick some new stocks.
Let's cue it up. Five stocks I own that I think you should own, too. And chances are if you are a longtime Motley Fool member, I would hope you own at least, let's say, two or three of these.
I had the pleasure here in Washington, D.C., last week of MC'ing an event at the National Building Museum for 500 Tar Heels. That's right, it was a University of North Carolina, Chapel Hill alumni gathering and a celebration of the campaign that the school is endeavoring to run to raise literally billions of dollars for the University of North Carolina, but in front of that audience with my Fool cap on, I picked a few stocks and suggested that these would be good stocks for my fellow Tar Heels for the next three-plus years.
So, I'm pulling that list from that event to share with you this week. Yup, I own each of these stocks and let's kick it off alphabetically as I tend to do, unless we're trying to be cute and use an acrostic and name our series after a month. Nope, this one's going to go back to the traditional alphabetical order by company name.
Stock No. 1: The first one up is Activision Blizzard (NASDAQ:ATVI). ATVI is the ticker symbol. Activision Blizzard is, for me anyway, the worldwide leader. There's some good competition [Electronic Arts and others] in interactive entertainment.
Now, the company's not as dominant in China as some very large Chinese companies, so you and I could debate who the real worldwide leader is. The good news is with a stock like NetEase, which is a big Chinese video game maker and one of those conglomerates, we own that one, too. I like to think that we've got this industry cornered, but I love the future of interactive entertainment, whether it's playing digital card games like Hearthstone, which I do almost every day, even though it's in its fourth or fifth year. I love Hearthstone to great games like Overwatch, which has been a huge hit and is the big e-sport of choice with clubs these days.
You might be following the The Overwatch League, some of you. Cities in the U.S. and abroad paying tens of millions of dollars to have the rights to have a team that's competing in Overwatch. So, e-sports is a big part of Activision Blizzard. Starcraft. Warcraft. World of Warcraft. The list goes on of this company's properties. Love Activision Blizzard. Bobby Kotick, the CEO. I've talked about him before on this show. He's a brilliant asset allocator. He's not even a video gamer.
He also, by the way, had a cameo appearance in one of my favorite films, Moneyball, when Bill James's great story and Michael Lewis's non-fiction book was turned into a movie with Brad Pitt. You'll see Bobby Kotick playing the owner of the Oakland A's in an early scene in that movie. A little trivia tip for Activision Blizzard fans. Anyway, ATVI is Stock No. 1.
Stock No. 2: Stock No. 2, alphabetically, pun intended, is Alphabet. Alphabet, of course, often known as Google with lots of other stuff attached. The ticker symbol is even just still GOOG. I had a good exchange with my friend Scott Phillips, who helps run Motley Fool Australia, and he was taking me to task by email, in a fun way, for organizing alphabetically by ticker. And Scott said -- and quite rightly [I agree, Scott] -- "Aren't we much more about the companies, themselves, and the businesses? Tickers are more for trader talk and people who don't necessarily think about the businesses, often, but the tickers more."
And I agree with you, Scott, so I'm going to order this one by company name and I expect to continue that going forward. And I know if I screw up, first of all, I'll try to blame Rick Engdahl because he's my filter. He's my whipping boy. He's my producer. I would immediately try to blame Rick. But if he didn't accept the blame, or people started realizing my game, here, then you could hold me accountable, Scott, and say, "Hey, Dave! You screwed that up. Make sure you keep these company names ordered alphabetically."
So, thank you, Scott! And yes, thank you Alphabet for being such an amazing company! A company, as I said to my gathered Tar Heels last week, that a lot of us associate, naturally, Alphabet with Google today and search, but 20 years from now our kids will think about Google as the AI company, the artificial intelligence company as artificial intelligence, as Kevin Kelly said on this show a month or two back. It begins to become a ubiquitous thing around us. You know how Wi-Fi is kind of ubiquitous these days and 30 years ago nobody knew what Wi-Fi was?
Well, 30 years from now Kevin Kelly says [I agree with him], AI will be all around us like Wi-Fi, and people will wonder what the world was like before that, and that's the future we're moving into and Alphabet is the leader.
Stock No. 3: Let's go back to the well. So, April last year what was the "I?" Quick quiz at home? That's right. It was Intuitive Surgical (NASDAQ:ISRG). I own the company, and in front of my gathered fellow Heels last week, I put Intuitive Surgical on this list, as well, so I present it for you again today. It reminds us to continue to add to our winners. It was a winner a year ago. It had a three for one stock split, something that I don't personally care about. I don't think we should spend a lot of time talking about stock splits. I realize some people think they're exciting or are confused by them.
I'll just point out that Intuitive Surgical, which has split a few times over our nearly 15 years of acquaintance. I like that stock just as much today, over the next 15 years, as I did 15 years ago. In fact, Intuitive Surgical is more clearly in the lead with more resources today than it was 15 years ago.
This is a company that spends about $250 million a year just on R&D inventing the future. A lot of upstart competitors would dream of having that as their revenues or, even more, their profits. Well, Intuitive Surgical is spending that much just on R&D. Love the company and I look forward to an increasingly minimally invasive future.
Stock No. 4: We're down to the M's. Match Group (NASDAQ:MTCH). Match.com. A lot of older people my age in our 50's or so, we grew up with that over the last 10 or 20 years. To me that's almost like the LinkedIn, but for dating. That's kind of the more corporate, professional world site, but many other people know and use Tinder, which is maybe for a younger generation. I'm sure it's used by people of all ages. Never by me, as a happily married man.
If you've ever heard of Tinder or you like Tinder, guess what? You could be a shareowner in the company that owns Tinder, and beyond just Match.com and Tinder, Match Group has 30 to 40 other sites appealing to many different types of people helping them find other people that they might fall in love with. Maybe get married one day. This is something that sounded bizarre 25 years ago and yet, meeting other people online and forming long-term relationships is increasingly in the top three of how we, as humans, interact with each other. Match Group is the out-and-out leader. Love the company. That's Stock No. 4.
Stock No. 5: And finally, at my speech last week, my joke was the "U" stock [I went down to the letter "U"], and it was University of North Carolina, Chapel Hill we hope you'll give money, and that was the joke. So, I don't think that's appropriate for this five-stock sampler. I think I do need to present a fifth and final stock.
Let's go to Z and let's go with Zillow (NASDAQ:ZG). Zillow and Zillow Group. You know, Zillow has about 150 million people who click in on a monthly basis. They're looking at listings of their house, of other houses in their neighborhood or places that they might want to move. Or just clicking around and looking at celebs' dream houses. All these things can happen on Zillow but, increasingly, the company is clearly the leader and is the friend of realtors.
And last week the company announced it's going to start buying homes, itself. So, you might end up selling your house over Zillow to Zillow. It was a move that was met with some consternation. The stock actually dropped 5% that day, but whether or not the iBuyer approach works for Zillow, which I think it probably will [I think they're very smart], this is the clear leader as we talk about finding properties online, which is a big, robust market and will be for years to come so let's close it out with my fifth stock, Zillow.
And there you have it. The 14th five-stock sampler we've done, here, on Rule Breaker Investing. I hope and trust that these stocks will perform over the following three years. I never insist that they do well in one year, and I'll be astonished if we can beat the market once again, here, because I am way overrated at this point. But they're great companies. It will be fun. I own these stocks and as I said, to kick it off, I hope you own them, too. I think you should.