On this week's Rule Breaker Investing podcast, Motley Fool co-founder David Gardner shares his thoughts on FANG stocks -- Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Google (NASDAQ:GOOGL) (NASDAQ:GOOG), give or take a few -- and how gloom-and-doom articles about these companies are so often misleading.
Tune in for David's reflections on how good capitalism can be, and usually is, for the world; what the changing nature of the FANG/FAANG/etc. acronym tells us about the market; why the idea of the oligarchical, zero-sum stock market is flawed; how snappy acronyms often miss the bigger -- and more exciting picture; why Amazon.com (NASDAQ:AMZN) doesn't need to be broken up; and more.
A full transcript follows the video.
This video was recorded on July 11, 2018.
David Gardner: Welcome back to Rule Breaker Investing! It's July 11th. That's the day we're publishing. We publish every Wednesday, late afternoon here on the East Coast of the United States of America. I hope you've subscribed to this podcast and that we're a weekly visit for you, and all of our Motley Fool podcasts -- Market Foolery, Motley Fool Money, Industry Focus, Motley Fool Answers, and yes, the one you're listening to right now. That's The Motley Fool family of podcasts, and I enjoy each a little bit every month. I hope you do, too. I hope you're having a great summer.
Last week, we had a lot of fun talking about stocks that I picked a few years ago. We reviewed a five-stock sampler from 2016 and saw that those stocks are dead on the market. They are up, the market is up, too, so they have not yet distinguished themselves as above or below the market after two years. It's been a good market. I like the companies, I certainly like them going forward. Please listen back for our Brexit-inspired stock list if you feel inspired. You might also enjoy the five new stocks that I picked last week, five stocks celebrating the World Cup, looking four years forwards, since that's when the next Men's World Cup will be. That five-stock sampler there for you on July 4th, if you didn't get a chance to listen in on America's birthday.
This week, it's time for something entirely different. In fact, this week, I'm going to use as my format the title of a book that I enjoyed reading more than a decade ago. It's by John Allen Paulos, the Temple University academic, the longtime writer and thinker about numbers and innumeracy. You might have read his wonderful book, I did, Innumeracy, which shows us how we can up our game as readers and citizens around math, especially as we read newspapers, watch media studies put out on television channels. We can be a little bit savvier about statistics and mathematics. That's important for a well-functioning democracy.
John Allen Paulos, years ago, wrote a book called A Mathematician Reads the Newspaper. That's my format for this week's podcast. What you're going to get this week is a Rule Breaker, not reading the newspaper, but looking at FAANG stocks. If you don't already know what that phrase is, I'll explain that in a second. This is a Rule Breaker Looks At FAANG Stocks. What I want to do is share with you a number of thoughts I had as I perused a recent article on the subject. We're going to have a few points, brief meditations across a few dynamics about FAANG stocks. That's what I have for you this week.
In fact, I first started to speak to this a little bit a couple of years ago on this podcast. It was April 20th of 2016. That one was called What The Top 3 Stocks Of 2015 Have In Common. That was a fun podcast to do, because among other things that they had in common, we had picked all three of them in our services. That's nice to know, that the top three stocks in 2015 were all Motley Fool picks.
But, I was reviewing those, and I was starting to talk about this idea of using an acronym to describe a set of companies, and what that means for our thinking and what that can mean for your investing. I have to admit, my cards on the table at the start, I'm a little cynical about using phrases like FAANG stocks. That'll no doubt come through on this week's podcast. But I want to think deeper with you and become better at thinking not just about investing, but about how we read things, how we take in information, and do we have the right lens perched on the end of our nose as we look as investors at how the media covers the stock market. That's definitely part of what we're doing today.
There's another book. I was just reviewing my Amazon book purchases over the years. I actually bought this one on May 27th, 1999, Amazon tells me. It's a devilish little book called How To Lie With Statistics. That one goes through my mind, as well. When you start talking about how the media reflects numbers, they say, "This study has proven this or that thing," or, "This is how we're going to look at the stock market," the use of graphs can be very misleading for people.
