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.
A full transcript follows the video.
This video was recorded on Oct. 17, 2018.
David Gardner: Exactly 200 months ago. Yes, exactly 200 months ago this month, my brother Tom Gardner and I each made our very first monthly stock pick for Motley Fool Stock Advisor.
It was March 2002. The market had been crushed over the previous two years and much of our company along with it. Understandably many doubted, following the dot.com crash, that self-directed investing [actually picking stocks and building your own portfolio, sleeves rolled up with our help or anyone else's] was even a worthy pursuit.
Well, Fools that we are, we disagreed. We have always disagreed. So that day in March I picked Schwab and Tom picked Moody's, and history will show that his first pick was pretty great. Up over 150% over the next 10 years when he sold in October 2012. Mine was not so much. I also held for 10 years over which time Schwab stock only rose 2.3% with the market up 50% over that time, after which I disconsolately sold.
Well, we've repeated that same process 199 more times.
I think it's one of the more remarkable -- maybe outside Motley Fool Stock Advisor members -- one of the more overlooked investment stories recently told. How have we done? Well, are you a member? How have you done and what can we all learn?
Yup, it's "200 Stock Advisor Picks Later" only on this week's Rule Breaker Investing podcast.
Gardner: And welcome back to Rule Breaker Investing. Well, it is a special week and I wanted to celebrate it with this podcast. That's right. This week my brother Tom Gardner and I will be picking our 200th consecutive monthly stock picks in Motley Fool Stock Advisor dating back, as I said earlier, to March of 2002.
And I decided let's think about that. Let's reflect on that. And I want to make some conclusions about that. I'm going to share with you some of the performance, and some of the lessons and stories, over the course of our time together this week. And I've organized it around six conclusions, so I numbered them and I'm set up to give you my six conclusions looking back "200 Motley Fool Stock Advisor Picks Later."
And in fact, I've organized those conclusions in terms of them being increasingly interesting to me, so we're going to go from one to six. We're going to start with something I think it's pretty cool, No. 1; but it's not nearly as cool as two, three, four, five, or six. So you can tell me via Twitter feedback -- @RBIPodcast is our address -- whether I ordered these properly. Are these, in fact, increasingly interesting conclusions?
Without further ado, let's get started.
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.
Conclusion No. 2: "Understand your real biggest losers." That is Conclusion No. 2. We're going to reflect a little bit on losing.
I want to share with you my 10 worst stock picks in Motley Fool Stock Advisor history. So people who take pleasure at other's damage -- people who love schadenfreude or enjoy the explosions that they get to see [things blowing up in action movies] -- get ready, because I'm about to please you.
Here are the 10 worst stock picks I've ever made in Motley Fool Stock Advisor history. Really quickly, the tenth worst ever: FireEye down 68%. That is an active, ongoing recommendation today.
Ninth worst is Electronic Arts (NASDAQ:EA). Somehow I took a great company, which is what Electronic Arts is, and I completely mistimed my buy in June of 2005 and my sell in December of 2010 and lost 72%.
Atwood Oceanics down 74%.
The Container Store Group (NYSE:TCS), which I recommended and then rerecommended and I'm really sorry about that, because over the three years from 2013 to 2016, The Container Store lost respectively 83.5% and 86.6%; so yes, those were my sixth and seventh biggest losers.
My fifth biggest loser was Westport Fuel Systems (NASDAQ:WPRT). Today WPRT, the ticker symbol, down 88%. By the way, every one of these is horrific on its own. I mean, any one of these, many investors live in fear of that every happening in your portfolio [to lose 70% or more], but unfortunately, my fellow Fools, it gets even worse, because Clean Energy Fuels (NASDAQ:CLNE), which remains an active pick today for Motley Fool Stock Advisor members on my side, is down 88.7%.
And slightly worse than that, my third worst pick ever, Krispy Kreme Doughnuts. Somehow I managed to take a fine American brand, and a product that I personally enjoy, and I managed [and I apologize for all of these], to have my Stock Advisor followers buy it in August of 2003 and then we sold it in October of 2005, about two years later. We lost 89.7%. There was some fraud going on back then, which I don't have time to talk about now, but that's part of the reason Krispy Kreme did so badly.
My two worst picks of all time -- Seadrill (NYSE:SDRL), down 92.7% from February 2012 to October of 2016. You're noticing many of these we didn't hold for 15 or 11 years. You're seeing me hold these for three or four years and then just giving up; sometimes doing well to do so and others not so much.
