Businesses That Win, Redux

In this week's episode of Rule Breaker Investing, Motley Fool co-founder David Gardner shares some great tips on how to pick businesses that win and how to spot Rule Breaker stocks. He explains spiffy-pops and also tells us his greatest secret of all and why holding on to stocks is important.

We also get a sneak peak of what's coming in the next episode.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Feb. 3, 2020.

David Gardner: Every week another podcast. Rule Breaker Investing. No reruns. Every week, since July 2015. New guests, new stocks, new books and games, new businesses and technology trends to share, new thoughts about the world at large. But is there any downside to always doing a new podcast every time, always a new trick, another ball in the air, a new flavor of ice cream? Well, if there is any downside, it would be the danger that amid all of this new, new, new, some of the most important things that were said that are from old, old, old Rule Breaker Investing podcasts might be forgotten. Turns out, if you don't keep saying some of the eternal verities, they could be forgotten. If you don't keep telling your wife that you love her, well!

And that's the reason for Blast From The Past, it's our series here on Rule Breaker Investing, that pulls the cardinal points back out of past podcasts, pulling rabbits out of hats to share with you, again, if you're a long time listener, or to share with you now for the first time, if you're a new one. Because many new listeners are now aboard this ship of Fools that were not around when I covered each of the five points I'll be covering this week, all of which come from the year 2015. We're going to talk about those, some of our greatest hits right here, right now on this week's Rule Breaker Investing.

Gardner: Welcome back to Rule Breaker Investing. Happy February 2020! Thanks for joining with me up. It's our Blast From The Past. So, we're going back to the year 2015, looking at podcasts I did in those months. Again, Rule Breaker Investing started in July of 2015, so it's only about half-of-a-year of initial podcasting, but I found some of my favorite points and stories and I probably don't say these enough. I've often said, "I would not be a good political candidate, I never will be one, but I don't like to just say the same sound bite over and over." And that's what gets you elected, I think, but I'm not very good at that, I'd much rather keep exploring, keep discovering, occasionally look back on maybe a flag that we planted on the hill behind us, but for the most part I like to keep moving forward. That's why Blast From The Past doesn't happen too often, but maybe it should happen more often.

I was noticing this is volume three, volume two was done this very same week -- this was a coincidence -- last year. So, it seems like I'm doing these about once-a-year. And so, I hope I'll be bringing some of the best points and stories.

And again, if you've listened since 2015, you probably have even forgotten these, but if you're a new listener, I hope I'll be trying to do what The Motley Fool tries to every day, making you smarter, happier and richer with what I have to share with you this week.

Two bookkeeping notes before we get started, you'll notice there was no ad on this podcast this week. Let's call it ad-free week here for Rule Breaker Investing and perhaps some of our other Motley Fool podcasts. But I would be remiss if I didn't promote something. So, it occurs to me since this podcast is called Rule Breaker Investing, that you might be ready to invest better, but not sure where to start. Well, our service Motley Fool Rule Breakers can help. In fact, our average Rule Breakers recommendation has now returned 181.4%, so it's just almost about a triple.

And those picks were made over the past fifteen-and-a-half years. The S&P 500, by comparison, against that 181.4 is up 82.5, so just about a hundred points ahead of the market averages per pick. We're proud that The Economist called us, and I quote, "An ethical oasis in the financial industry." And if you're ready to take control of your financial future then you're ready for Motley Fool Rule Breakers.

So, go to joinrb.fool.com to learn more. And for a limited time, my podcast listeners will get up to 67% off Rule Breakers, just go to joinrb.fool.com to sign up. joinrb.fool.com returns as of, of course, February 2020.

And my other bookkeeping note is just to remind you that we love reviews, so if you haven't already, please subscribe to our podcast on iTunes, Spotify or Google play, wherever you can find podcast. You can follow us on Twitter at @RBIPodcast. Follow me on Twitter, if you like, I'm @DavidGFool. Finally, I hope you'll give us a review. Throw me some stars. Let us know how we're doing; I read every one of your comments. Thanks!

Alright Blast From The Past No. 1, I did a podcast on October 21^st of 2015 entitled The Businesses That Win. Now, I would love for you to go back and listen to that podcast. Generally, it's no longer going to be shown if you're looking at say, the iTunes podcast app because they only keep your last one hundred and this one was a couple hundred ago but you can generally google anything. If you google, 'businesses that win' and 'Rule Breakers podcast' I'm sure you'll find it. You can also find our podcasts at podcasts.fool.com. All of The Motley Fool podcasts over the years, if you are ever looking for one. But to make it extra convenient, my Cracker Jack producer, Rick Engdahl, is going to take each of the five points that I make and link in the podcasts where it was made to the show notes this week, so you could just click the link and listen to that podcast if you like or all five of them if you like at your leisure.

