200 Stock Advisor Picks, 6 Conclusions, No. 1: "We've Done Really Well, and You Have, Too"

Journey in your mind back to March 2002. The stock market was still stumbling around in the aftermath of the dot-com crash, and retail investors were running scared. It was in that environment that Tom and David Gardner launched a monthly newsletter featuring one stock pick from each brother, with detailed explanations about why they'd been chosen -- a friendly fraternal competition that became the foundation of the Stock Advisor portfolio. The returns on those investments have well outpaced the broader market's gains in the ensuing 16 years. Had you acted on all of their recommendations, you'd have reaped a market-smashing 1,955% return overall.

Profit, however, isn't the only thing the Gardners have accrued in the intervening years. They've also figured a few things out along the way. So in this Rule Breaker Investing podcast, David shares six interesting conclusions from his 200 months selecting recommendations for Stock Advisor.

In this segment, he considers the first of those six (though not the most important): Quite simply, their methods appear to work, based on both their separate and joint return-on-investment numbers, which he breaks down a bit.

A full transcript follows the video.

This video was recorded on Oct. 17, 2018.

David Gardner: Conclusion No. 1: And this is a fun one because we're going to talk about performance, which does seem to matter a lot. I hope it matters to you as an investor and maybe as a Motley Fool Stock Advisor member or a prospective, future Motley Fool Stock Advisor member.

Conclusion No. 1 is that "we've done really well and you have, too." And using that phrase reminds me [that] when we first published The Motley Fool Investment Guide, our first book, we wrote it in the summer, the hot summer of 1995, and Simon & Schuster published it at the start of 1996. We did our first book tour then. And we were going to call it "The Motley Fool Investment Guide," and we were all deciding, "Well, what's the subtitle for this book?" And we went with: "How the Fools Beat Wall Street's Wise Men-and How You Can Too."

And that phrase is the spirit of this podcast. The reason that I've sat in front of a mic, now, every week, consecutively, for more than three years is to show you how you can, too. So Conclusion No. 1 is that we've done really well, and you have, too. So let's look over the numbers.

First I want to start with my brother Tom's performance, because what he has done is truly remarkable. So over the course of 200 monthly stock picks [so that's 16 and a half plus years of annualized returns], the S&P 500 is up 7.5% annualized over that 16 and two thirds year time frame. 7,5%. And Tom's monthly stock picks are up 15.3%, which means that Tom has outperformed for Stock Advisor members... for you! ... he's outperformed by 7.8% a year over more than 16 years.

And while I, as a fellow podcast listener, rarely use this, maybe it's time to hit that rewind 15-second button a couple of times on your podcast interface because what I just said is truly remarkable and worthy of great celebration. I'm going to explain a little bit more later on in our conclusions some of the handicaps that he and I have faced as stock pickers in doing what we do.

So in a world where many people continue to believe that it would just be luck if you beat the stock market's average, Tom more than doubling up the stock market's percentage return since 2002 stands as great testament to the fact [and I think it's a fact] that that is patently untrue. Not only untrue but sad when you think about it. That so many people today believe that you couldn't do better than average.

We believe the opposite in almost every other aspect of life. We believe that you can be better than average if you put in an effort. Whether it's toward your career if you're a doctor or a basketball player professionally, I think you can be better than average. And that's also true of our hobbies and our pursuits.

I'm a big board gamer. I think if I were a better board gamer I would win more than half my games, but I do play with other people who do beat me more than half the time, so I know they're quite good. But whether you're painting, or you're an extremely fit person who enjoys endurance cycling, I think you can do better through effort and be better than average, but for some reason we live in a benighted world where many people believe it just would not be possible to do what I just told you my brother Tom has done.

And I'm really happy to say that right alongside each of his monthly stock picks, I've been making my own, and my performance against that same 7.5% for the S&P 500 has been 20.7% annualized. So I'm up 13.2% per year over more than 16 years just doing that Stock Advisor -- that Fool thang -- that we've been bringing to you for lo these many years.

Before I get to Conclusion No. 2, I want to briefly say two things. One is that Tom and I, while we're certainly brothers and we're certainly competitors [we set up Stock Advisor as a competition between the brothers, and some people still enjoy that aspect of the service today], it's not a big emphasis of ours.

But I would never want that to mask the great performance that we've both had, which I think says really interesting things to people because we take slightly different approaches. I think we're more alike than different, but one of our really key points is that Tom invests differently from Dave and look how they're both beating the market. So that's quick Point No. 1.

And then quick Point No. 2 -- a brief story. I had the pleasure of being at The Greenbrier, which is a beautiful resort in West Virginia, about a month ago. And the weekend I was going with friends to stay at a cottage, I didn't know that there were two professional tennis stars that were right there at The Greenbrier playing in a small intimate setting. It was a small stadium domed at The Greenbrier, but kind of like a high school gym, and the two professional tennis players who were playing each other were Venus and Serena Williams. And so a lot of people showed up to see them play, I included.

And I was thinking, "Isn't it great to see siblings play with each other? Compete with each other, but both be outstanding?" Venus and Serena. I couldn't even tell you who's outperformed the other. I'm not a big tennis buff. I am more of a football fan and I think about Peyton Manning and Eli Manning. I don't exactly know which of those quarterbacks or which of those tennis players, depending on how we're scoring them, has done better, but I don't think that's really the main point, is it?

It's that it's a pretty special dynamic when we can see competitors, who are siblings, perform out there in public in front of the world, whether it's in investing or tennis or football. And so it's been a delight playing and investing with my brother Tom right in front of you for, as I've said, lo these many years.

And while we're counting Stock Advisor performance back to its start in March of 2002, a lot of you were still with us before then when for nine years I ran a public real money portfolio on AOL and then the web [the Rule Breaker portfolio], which had a 20.3% annualized return over those nine years. So it's not just about Stock Advisor, either. It's a 25-year story. But really we're focused, this week, on Motley Fool Stock Advisor and that's Conclusion No. 1. We have done really well and you have, too.

And a footnote, there, is you may have just started with us a year or two ago in Stock Advisor. I think you've done really well. It's been a tremendous couple of years. Or maybe you started 10 years ago or maybe some you started 16 and two thirds years ago. In fact, looking over our rolls, I believe we have something like 400 present-day members of Motley Fool Stock Advisor who have been with us from the outset. It was a much smaller company back then and a smaller service back then, but it's a delight to think that a lot of you can measure your relationship with us through years and years, and I think we have done really well. I sure do hope, and believe, you have, too.