And then my worst pick ever: Satyam Computer [Services]. Another fraud, I'm sorry to say. The India-based software developer outsourcing to many of the Fortune 500 at the time. Unfortunately that company was a fraud and lost 94% of its value from just May 2007 to January 2009.
So that's the really bad news. Those are my 10 worst picks. I've had a lot of other losers, too, but I like to share with you me at my very worst for two reasons. The first is how often do you see anybody do this on CNBC, or in The Wall Street Journal, or in Barron's? Rarely do I see professionals talking about how badly they've screwed up.
We've always said at The Motley Fool, "I'm not the only one." This is just me as one of many Fools that we like to lead with our bad picks. Lead with your loser. Always share a loser. Make sure you're sharing a lesson. So it is my pleasure -- my horrific pleasure -- to share that list of 10 stocks with you.
But Conclusion No. 2 was entitled "understand your real biggest losers" and here's an important point. Because if you do the math, my real biggest loser I haven't even mentioned yet. If you imagine $1,000 or $10,000 being put in each of these... Let's just go with $10,000. Well, if it loses 90%, how much are you left with? The answer is you're left with about $1,000. From $10,000 you're down to $1,000. You lost $9,000.
But the real biggest loser for you, if you're an investor and if you've been acting over the long term, I bet you realize that it's not the bad-performing stocks. It's the megawinners that you sold too early. It's that you didn't stick with big winners and I'm going to share the math with you to make it obvious in a second.
Because my real biggest loser was a company called ARM Holdings. The ticker symbol was ARMH. This is a British-based company that did R&D for the chip industry, so a lot of semiconductor companies would use their research in order to design better, faster, cheaper chips. ARM Holdings, history will show, I recommended in October of 2003, so 15 years ago, this month, at $5. I then rerecommended it two months later when it had crossed $6. That was in December of 2003.
Well, fast forward to June of 2009. So almost six years later the stock was languishing. It was at a dividend-adjusted closing price when I sold it, of $5.38. So I paid $5 for it six years before. I then added some at $6 and I'm sitting there. The year 2009 was not a good time. I was probably really sad at the time about how badly the stock market had done. I looked at ARM Holdings, a double recommendation for me, and it was at $5.38 and I said to all my Stock Advisor followers, listeners, and members to sell. We're out.
Here's why ARM Holdings is my real biggest loser. Because when the company finally got bought out in September of 2016 the share price that day was at $67.77. So two different positions from $5 and $6 would both have been 11-plus baggers. And if you do the math on a $10,000 investment, you'll see very quickly that I passed up literally hundreds of thousands of dollars in that one mistake; and my worst pick ever, Satyam, from a $10,000 start we lost about $9,500.
So you can see it's not even close what your real biggest loser is. If you ever have had a wonderful winner in your portfolio and you sold it too early, that is by far a more criminal act on your portfolio. You're doing far more abusive damage to your own financial future than if you pick a really bad stock and watch it lose most of its value. Conclusion No. 2 -- understand your real biggest losers.
Conclusion No. 3. And before I get to Conclusion No. 3 let me just point out that I'm hoping you'll find these increasingly interesting. You heard me with, "We've done really well, you have, too." Weren't you even more interested to think about what your real biggest loser is? Well, that was No. 2. Here's No. 3.
Conclusion No. 3: "Foolish investing is manageable, even easy." It's one thing to talk about numerical performance and how well we all have done together by being Foolish investors; investors acting by definition over the long term. The opposite of traders. True investing. And it's another thing to think about our real biggest losers.
But here's a profound, important truth for me about Motley Fool Stock Advisor, whether you've been a member for years, you just joined, or you're thinking about joining in the future. I sure hope we are delivering to you an experience that is manageable, even easy.
And what do I mean by that? Well, think about what Tom and I have done, now, for 200 months in a row. We've simply raised our hand, once a month, and we've said, "Buy this." Now some people may have listened to one of the brothers and not the other. Some people may be acting off both of the brothers' advice, and a lot of people, no doubt, are doing some of each.