So again, The Businesses That Win. And in fact, I had five traits that I talk about and each of the Blasts From The Past is, of course, a truncated version of the actual podcast itself. So, I'm just going to give you the Cliffs Notes, I'm going to give you the cheat sheet and give you those five attributes that I look for in businesses that win. Here they are in order: No. 1, multi stakeholder orientation. Now, if you're somebody who knows Conscious Capitalism, I don't have to explain this to you, but if you're not, I'm not going to explain Conscious Capitalism to you but I will define my term here. I love businesses that think about lots of different stakeholders and try to create a win for all of them. So, they're not just there to reward one group, like, let's say shareholders, which is sort of how Wall Street is often conceived of, and treated capitalism and the stock market, we're just trying to enrich the shareholders. Nope, I love businesses where the employees love to work there. That's a different and very important stakeholder. Of course, I love businesses that please the customer. I think that's why we do what we do, not just at The Motley Fool but, of course, in capitalism writ large. So, that's a really important stakeholder group to me.

And I know I'm speaking to a lot of entrepreneurs who listen to this podcast. So, depending on who you are and what you do, it might be that your local community is an important stakeholder for you or maybe the environment, which is something a lot of people are thinking about today. So, naming your stakeholders and then orienting yourself to create a win for all of them, not just privileging one group or not paying attention to some of the groups, but truly thinking holistically, and more important, acting holistically. Trait number one of The Businesses That Win.

Trait number two, I love businesses that solve real-world problems. It's not that I always recommend stocks that do this really well, but my favorite stocks tackle a real-world problem, like, say, e-commerce or fitness or eating better or how about robotic surgery? These are all real-world problems. Surgery can be done better and sure enough Intuitive Surgical -- ticker symbol ISRG, one of our best ever Rule Breakers -- has tackled that and continues to innovate and grow. So, real-world problems, now that's not to say I won't still recommend stocks that don't seem to just nail it with this one. For example, Monster Beverage -- Monster, the energy drink and a bunch of other drinks there. I'm not sure the world really needs those. I mean, if you're staying up late trying to get ready for your exam tomorrow, it might be solving a real-world problem for you, but some companies are more into entertainment or sometimes neutrally healthy, arguably slightly unhealthy products. Some people don't like video games because they perceive others getting addicted to them and they think it's a waste of time. So, we're all looking around as asking, what are the real-world problems that we have?

In my experience, the best stocks at scale are solving those problems. That's trait number two of Businesses That Win. And even if you're a small business entrepreneur and you're not out there like Elon Musk is, to rid the world of the combustion engine in cars, you can still think harder and deeper about your context and ask, "How do I really solve someone's problem?"

Alright, well, number three is pretty simple. They have a long-term orientation. We talk all the time about the only term that counts on this podcast and, of course, for The Motley Fool having been in business itself for 27 years. Now, we love the entrepreneurs, the businesses, that have a long-term orientation. Arguably the best company of our time, including its stock returns; Jeff Bezos and Amazon.com: An incredibly long-term thinker and actor. And that's just one example, of course, there are many businesses that literally have been around for a very long time.

A company like Union Pacific, which has been an OK stock pick of mine; picked it about a year-and-a-half ago. It's up 12%, market is up 13%. But Union Pacific has been around a very long time. Or Nintendo, you know today's Japanese entertainment giant in an earlier form was just selling playing cards, American-style 52-card decks into Asia. That's part of the early history of Nintendo. So, certainly companies that have that long-term orientation and that long-term history, those are businesses that are clearly winning.

Trait number four. I just talked about Nintendo. What did it do? What has it done? It's a great example of a business that evolves. So, if you're going to have that long-term orientation, that's great trait number three, but you're living in a world that is dynamically ever-changing and certainly changing faster than it ever did before, 50 or 150 years ago, so you have to be ready to evolve. You want the Board of Directors to be open to change, you want the CEO to be a real thinker and an explorer. You want the employees of the company to be innovative, to have systems in place to cause them to question their assumptions sometimes and ask what could we do bigger, better, faster and evolve.

And then finally, trait number five, that I speak to on that podcast Businesses That Win, they created fun. I hasten to add, there are a lot of winners that don't necessarily conform to all five of these on my list. You know that fun means a lot to me, after all my most recent five-stock sampler pick, just a couple of weeks ago on this podcast was five stocks that spark joy. And boy! have they, especially Tesla been sparking joy since I picked that five-stock sampler. But those companies create fun, in my mind. And there are a lot of examples of what fun would look like and what it means. But especially, the companies that do spark joy in that podcast five years ago. I wasn't using that phrase, I didn't know who Marie Kondo was at the time, but creating fun is a big thing.