How To Lie With Statistics by Darrell Huff cynically and humorously shows you how you can put up graphs in newspapers -- I won't name any particular newspaper, but you can imagine infographics can sometimes be used to mislead people. Sometimes, you won't even see the x-axis or y-axis label. Sometimes the actual scaling of the axes is questionable. Sometimes, what data went into the studies in the first place are questionable.
So, How To Lie With Statistics and A Mathematician Reads the Newspaper. If you've read either of those books, you're already a step ahead of listening to this week's podcast.
OK, so what was the article I read a couple of weeks ago that I want to reflect on? The title of that article, this was on Bloomberg, it was a Bloomberg opinion piece, is, "The $1 Trillion Market Cap Race Is A Zero-Sum Game." The article was written on July 3rd of 2018. If you just want to Google the phrase "Bloomberg opinion trillion," it will be the top link, at least of July 2018. You can find it pretty quickly. It's by somebody that I don't know named Jim Bianco. "The $1 Trillion Market Cap Race Is A Zero-Sum Game." That's what we're going to be thinking through. I'm not going to take you all the way through this article, I'm certainly not going to read the article to you. Feel free to enjoy reading it yourself. That's what we're going to be looking at.
Earlier, I used the phrase FAANG stocks. I know many people listening to this podcast already recognize that as a commonly used acronym referring to some of the great companies and stocks of our time. I've variously heard FANG as Facebook, Amazon, Netflix, and Google; sometimes I hear it phrased with two A's, FAANG -- Facebook, Amazon, Apple, Netflix and Google. One of the things this article does is introduce a couple of additional letters. I'll be making a point about that later.
One thing the article we're talking about this week does is, it adds a couple of extra letters, so let's make sure that we define our terms right now, up front. It's using a six-letter acronym to describe earthshaking, big-time players on the markets today, companies that have huge market caps that have made big gains. The premise of the article, which was implicit in the title I read to you, is that it's a "zero-sum game." These companies are winning, and everything around them seems to be losing. Here is the six-letter acronym used in the article -- FAANMG. For our purposes this week, I'll be pronouncing that as FANG stocks. But, FAANMG could be said differently. I'm not sure how we would refer to it other than FANG. It's Facebook, Apple, Amazon, Netflix, Microsoft (NASDAQ:MSFT), Google.
In that spirit of those six letters and the concept of FANG stocks, I'm going to make six points this week, each organized with those same six letters. I have six points, and each of my points will start with those letters -- F, then A, then A, then N, then M, then G. Now you see the full rules of the game that we're playing this week.
That brings us to reflection No. 1. This is the F reflection. I'm going to go here with the two words Foolery works. I think most people listening to this podcast know that The Motley Fool name comes from Shakespeare. Specifically, The Motley Fool name comes from act 2, scene 7 of the play As You Like It. It was indeed I who was flipping through a book of quotes, The Penguin Book of Quotations, about 25 years ago, trying to figure out what we would call the newsletter for our parents' friends that The Motley Fool started out as.
I loved the concept of The Fool, the one who could challenge conventional wisdom, the one who could tell the king or queen the truth, the only member of the court to be able to say the emperor has no clothes when necessary. The Fool got away with that because he had license to do so. It was part of his or her role within the court to be able to tell the truth, but of course, to do so with humor and with wit. I loved the idea of The Motley Fool, and I certainly love even more what The Motley Fool has become 25 years later. Foolery works.
In fact, one of my favorite Shakespeare quotes, we used it a lot for our old Motley Fool radio show, we would open up each show with this quote: "Foolery, sir, does walk about the orb like the sun. It shines everywhere." That comes from Twelfth Night, where there's another great Fool, Feste, who says that. Foolery, sir, does walk about the orb. It spins around the earth like the sun. It shines everywhere. And while that was supposed to be a negative comment on humanity, that there's foolishness everywhere, we flipped that and made it a great way to open up The Motley Fool radio show.
Similarly, I'm opening up this week with my F as Foolery works. As I look over the FAANMG stocks -- let's do this together -- I'm going to ask you the same question I asked on this show a couple of years ago, what's your FANG score? There are two ways of scoring your FANG score. We're going to do that right here. One way is the way I did two years ago. I want you to ask yourself, do you own the stock? If so, for how long? For how many years have you owned the stock? Let's go over these six. I'm going to give you my FANG score, and I'm going to encourage you to come up with your own FANG score. The first is just how many years have you held it.