But in each case, whether you just listen to one brother or two, or even if you skipped a month, all we are asking you to do is save your salary [hoping you're a net saver]. Whether you want to do it every two weeks and buy one brother's pick that week and then one brother's pick in your IRA the next two-week increment, or just once a month, that's all you're having to do, and that is a profoundly wonderful truism to share with you. That in a world where so many people think you have to be very active. They think investing is complicated, so they make it complicated.
Instead, we're there just raising our hand lazily, once a month, for years and years now saying, "I'd buy this, this month and you can, too." And so I think what we're delivering -- I hope what The Motley Fool is delivering to you, through this service and some of our others -- is simplicity. Ease of use. Just open up a brokerage account, deposit some money in it, divide it by 12 if you like, and then once every one of the next 12 months raise your hand and buy along with us, or if you're an ongoing saver [and God bless you if you are because it's a great thing to be], then every two weeks or so sock it in to the most recent pick. It's as simple as that.
Now I do want to reflect a little bit more on this point before getting to Conclusion No. 4, because I want to say to you that there are some interesting handicaps that Tom and I have had when you think about that outperformance we've generated now over almost two decades.
For example, professional fund managers who I think would love to have annualized performance like the numbers I've been talking about this podcast, professional managers can act whenever they want to. When Tom and I published a pick, we'd basically decide on it, then we'd tell our staff, and there's a publishing machination that you go through and several days later it shows up. We have no real control over what's happening in the market over those several days.
And further, every single month we're making a new pick for you. We can't say, "I don't want to pick anything. The market looks high to me this month." Or, "I love where the market is right now. I'd like to pick four." No. Instead Tom and I kind of, through the system that we co-developed with our hands somewhat intentionally tied behind our back, we're only allowed to raise our hand once a month on your behalf.
And so while what I'm saying to you may sound like a handicap, and I think a lot of people who are professionals in this field would say there are clear handicaps to how the Gardners operate Motley Fool Stock Advisor, I'm also here to tell you that in our weakness is our strength.
Because while on the one hand you might think, "Well, they can't act nearly like active fund managers would or wealth managers or money managers who are competing with them." Instead, I think, we've benefited immeasurably from the discipline of having to come up with a new best idea every single month through good markets and through bad.
I'll just focus briefly here on 2009. The market was so bad in 2009 that I didn't even want to make each of my monthly picks. I was having the experience -- maybe you were around or maybe you've had this similar experience in life -- where anything I did within the next 30 days it was down 25% or more.
It was horrific. From one month to the next, from mid-2008 to mid-2009, I felt like I was being riddled by gunfire with every single new pick that I made. It didn't feel good and I didn't want to keep doing it. And yet I did, because that's the way we've built the machine of the Motley Fool Stock Advisor and as a consequence I, and perhaps you, can now look back at the actions that we were taking in 2009 and see, "Wow! That was such a great time to be buying."
So there's something to double underline, here, about the benefits of regular, committed investing. About not worrying where the market is. About just looking and saying, "What's the best company that I've found this month to add my funds to?" Sometimes we readd back to the same company we may have recommended months or years ago, so it's not always a new idea. Most of the time, over those 200 months, it has been new ideas and for most of them we hold them for at least five years, if we can. Some a lot more than that.
But it is that regular discipline. I'm a baseball fan. It's an exciting time of year if you're a baseball fan. It's fun to watch the postseason, and I know I've used this analogy a lot on Rule Breaker Investing podcasts in the past, but I really appreciate the discipline of having to step back into the batter's box time after time over the course of a season, or a career, which is what baseball batters must do. They must step, by themselves alone, into the batter's box and keep swinging. Every single time, whatever the score is, whether their team is winning or losing.
So what looks like a handicap and what truly is handicapped in a lot of ways vs. other active professional managers has, in fact, been a great strength and it's a strength that suits you because it's much easier than being highly active. Than guessing the market. Than jumping in and out. So Conclusion No. 3 reads Foolish investing is manageable, even easy.
All right. Well, resuming then with "200 Stock Advisor Picks Later" and my six conclusions about that, I made a promise to you earlier that these will get more and more interesting. Let's see if they do. Let's go to Conclusion No. 4.
Conclusion No. 4 reads pretty simply. "This is fun and it gets really fun!"
Now, when I say "this," I mean investing. I mean sticking with the market. I mean letting great companies compound for you in your portfolio by finding them in the first place, because you've got to find great companies to really enjoy compounding and once you do, letting them compound is more than half the trick, in my experience. For a lot of people, they're not going to be patient and enjoy the fruits of their early labors.
