As Aesop wrote, "A man is known by the company he keeps." That's a moral that still applies 2,600 years or so later, and in a similar vein, the Rule Breaker Investing podcast should be happy to be judged by its listeners -- and the caliber of their questions. Motley Fool cofounder David Gardner is once again tackling those queries in the mailbag episode, and he's received some excellent ones.
In this segment, Stock Advisor member Shingo is wondering how the current most valuable public company, Microsoft, has never been a Stock Advisor or Rule Breakers recommendation. Well, explains Gardner, it's not because he dislikes the tech giant -- he doesn't.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on June 26, 2019.
David Gardner: All right, Rule Breaker mailbag item No. 2. This one's from Shingo Pyo. "Hi, David. My name is Shingo Pyo, and I've been a Stock Advisor member for many years, a big fan of your podcast. I'm a U.S. federal government employee stationed in Camp Humphreys, South Korea. I've recommended your services to many friends and family." Well, thank you, Shingo. "Of all the companies that you've recommended in Stock Advisor and Rule Breakers, I can't help but wonder why you haven't recommended Microsoft. They have a subscription model, which you're a big fan of. They have a big moat. They're an industry leader, and a first mover. I'm sure you've thought about recommending them before but haven't pulled the trigger on it yet, probably. What are your reservations? Thanks, and I can't wait 'til the next mailbag. Signed, Shingo Pyo." Thank you very much, Shingo! Yes, here is the next mailbag. Here we are together.
Well, three quick thoughts about Microsoft. The first one is that I deeply admire the company. I think that Bill Gates is one of the great not just businessmen, but one of the great people of our time. After all, he dropped out of college, started a company that is a massive worldwide success today, and then took so much of what he made and said, "I'm going to give it all to charity, and we're going to help heal the world." I vote for more of that type of thing surrounding us, brought to you and me by our fellow humans. We need more of that. Of course, Microsoft has been controversial at different points. There was a Department of Justice investigation into it. Some people don't like Microsoft OS, or they think of Apple as the antidote to Microsoft. I understand that, too. I love my Xbox. It's one of those companies that's big with cloud services today, it does many different things, you can't wrap your arms around Microsoft. Thought No. 1, Shingo, is that I deeply admire the company.
Thought No. 2 is that there is no intentionality to me not recommending the stock. Or, you should never infer because I've not recommended a stock that I don't like it. Now, you are not inferring that. You didn't say that. But sometimes I'm asked, "David, why haven't you picked this or that stock, this new IPO, or this company, Microsoft? He must not like it if he hasn't picked it." The reality is that I pick three stocks a month. I've done that every month for about 15-plus years now. That's a lot of stocks. It may look like I've got a lot of the market covered, but the truth is, it's only three stocks a month. Sometimes they repeat, so I'll rerec a stock. If you're following Stock Advisor, you're getting one for me a month. That's not that many when you think about it. Over the course of years, you can build a great portfolio with that, but by no means am I sitting in judgment of the entire U.S. market, let alone the global market, saying, "I like this one. I don't like that one." The truth is, I'm just flipping over stones as a bottoms-up investor, organically asking, "What are the companies that I'm looking at this month that I like?" And when I find one of them, I compare it to the others.
That's another quick point here before I hit No. 3. Another quick point is just that there are a lot of great companies out there. When I'm picking a stock, I'm usually saying no to two to four others that I would otherwise have picked that month. The tide goes in, the tide goes out. I just want you, Shingo, and anybody listening to Rule Breaker Investing to know that you shouldn't infer that because I haven't picked a stock, I don't like it for some reason. The world is so much bigger than our individual footprints that we can leave on it.
Now, finally, point No. 3, to close. At various points, I've thought hard about Microsoft. For about 10 years, I thought hard that I don't want to invest in Microsoft. I wasn't a big Steve Ballmer fan. One of the funnier YouTube videos I've seen is when Steve Ballmer comes out on stage and says he loves this company. It's to get the troops riled up because he's speaking to Microsoft employees. Pretty hilarious 45 seconds. If you haven't enjoyed Steve Ballmer saying he loves this company, please enjoy that YouTube video. That's the type of video that did not inspire me to recommend ticker symbol MSFT. There was a whole decade, a lost decade there. Unfortunately for Microsoft investors, it was a lost decade for your capital, as well. The stock just didn't do anything. But ever since Satya Nadella has shown up, the company has really rocked. He deserves huge kudos. He gets it, too. It's not like this is a man operating in obscurity. He's one of the more admired CEOs of our time at this point. Just think about how much it took to revitalize a company that large. It has been a wonderful outperformer for the last five years, and I've missed it, and I regret that.
Closing thought: I continue to not recommend it because I'm comparing it to other companies that are much smaller, or earlier stage. And I ask myself, "Will Microsoft triple from here? How much would that take? vs. would this other company that I'm thinking about triple from here?" That's always operating in my thinking, and why probably I tend not to recommend huge-capitalization companies. It's not that I'll never do it. There are no rules. This is the Rule Breaker Investing podcast. But that's probably, Shingo, why I haven't recommended Microsoft. It's a company I admire. If you have it in your portfolio, you're a happy person, because it has been a great performer, doing good work in this world. Thank you for that question!