If you are a Rule Breakers and Stock Advisor subscriber, in 2012, we recommended Facebook. We've held Facebook in Rule Breakers for six years, so that's six. Apple is next. I first recommended Apple in Motley Fool Stock Advisor in 2008. That was ten years ago. Six plus ten is 16. Amazon, I first recommended for Motley Fool Stock Advisor in 2002. That's 16 years ago, plus 16, makes 32. Netflix, I first recommended in 2004. That's 14 years ago. 14 on top of 32 is 46. Microsoft, I have never recommended, so unfortunately, I missed that one. We're going to give ourselves a zero for that. If you've held Microsoft for any amount of time, feel free to add to your own FANG score for that one. And finally, Google, I recommended shortly after its IPO. In my case, it was in 2008. That was 10 years ago. That brings my FANG score to 56. Foolery works.
If you are a longtime Stock Advisor and Rule Breaker subscriber and you've acted on our advice, you've held those six companies for a combined total of 56 years at this point and counting. That's because each of them -- with the exception of Microsoft, which is still not an active recommendation -- remains an active recommendation here, six, ten, or 16 years later. All of them are winners that we've let run. Foolery works.
Here's another way, a second, new way to calculate your FAANG score. This will take a little bit more time, but I've done the homework myself, so I'll give you mine. What multiple of each of those investments does that represent for you? For example, Facebook is up 7X in value for us since 2012, so that's a seven-bagger. I'll just go straight down the list really quickly. Apple has been a nine-bagger for us. Amazon has been a 113-bagger for us. Netflix has been a 179-bagger from our first recommendation in October 2004. A couple of months later, I recommended it again. That one's actually a 225-bagger, because it dropped from October to December of 2004, and we reupped it. But I'm just counting the first instance of each of our active recommendations, so I'll just count Netflix for a 179-bagger. Microsoft is a zero-bagger. Still have never recommended the stock. Finally, Google, since 2008, this isn't as impressive as you might think, is a four-bagger. If you add up all of those FANG scores measured by baggers, that's 312 times around the bases for investors who've patiently and Foolishly held on to those companies over the course of time.
Reflection No. 1, my F reflection this week for you, is Foolery really does work. This is not a backward-looking thing at companies and their performance. In each of these cases, we've actively recommended these to you, our dear members, our paying subscribers, and said, "Buy this one." Whether it was Amazon in 2002, still holding; or Google in 2008; Facebook in 2012; etc., Foolery works.
Reflection No. 2, A. The first of our two A reflections is: appreciate capitalism. Certainly, there are some poor forms, there are some crony forms, of capitalism. There are some abusive companies out there. Often, sadly, those companies get a lot of the headlines. But underneath those kinds of bad stories, there's almost infinite good. The tremendous efforts, not just of these companies, but by every for-profit company trying to do good by their customers, create a product that is useful, create a service or experience that is memorable -- all of these things are humanity coming together, working in teams, trying to create things that are of benefit to others, that you or I would pay for, would buy, as customers, and maybe pay above their costs so they can make a little profit and grow their enterprise. Appreciate capitalism.
I don't think that capitalism is a zero-sum game. A point of debate I have with this particular article, it's right there in the headline, the trillion-dollar market cap race is a zero-sum game. Each of these companies has been growing its market. While part of the premise of these kinds of articles these days is that only a handful of companies are really prospering, and everybody else is just treading water in this market environment, how did those companies even get to the point where they are today over the last five, ten, or 15 years? The answer is, they did a great job for their customers.
Even a company like Starbucks, which is not listed in the FAAMNG acronym, in addition to prospering greatly on its own and for its shareholders and all of its stakeholders, I see far more mom-and-pop coffee shops around me today than I did before Starbucks showed up 30 years ago. I don't believe, for the most part, that capitalism is a zero-sum game. Business is not zero-sum. These companies are great examples of that.