I really love the way we invest here at The Motley Fool, because we take that long view and it means you don't have to work nearly as hard, because you make some good decisions early and then you just let them go and watch them go up [the ones that really work]. So this is fun, and it gets really fun, and I'm saying that because as things compound and the world keeps advancing; new technologies come and your companies grow up; you start getting more and more opportunities.
In a lot of ways, you could frame up anybody's Motley Fool relationship in two simple stages. The first stage is the effort to become financially independent. And every one of you who's listening to me right now is somewhere along that journey. Some have completed it. Some have just started it. Some are halfway through. Every one of us comes from our own unique context with our own unique background, knowledge base, and support system. Some of us really had to pull ourselves up by our bootstraps to become savers and investors, and others inherited beautiful portfolios, and a lot of us are somewhere in between.
So we all come from a unique place, but once you do get on that journey of investing, that's the first step, the first stage is getting to be financially independent.
And guess what the second one is?
That's right. It's "being" financially independent. It's being able to walk away from your job if you don't like it. In my case, I'm happy to say that I have been financially independent for a while. You probably expect that the brothers who started The Motley Fool probably should have prospered enough that if they wanted to, they could walk away from The Motley Fool, and yet Tom and I love what we do. I love doing this podcast for free for you every week.
So I'm in that place. I've been in both stages. That's where I am, now, in life. I'm 52 years old and very happy to say that financial independence is a dream come true. And I hope that's true of you and if it's not, I hope we get you there.
So there's kind of two stages to our investing journeys. It's the struggle to become independent, and then it's the enjoyment of the independence and that's the part that gets fun, and it starts to get really fun as the numbers roll up and you start deciding, "What am I doing to do with all this wealth?" That each of us has. That each of us gain in the future? How are you going to spend it or leave it? To whom are you going to leave it? How are you going to make the world better?
As Seth Godin said on this podcast a few weeks back, "Did you make things better?" Very simply asking as you entered an industry as an entrepreneur, or Planet Earth as a human being; who's making things better and are you going to be one of those people?
So Conclusion No. 4 is this is fun and it gets really fun, and I want to share with you two, brief really fun stories, both of which have happened to me within the last few weeks. And I had a lot of fun in both of these instances and I want to share that out.
Here's the first one. The first one was last week at the Conscious Capitalism Conference I was attending in Austin, Texas. It's my ninth or tenth year attending this annual CEO summit. I'm not the CEO of our company -- my brother Tom is -- but I am the co-chairman and the co-founder so they still have me at this conference.
And I had the pleasure of sitting in the audience during an interview with Arthur Sulzberger, Jr. Some of you will recognize that name as the owner, one of the family that owns The New York Times. The Sulzberger family [owns] a multigenerational business and recently Arthur gave over to his son, "AG," the leadership of The New York Times, but over the course of the last 20 years, or so, he was running the show and he was being interviewed in front of all of us.
So picture 250 or so attendees of this conference, and if you're seeing chairs set up in long rows around the room you're not seeing what's happening in Austin, because in this conference there are like big lounges. Lounge chairs. If you know what a LoveSac is [basically a giant overstuffed pillow for adults], there's some of those there. People are just splayed out around the conference floor, and I was toward the front. And I was just sort of sitting front center and Sulzberger, during the interview in front of the crowd last week asks everyone to raise their hand if they read The New York Times.
And a lot of people around me just raised their hand straight up.
I kind of demurred. The visual for me was I kind of held out one hand, my right hand, and sort of thrust it to the side. Kind of like eh. You know, some. Yeah. A little bit of that.
Now if you're a longtime listener to this podcast, you know that I gave up reading regular daily news in I think it was July of 2017 and here I am, more than a year later, with a lot more time. I still read and keep up with the news often through The Economist on a weekly basis, but I'm not there, every day, reading The New York Times.
So I kind of went eh and Sulzberger, for whatever reason, having never met me before and not knowing who I am immediately singled me out. He pointed right at me. 250 people, many of whose hands are raised. I'm sitting front and center going eh and he's like, "You, sir. You need to read some more."
And I was really happy that I had recently checked my phone for some numbers, and I was ready, skipping not a beat with my quip back. I said, "Mr. Sulzberger, I recommended your stock, The New York Times Company, to Motley Fool Stock Advisor members in December of 2015 and it's up 96%, so I'm pretty happy with The New York Times myself, anyway." And a lot of people around me laughed and Sulzberger immediately said, "OK, you win!"
So there's my anecdote No. 1. Just recent adventures. That was fun. It was fun to be at a conference. To be invited to one where I have real newsmakers there. It was fun, in retrospect, to be singled out and surprised, and it was really fun to be able to say what I said, which is that I'm a believer in his company.
I'm not even a regular reader of The New York Times and I'm not a big fan of some of the things The New York Times does, but when I look at the business, overall, I think it's a great brand. It conforms to a lot of what we talk about every week on Rule Breaker Investing, and I was really proud to be able to share right back to the retired CEO that I had recommended [his] stock and we've got a lot of backers, more so than just readers. There's Anecdote No. 1 -- fun.
Anecdote No. 2 was what happened a couple of weeks before that last month when Jeff Bezos came to Washington, D.C.
I had interviewed Jeff Bezos a number of times in the past, although it was a lot easier to have Jeff on The Motley Fool Radio Show when Amazon (NASDAQ:AMZN) was about 1/100 of the size it is today. It's very hard to get any interview with the Steve Jobses, Elon Musks, or Jeff Bezoses of this world.
So I knew that Jeff Bezos was coming to speak at The Economic Club of Washington a few weeks ago, and I was going to attend that night. It was a big bash, and I told my wife Margaret the day before, "If I ever get to the guy, Margaret... if I can get up to him... here's my line for him. I'm going to say, 'Jeff, I believe I'm the guy with the second lowest cost basis in the room on Amazon stock.'" Obviously the guy with the lowest was the founder, Jeff Bezos himself, but I wanted him to know ever since recommending the stock at $3.21 shortly after its IPO in 1997, a recommendation that I have left in place ever since, it's been a huge winner for Stock Advisor members starting in 2002, etc. I wanted to be able to tell that to Jeff and reconnect with him if I could possibly get to him.
Fast forward to the next day. The evening. It's time for the big bash with Jeff Bezos at The Economic Club of Washington. And as I approach it in the twilight hour, I see media all around outside the Washington Hilton, a large hotel where they have the White House Correspondents dinner traditionally here in Washington, D.C.
It's a huge venue for an event like this and there were thousands of people. There were even people across the street from the hotel with a loud speaker going, "Hell, no! Bezos has to go! Underpaying his workers." This was, by the way, before the $15.00 raise in minimum wage for Amazon workers. But earlier that morning, he had recently dedicated $2 billion to the Washington Housing initiative, so an incredibly generous person that was being protested across the street, so there's a media circus.
You get inside the door. You try to get, as I always do, to the bar to get a glass of wine. Almost impossible to reach the bar. There's so many people, elbow-to-elbow, it's comic. You can't even move around this group. I'm thinking, "I'm not going to be getting to Bezos tonight."
I get my table assignment. It's Table 334. That's right. They're counting by ones, so you can imagine. I wasn't at Table 1. I was at Table 334. And if that sounds a long way from the stage in a big room, you're right.
The event starts. David Rubinstein [the billionaire] -- head of The Economic Club of Washington -- a very generous and very intelligent interviewer who runs the show; he's reading off all the sponsors. He's then reading off scholarships that we're giving out at ECW. He asks Bezos briefly to stand up and raise his hand. You see a little guy, way up front there, showing that he's in the room and we'll be talking to him after supper. And it continues like that.
And finally the announcements, which lasted about 20 minutes or so, end and we're all going to start supper. And I turned to the guy on my left, who I'd never met before, Table 334, and the guy on my right, and I said, "Guys, I'm going for this right now. We'll all know, within five minutes, whether it works or not. I'm going to try to get to Bezos right now. Excuse me."
Stepped up from the table. Worked my way past Tables 330 and 329. Got into the high 200s. Wheeled around that. Moved into the 100s and then finally up toward Table 1 right in front of the stage and with all the other tables, little circular tables, spread out around a huge room, people are already sitting down eating. I noticed up here at Table 1, as I got up to the mountaintop, they're still standing and milling about. They're not sitting down to supper, yet, and there's Bezos. And there's one guy talking to him.
So I decide, "Here's my moment." I went and stood right behind that gentleman. I just kind of listened, offhand, to their conversation which lasted another two minutes or so. And then that guy finished, he stepped away, and there was Jeff.