In fact, how long have each of these companies actually been around? Microsoft has been around for more than 30 years, but a few of these companies haven't been around for much more than a decade. Part of the reason we should appreciate capitalism, and it works, is that the big movers and shakers of today haven't been the overdogs of yesterday, and haven't been these oligarchical, dominant things for the last century. No. In fact, most of these are really upstarts, if you think about the world of business. That says something very good about letting innovation happen, and about upstarts coming out and unseating the power of the past. There's something really wonderful about capitalism. Of these FAANG stocks, none of them even existed when I was born in 1966. That's a remarkable thing to reflect on, and it shows how well our system works.
Reflection No. 3. We've been through FA, here comes the second A. The second A is: acronyms reveal. We've already said Foolery works, appreciate capitalism, and acronyms reveal. I think it's really funny that people have taken to grouping a few companies together -- this has happened for a few years now -- and refer to them using an acronym. The reason I think that's funny is, if you've noticed, the acronym keeps changing. That reveals something for me. When you try to lock down and just say FANG is Facebook, Amazon, Netflix, Google, well, all the sudden, a few other companies show up and look like those companies, so we add an additional A. Or, for this article, we're throwing in an M, as well. Acronyms reveal.
The first thing that acronyms reveal to me is, since we can't keep the acronym constant, probably, the system is more dynamic and less zero-sum than most of us would be led to believe. In fact, when I did my episode a couple of years ago that I mentioned earlier, which is the April 20th, 2016, you can probably still Google it and listen to it, if you'd like -- What The Top 3 Stocks Of 2015 Have In Common.
After that, I was starting to make jokes that the phrase FANG missed Priceline (NASDAQ:BKNG), which, at the time, was among the top five stocks of the last ten years that were being written about in articles a couple of years ago. These days, Priceline renamed itself to Booking Holdings. That company is a true, worldwide leader, but because the letters P and B didn't seem to fit the acronym, it's never really been mentioned, even though, for Stock Advisor members, Priceline is up 87X since we first recommended it. That's way more successful than Facebook's seven-bagger or Apple's nine-bagger. But, because the letter doesn't seem to fit the acronym, we forget about one of the worldwide leaders, and a great company unto itself.
In fact, I remember tweeting out a couple of years, PNNA is the new FANG, because Priceline had outperformed Netflix. It was the No. 1 stock at the time, so I was making a joke that PNNA is the new FANG, and trying to confuse people on Twitter by using No. PNNA and suggesting it's better than FANG. If you were casually watching, you wouldn't really have understood what was going on or what I meant at the time. Now, I guess I would say BNNA, since it's Booking Holdings, is the new FANG. The key point here is, acronyms reveal. They reveal that we really can't put our arms around any given set of companies because we'd be excluding others when the letters don't fit, or the numbers start changing.
One other thing that acronyms reveal for me -- this is my own opinion, I can't back it up with data, it's just pure intuition, but I'm going to submit to you that I think that most of the people who actually frame things up in this way, who say "FANG stocks,: who search the internet for the phrase "FANG stocks" or listen for it in articles or on television, I'm going to submit to you that most of the people who frame things up this way don't actually have a very big FANG score themselves. That's just a guess. When people are looking for something hot, and they start creating trends in their heads and use acronyms to reveal them, I'm betting, in most cases, those people weren't investing in those companies five, ten, or 15 year ago, and they're looking for what was hot last year as a way to figure out how to get started for this year and next.
So, I think acronyms can reveal a lot to us. By paying attention to language, which is something that I've always done very naturally as a writer myself, an English major back in the day, and something that I know a lot of you do, and I've always encouraged us to look hard at language. That's one of the things I'm doing this week with this reflection No. 3, acronyms reveal.
Reflection No. 4, we've gotten to the letter N. In the FANG long-form acronym, that stands for Netflix. On this podcast, N will stand for names change. In some ways, this is a continuation of my previous point about acronyms and how they change. Names change. I want to mention, going back to that Bloomberg opinion article, which has inspired a portion of this podcast, I want to give you what the subtitle of that article is. It reads like this. "The stock market values of a few technology companies are increasing at the expense of legacy businesses." Names change.