Looked him right in the eye. I said, "Jeff, I believe I'm the guy in the room with the second lowest cost basis on Amazon stock. Hi, Jeff! It's great to see you again. David Gardner from The Motley Fool. I used to talk to you..."
And what did Bezos do? He right away said, very warmly and familiarly, "David!" And then the next thing he did is he whips out of his pocket his phone, puts his arm around me. Holds it up. And he goes, "Selfie!"
And that's how I got a selfie with Jeff Bezos. I may have been one of the few that night at the ECW bash that did. I wasn't even at Table 1. Well, you can't win the game if you don't get in the game, so just by playing the game, I somehow got selfied with Jeff Bezos, one I'll probably never see because it's just on his phone, not mine, and he's not exactly that easy to reach through social media or even through his own spokespeople today.
So Jeff, love the picture! I hope one day that will be part of the public domain. But forget about the picture. That was a great, fun event and story that I have to share with you, my fellow Rule Breaker Investing listeners to know he's a really great guy. Very warm. Very heartfelt. Super smart, and he's been an incredible value creator, not just for our country or for consumers, but certainly for shareholders, as well. I know a lot of people have questions about Jeff Bezos. Some people don't even like Jeff Bezos. I love Jeff Bezos! I think he's great!
So there's my Sulzberger and Bezos anecdotes. I told you I was going to try to make this podcast more fun and better as we went through, so I hope you enjoyed those stories. But that just gets back to Conclusion No. 4. This is fun and it gets really fun. So as the numbers get bigger and the possibilities get grander, you and I can have more and more experiences like that. As we go through life we should be seeking them out.
Conclusion No. 5: Reads simply "self-directed investing though Stock Advisor should beat, maybe crush, your funds." Now that's not going to be as fun to talk about. I'm not going to be relating Bezos or Sulzberger stories now. I'm just going to tell you really great news, I think. Having observed how Stock Advisor works and thinking about the math of all of this, there are a couple of key points I really want to make here. Why does Stock Advisor really beat up on funds? I have two things to tell you, here.
The first is think about the cost of a service like Motley Fool Stock Advisor vs. what you pay even for your cheap index funds. So let's just pretend that you've done well and you have a six-figure portfolio. I'm not even going to say seven or eight figures, though I know some of our listeners do, indeed, have portfolios like that. If you think about the cost of Motley Fool Stock Advisor, which ranges depending on when you buy it from us and how long you've been us, somewhere between $100 and $200, but we'll just say $200 for the sake of a good example,.
So you've been paying how much to Motley Fool Stock Advisor over the last 16 years? The answer is [and you've actually paid less than this], but the answer is 16 x $200. That's $3,200. It really hasn't gone up. In fact, it's stayed the same for the most part over those 16 years. So Point No. 1 here, of Conclusion No. 5 [if you're outlining along with me, that's where we are] is cost. Now compare that to your index fund.
Now a lot of people have index funds from firms like Vanguard and if you'd started 16 years ago or so, I'm just going to round, here, without being too hardcore. But typically you'd be paying about 0.25% in terms of your annual fee. These days they've actually come down, some, and I certainly laud that, especially because index funds will never beat the market. You're always just going to do what the market does minus costs, so it's good to see them have lower costs. That's a good thing.
But, you know, 0.25% on a $100,000 portfolio 16 years ago was [do the math with me] $250. You were paying $250 a year and as your portfolio grew from $100,000 [let's hope it's doubled, at least over these last 16 years], that means if you have a $200,000 portfolio at 0.25% these days you're paying $500. In fact, you keep paying more to your mutual funds, and I'm giving you a fairly rock-bottom example of an index fund that's very cheap. Many people are paying 1% each year to have their money managed for them by a wealth manager or a set of mutual funds. That amount constantly goes up over time.
That is such a strong and direct contrast with the people who were brave enough to join Motley Fool Stock Advisor 16, 10, six years ago or six months ago who are paying out of pocket but paying a flat fee. And as your portfolio has grown along with us, your costs have dramatically come down and they've never been high to start with. So Reason No. 1 that self-directed investing through Stock Advisor should beat, maybe crush your funds is flat out the costs and the two different cost models and I hope you can see that.
And by the way, I have no gripe with a lot of mutual fund fees. We have some mutual funds at The Motley Fool. Some of you love them and if so, God bless you! I hope we're doing well by you. And in fact, we're always looking at our funds saying, "After fees did we help you beat the market?" I'm really happy to say we have some real examples of that for our fundholders.
So everybody makes their own decisions in terms of how they want to be invested, but whatever the fund is that you're looking at, I think it's fine for them to take a percent, whatever it is, a small percentage of your money each year. Just realize that that's constantly increasing if your portfolio is going up over time.
So, wow! What a difference in the costs of these two services when you look at Stock Advisor vs. mutual funds, but here's the even better news, and that is we've been winning. We've been beating the market averages. We're way ahead, as I talked about in Conclusion No. 1 earlier of the stock market's performance. And so you are really winning.
And one of the things I learned from Peter Lynch is that you and I, as self-directed individual investors, have a lot of advantages over the fund managers. One of them is we can let our winners win in a way that most mutual funds never can. So if you have a stock that goes up 10-50x in value over 10 or 15 years, you can hold onto that and let that grow and become a bigger percentage of your assets than any mutual fund would ever let happen.
So mutual funds are constantly having to sell off their biggest winners in order to keep the percentage influence of that one stock over the overall fund down in a way that investors who really know their stuff and buy Amazon, or Netflix, or Booking, or Disney (NYSE:DIS) [all of these great companies] don't have to.
So just realize [I'm tapping a little bit back into our recent mailbag which we entitled, "Winners Win,"] winners win. What do they do? Winners win, and you've been winning with this service both because of its much better cost structure, but also because you are self-directed and you can make smarter decisions about your portfolio of stocks than fund managers who have their hands tied, in some cases, by regulations could ever do for you when they invest for you.
So yes, Point No. 5, and then we're going to get to my very favorite point right now, was self-directed investing through Stock Advisor should beat, maybe crush your funds.
Conclusion No. 6: Which brings me to my grand conclusion to "200 Stock Advisor Picks Later," and that's Conclusion No. 6. Stated simply the conclusion is maybe the best lesson of all: "the math of losing to win."
Let me throw a little bit more math at you this week. It's been a more math-heavy conversation, but that's appropriate when we're talking about 16-plus years of performance of a portfolio's annualized numbers and stock picks.
I want to share with you [that] this kind of rechannels Conclusion No. 2, which is "understand your real biggest losers." And ARM Holdings' sell was a far bigger loser than Satyam Computer Services. This kind of gets back in there, but we're going to look at losing to win and the math of it through my side of Stock Advisor. And here's how I do it. And by the way, the same thing applies to Motley Fool Rule Breakers, as well. The numbers are a little bit different, but the concept is timeless and really important.
Over the course of 200 monthly stock picks, I am embarrassed [I already shared with you my 10 worst ones] to say that I have picked a bunch of stocks that have lost 50% or more. And since I took the time to count down through our scorecard, which has been transparently up there for members from day one of our service, so anybody who uses Motley Fool Stock Advisor or really any Motley Fool service can transparently see the scorecard of every good and bad thing we've ever done, and I think that's a great exemplar to the investment world at large and something that we take a lot of pride in here at Fool HQ.
So how many 50% or worse losers have I picked over 200 picks? The answer is 21. More than 10% of the time [and that sounds horrible, and I've never wanted any of them to go down], I have selected a stock that would lose 50% or more of its value. And that's not even against the market. The market will go up, let's say, 50% itself, so we're 100% or more behind the market with each of these.
Before I share with you the win part of the math of "losing to win," let me just restate that every one of the monthly picks that Tom and I make in Stock Advisor we think is going to be a winner. I put it out there. It's kind of like when you swing a bat and baseball. You're not really sure if you're going to hit the ball or not. You're definitely swinging for the fences, or you'd at least like to get on base, but you're not sure what's going to happen.
And circumstances play out from there, and it takes a lot longer in the markets than it does in a baseball game to see exactly where the ball winds up after every swing we've taken. It takes years for us to figure out whether that was a good decision that I made that month or next month. It takes years. But do know that every time we're doing our best and we think we're going to do well, and the bad news is about 10% of the time or so I do very poorly. But here's the win part of the math of losing to win.
21 50%+ losers. I've already read a bunch of their names off earlier. But how has the 21st best pick done out of those 200? 21 50% losers. What has been the 21st best performer? It just so happens to be [I looked it up earlier today] when I picked Pixar in July of 2003. Today it's no longer Pixar. I think most of you know that Pixar was bought by Disney.