How about this name -- the phrase in that subtitle, "technology companies?" That's a funny concept for me. I've said this for more than a decade. I remember when we would go on CNBC back in the day, and they'd be saying, "Now here to talk about tech stocks are David and Tom Gardner, The Motley Fools." I would start by saying, "You guys can call these tech stocks. I don't call them tech stocks." I don't really know what the phrase "tech stock" means. For a long time, I've invited you as my listener or my fellow Fool to question the words around us. Names change.
Technology stocks, maybe in 1950, made some sense to me, when there was a company like IBM but not that many others, or when Intel starts, and the PC comes online. But since the age of computers and now the internet and information technology and social media, and we're not even talking about things like virtual reality. The bones, the foundations that our business world is built on today, technology runs through it all.
In that article subtitle, to say the stock market values of a few technology companies, doesn't make a lot of sense to me. Really, when I look at these six FAANMG stocks, I see completely different businesses. What Google is doing with search, but oh, by the way, also with Uber and autonomous cars, or, did we talk about YouTube? Even within Google, it's doing completely different things, operating in different businesses. That's to say nothing of a company like Netflix, which is entertainment streaming, or Microsoft, which is clouded as a business, a huge cloud business with its Azure business today, in addition to the Xbox. How about Amazon's Web Services clouded business, existing right alongside a place where I could buy John Allen Paulos' book, A Mathematician Reads The Newspaper? Haven't even talked about Facebook or Apple. I don't have to go through all six companies. Each of these companies themselves is itself operating in completely different businesses. Yes, technology runs through them all and through much of their competition. Names change.
I'm going to quote a little bit from this article for you now. "These six stocks alone," the author wrote in the article, "pushed the S&P 500 up 2.66%." That's since December of 2017. That's, admittedly, the near-term focus of this article. It goes on to say that the other 494 stocks in the S&P 500 were collectively down 0.4%. Overall, the S&P was up just over 2%. So, the perception is, these six companies were all of the gain, and all of the others were actually down.
"This is not just a U.S. phenomenon," the author goes on to say, "the next chart adds Twitter, Tesla, Alibaba, Baidu, Nvidia, and Tencent Holdings to the FAAMNGs to form a group we call "The Disruptors." Since the start of November, this group pushed up the Morgan Stanley World Stock Index by 1.6%." I'm not going to go through too much more of this.
The two big takeaways here are, one, by enlarging the group and adding some more letters and names, and then giving them a new name -- names change. Calling them "The Disruptors," we can now make a big point about the world markets. That's big point No. 1.
Big point No. 2, hilariously to me, most of these companies are Rule Breakers or Stock Advisor stocks. It's funny to me that they're inventing a new phrase, "The Disruptors," to refer to this group. Now, we've added enough companies in that we can't use an acronym anymore, so we invent a new phrase. I think you and I, as longtime listeners of this podcast, or even longer-time members, might just call them, instead of The Disruptors, say it with me, the Rule Breakers! The methodology that I've talked about for three years on this podcast has led us to find all of these companies not last year or since December 2017, but in fact, has led us to find them and hold them for years and years to great profit.
Yes, I think, going back to my point No. 1, Foolery works. To the title of this podcast, as a Rule Breaker looking at FAANG stocks, I can't help but notice that Rule Breakers are what are winning worldwide, whether we're talking about U.S. domestic stocks or the real innovators globally. What runs through Rule Breaker is not merely disruption, but I would say innovation, a great ability to constantly innovate and innovate at scale.
Those are the stocks you and I want to own. Yes, these are the stocks that we have, if we've been Motley Fool members for a long time, owned for quite a while. To close reflection No. 4, names change. Sometimes company names won't fit acronyms. Sometimes the world changes. Sometimes what we mean by technology changes. Names change.
Reflection No. 5, we've reached M. This is a particularly American reflection. Phrase five, this one came to me from my producer this week, Anne Henry. I was like, "Anne, I need something for M. Here's the point I want to make. But like others who create mnemonics with acronyms, I need to fit certain words or phrases to make it spell something." I needed to make this fit M. And Anne said, "Aren't you just saying that they're made in America?" Each of these is a two-word phrase this week, so, made American.