And when that happened in Motley Fool Stock Advisor we said, "Great! We'll just roll our Pixar shares right over into Disney, because it wasn't a cash deal." Disney said, "We're going to buy Pixar shares and you're now Disney shareholders," and that happens to have been my 21st best pick historically. And as of this week, that pick is up 824%. 824%. 500 plus points ahead of the market and that's our 21st best pick.
So if you've heard me say we've had 21 50% or worse losers, you can see that a single winner, almost on its own, wipes out all of those losers and that's my 21st best pick. I'm possibly guilty of bragging a little bit this week on the podcast. I apologize if it sounds like that, but I'll just give you the facts.
That doesn't include picks like Nvidia, which is now up 3,473%. That's right. That's the 10th best pick I've ever made on my side. It's up 35x in value. There are nine that are doing better than that. The best ever -- is it Amazon? Well, close. Amazon is up 113x in value since I picked it in September of 2002, but that's just the third-best pick.
The very best pick was Netflix, which I selected in December of 2004. It's up 17,865% for members who bought and have held; and while not everybody found Motley Fool Stock Advisor back in that month of December 2004, a lot of you have discovered it since and that's been a tremendous performer no matter how you slice it.
So the math of losing to win reminds us that you can take your biggest losers, you can put them all together, and if you're investing Foolishly, and if you're a Rule Breaker along with me, you can take your 21st best pick and almost wipe out all of those losers [this is using real math; imagine $1,000 or $10,000 in each] and you can almost wipe all of them out with just your 21st best winner.
So there's a little bit of math -- losing to win. I think it's a natural question to wonder, "Hey, if I had invested $10,000 at the start of Motley Fool Stock Advisor and I got those 20.7% annualized returns, how much money would that $10,000 at the start of Motley Fool Stock Advisor be worth today?" And, well, as of last Friday, October 12th, $10,000 invested on my side of Motley Fool Stock Advisor would have been worth $228,184. And please note, to close, that every one of those bad losers is implicit in that number, as well.
So I hope, looking back over the six conclusions that we've shared today:
Conclusion No. 1: We've done really well, you have too.
Conclusion No. 2: Understand your real biggest losers.
Conclusion No. 3: Foolish investing is manageable, even easy.
Conclusion No. 4: This is fun, and it gets really fun.
Conclusion No. 5: Self-directed investing through Stock Advisor should beat, maybe crush your funds. And finally the best lesson of all...
Conclusion No. 6: The math of losing to win.
I hope that I've given you your own unique lens into seeing what investing looks like. How to make money in the stock market. How to do it well. How to be lazy. How to have fun with it. And why, whether you've been a member of Motley Fool Stock Advisor from its outset in March of 2002, 200 months later, or whether you're thinking, "Now it finally is time for me to get started investing," I hope you see the value of what my brother Tom and I have been at lo these 16 years for Stock Advisor members. Or of The Motley Fool, which I hope over its 25 years has added value to the world, but I hope over its next 25 years it adds a lot more value than its first 25, and I'm really glad that you're along for that journey.
And I should mention that if getting started investing sounds good to you, a couple of weeks ago to kick off October we did the first of two in our series "Getting Started Investing," and the first week of November we'll be concluding that series. Talking a little bit more. Answering your questions about getting started investing. That's a big focus of ours, here, on Rule Breaker Investing this fall.
So there you have it! And I want to thank all the analysts, present and past, that have helped me and Tom bring you Motley Fool Stock Advisor. The help we get is invaluable and it is winning, and [have I said this enough?] "winners win!"
I want to close by thanking you, as well, for suffering a Fool gladly this week. I think I'll do a podcast like this maybe once a decade. How long does another 50 picks take? Well, we'll say four years or so. But I hope this week's insights were one for the ages, and that you'll share it out and get invested. Fool on!
As always, people on this program may have interest 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. David Gardner owns shares of Amazon, BKNG, FireEye, NFLX, and Walt Disney. The Motley Fool owns shares of and recommends Amazon, BKNG, Clean Energy Fuels, NFLX, NVDA, and Walt Disney. The Motley Fool owns shares of The Container Store Group. The Motley Fool recommends Electronic Arts, FireEye, and NYT. The Motley Fool has a disclosure policy.