With reflection No. 5, I think we should briefly reflect on that. Isn't it interesting that these FAAMNG stocks all happen to come from one country in the world? You'd think, if this was all random, it would be randomly and evenly distributed globally. And indeed, I think we'd be a stronger planet if that were the case. My hope for our future, my hope for your future, is that you live in a world where these companies come from all over the place.
They could have come from anywhere. But the reality is, there are a few key ingredients that are part of America today that are not present in many other places around the world that has made it so that America -- this is a little bit of a Chauvinistic point, a national pride point. Nationalism is not going to invade the Rule Breaker Investing podcast here for very long, but briefly here with reflection No. 5, indeed, all of these companies came from the United States of America, and, most of them in just the last couple of decades.
Is that a coincidence? I don't think so. I think that capitalism, practiced well by visionary entrepreneurs who gain backing from places like Silicon Valley, where there is capital, seeking a better world, go on to take their widget, their great product or service or website, and start to improve lives of people who say, "I want to use that product or service. I will pay you for that. I will give you my money, my time. It's worth it to me." It's an incredibly powerful one-two combination, when good ideas meet good capital in fertile soil that we've always had here since the United States of America was born in the year 1776. Now, you see what it looks like.
The rest of the world can participate, too. In fact, if you're not an American, I hope that you look on with, I'm not going to say envy, because that's kind of negative. How about admiration for these companies? I realize these companies are in the headlines. Facebook has gotten a lot of criticism for what happened in the last U.S. presidential election. Netflix made some horrible mistakes in 2011 that sunk its stock badly. Microsoft has had the Department of Justice go after it. Some people think that Amazon should be broken up. I realize there are always fair questions to ask of these kinds of companies. My fair question, which I think maybe isn't asked enough, is, how did these all start in one place? Why? What can we learn about that? What can the rest of the world emulate about that to lead to even more great companies starting in other places worldwide? Reflection No. 5, made American, that's our M point.
Briefly, before I close with our final reflection this week, I want to speak to the idea of whether something like Amazon should be "broken up." I think it would be a huge mistake for us, in this case, as American readers of a Bloomberg opinion piece, to conclude -- after reading a headline, "The $1 Trillion Market Cap Race Is a Zero-Sum Game" -- that something like Amazon has gotten too powerful and should be broken up.
On the one hand, most of the companies we're talking about this week didn't even exist a couple of decades ago. On the other hand, do you truly think that in the next 20 years, the world won't change again, and new leaders won't arise? Yes, indeed, they will.
I'd also like to point out that these are great American assets for me and my fellow Americans. These companies are world leaders. If we as Americans begin suggesting that's what's going on here has gotten too big and powerful and needs to be broken up, I think we'll really reduce our standing worldwide. If we were to start taking the best players on our team and saying, "They need to sit on the bench some," or, "We need to trade them away," guess what's going to happen? Other places worldwide will gain from our losses. For example, I doubt the Chinese government is going to start taking its equivalents, companies like Baidu or others, and start breaking them up.
I think as Americans -- this is my made American point here -- we should be pretty big fans of propping up these companies. Think about a company like Samsung in South Korea, how much it means to South Korea, how proud Koreans are of Samsung. I think we Americans should remember to take serious pride in the made in U.S.A. nature of these FANG companies, full stop.
Reflection No. 6, to close this week, we're down to G. G in the FANG stocks acronym stands for Google, which is kind of funny, since the company's name is Alphabet now. Names do change, don't they, back to reflection No. 4. I'm going to go with this G -- generalizations mislead.
Generalizing can be helpful. It's helpful to start seeing connections between things and grouping them up ... until we go too far with it. I would say now, in the third or fourth or fifth year of people using the phrase "FANG stocks," we're starting to mislead ourselves and head fake ourselves into what's actually happening in the world if we think that's a meaningful set of companies.
I've already shown, from the article we're looking at, that the author begins to broaden and add in ten other companies worldwide that start to fit. You start to see a more amorphous grouping, and no longer an acronym. Within that amorphous grouping, you have wildly different businesses. Tesla was mentioned and Twitter. Could Tesla and Twitter be any more different as businesses from each other? I don't think so. Generalizations mislead.
In fact, it would be misleading to even think that these had been the best stocks over the last ten years. Yes, they've been awesome picks for Stock Advisor and Rule Breaker members who've shown patience. By the way, if you're not already a member of Rule Breakers and Stock Advisor, I highly suggest you sign online to fool.com and take a 30-day free trial and check us out. I hope you'll join us if you're not yet a member. It would be misleading to think that these have been the best stocks. Sometimes, articles like this make you think that's been the case.
The truth is, as I mentioned earlier, a company like Priceline, now Booking Holdings, has far outperformed Google. Or Activision Blizzard, which I haven't mentioned at all this podcast, has been a wonderful 47-bagger for Stock Advisor members, which is way ahead of most of FANG stocks.
In fact, when you start generalizing and saying, "These six companies have been all of the gain of the S&P 500 since December," even that's a little silly. Among the other 494 stocks, some of those have outperformed the six. Some of those other 494 have been incredible picks, and others have been really bad. Balanced out, they about equal 0, as it turns out, while these so-called six companies are up 2.5% to explain most of the gains. But what the author is doing there is cherry-picking a small group of companies. You could cherry-pick a separate group of companies and make the same point. Generalizations mislead.
I think it's worth noting that these are the big players. These are the index drivers. When you have a market cap of $100 billion, that's going to push an index far more than a stock that has a market cap of $1 billion. That's just 1/100th of the size of one of these companies.
Here's another generalization I don't want you to make, I don't want you to mislead yourself about -- do you think that these so-called FAANMG stocks are the best-performing stocks over the next 20 years? I certainly don't. I think, again, a lot of people are generalizing and head faking themselves into thinking those are the ones to own. Yes, I love each of these companies. I even love Microsoft, though I've missed recommending it. I wish I had recommended it, it's been a great performer the last five, three, and one years. Microsoft under Satya Nadella has been an incredibly great company.
But, as much as you or I may love any or all of these six companies we've focused on this week, the truth is, they're going to underperform the big performers of the next 20 years. In some cases, they're so large. It's just hard for Apple to double or triple again from the size where it is today. You and I might own Apple. I do. I think it's a great company. But if I'm looking for the big winners of the next five, ten, 15 years that we talk about on this podcast, you'd want to be looking at much smaller companies, emerging companies. Going back to reflection No. 1, Foolery works.
Using our Rule Breaker principles, I think you're well on your way to start figuring out what those new companies are. But, generalizations mislead. Don't be fooled into thinking that these are the stocks to own for the big winners of the next generation. Some of these companies may be dramatically disrupted in the way that General Electric has been over the last 30 years and won't look anything like they do today 20 years from now.
On this podcast, and with my investment strategy and approach at The Motley Fool, the Rule Breaker approach, we're always looking not backward but forward at the future, asking, what are the next leaders? Who's innovating? Can we please get our money there as early as possible, holding for as long as possible, together?
Alright, there you have it! A Rule Breaker Looks At FAANMG Stocks. I do appreciate the article that was written. Jim Bianco, I've never met him, I probably never will. I really haven't focused that much on his article. I'm glad that people are caring enough to write about stocks. I don't have a lot to say about the man or his work. I did want to use this opportunity to talk some about these companies and go over our six points, which, to close, are: Foolery works, appreciate capitalism, acronyms reveal, names change, made American, and, generalizations mislead. A Rule Breaker Looks At FAANMG Stocks.
That's all she wrote for this week. Next week, I'm really excited to be welcoming back my brother Tom Gardner and our longtime producer, Mac Greer, for a continuation, the second in our series, a Blast From The Radio Past. We did this a few months ago, got a great reception. I've asked Mac Greer to go back, find more quotes and quips from past CEOs, business authors, and celebs from Motley Fool radio shows. We'll play those and reflect on them in next week's Blast From The Radio Past: Volume II. In the meantime, have a great week. Fool on!
As always, people on this program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. David Gardner owns shares of Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Baidu, Booking Holdings, Facebook, Netflix, Starbucks, and Tesla. The Motley Fool owns shares of and recommends Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Baidu, Booking Holdings, Facebook, Netflix, Nvidia, Starbucks, Tesla, and Twitter. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.