Alright, so just to summarize then, the Businesses That Win have a multi-stakeholder orientation, solve real-world problems, have a long-term orientation, evolve and create fun. Blast From The Past point number one, The Businesses That Win.

Alright, Blast From The Past number two. The third, fourth and fifth podcasts Rick and I -- and Rick has been with me all the way through; thank you, Rick, it's been awesome to still be working together four-and-a-half years so far of this podcast. Podcasts number three, four and five were all about the six signs of a rule breaker. The six traits that we look for in stocks in order to say, "Hey, that's a rule breaker." Now, I first wrote about these in our 1998, I think it was, book Rule Breakers, Rule Makers. Guess what? They haven't changed. The strategies work pretty well for the last 20 plus years. And these are so seminal that I want to make sure -- I probably don't do this enough -- I want to make sure I share with you, especially for new listeners, those six traits, again, in rapid truncated format.

Now, I should mention, we've been using these signs -- as I said earlier -- since 1998 or so, but one thing we hadn't done until two years ago was to think not about the stocks themselves -- the six signs in the stocks -- but the six traits that you should be exhibiting as a rule breaker investor. They're traits that we've used and taken for granted for years and years. But I realize, it would be helpful for me to put out six -- just like the six signs -- six traits to make sure you're abiding by those. Because this is the way to invest using the Rule Breakers stocks themselves. This is how you need to behave.

And I'm not going to summarize them here -- that might be for another Blast From The Past -- but I will mention, that on September 19^th, 2018, it was entitled "The 6 'Hows' of Rule Breaker Investing," how to do the investing. And I certainly recommend that to your attention, if you're not already familiar with our 6 hows.

So, trait number one of the Rule Breaker stocks we're looking for, is that it would be a top-dog and first-mover in an important emerging industry. So, for this one, I'll just give a quick example of Netflix. You think about streaming entertainment today, a pretty big thing, right, all the kids are trying it now; CBS, NBC, these upstarts in this category, if you can believe it. Of course, Netflix was first, but HBO, Hulu Amazon Prime, I mean everybody is there, but who was the top-dog and who was the first-mover in this important emerging industry? Netflix. Great example of one of our best stocks, and for this kind of reason.

And I've often said, of the six signs I'm sharing with you right now, this is probably the most-important. When you find that top-dog and first-mover in an important and emerging industry, you're setting yourself up on potentially a long runway of stock market-beating returns. And Netflix has been providing that for us since I first picked the stock in 2004; still holding.

Alright, Rule Breaker sign number two, a sustainable advantage. There's a longer form of this, but let's just keep it short because this is the truncated version. If you're going to buy a stock and you're going to hold it for at least three years, if not three decades, then, of course, sustainable, competitive advantage for that company is really important. And a quick example here that comes to mind, well, let's go with Apple. In addition, to its incredibly well-known brand, and probably the best-known brand in the world, Apple has an ecosystem. When you buy -- I first bought, I think, an iMac or maybe it was a Mac Air laptop, whatever it was, I was like, well, then I need the other one of those. And then also, the iPhone comes out. So, I got to have one of those. Now, I'm locked into an ecosystem that I don't really want to leave. And Apple hasn't screwed it up for me. Not everyone of their apps or experiences is perfect, but that's a real sustainable competitive advantage and Apple knows it and Apple shareholders -- like me and you, I hope, have really benefited from that over the years.

Okay. Number three, strong past price appreciation. Now, the reason I've always liked this as a Rule Breakers sign, is because it goes against a lot of people's instincts. I'm specifically looking to pick a new stock, for you and I to buy new shares, of a stock that has already done really well. Again, most of the world thinks, it's all about buy-low sell-high. So, they're looking at the 52-week lows. You and I should be looking at the 52-week highs. I really learned this from William O'Neil, his book, How to Make Money in Stocks, the Founder of Investor's Business Daily. He did such a great job explaining the dynamic of how great stocks keep hitting new highs all the way through. Those are the ones we want to own. I sometimes phrased it this way, "The stock market is like a horse race." Here's the good news, you don't just have to place your bets before the bell rings, you can keep betting on the horses all the way down the track. And as they start to separate, which one do you want to put your money on to win? I know which one I want to put my money on to win, Secretariat, when it's already up nine lanes and it's not even the final stretch yet, right? That so often has led me to stock market wins; I bet you too, if you're listening to this podcast. And here's the beauty of it, most people don't think that works, they think the opposite, which is why this works so well.

So, what's a good example for strong past price appreciation? Well, the market's been really great the last few years, but I would say, a company like The Trade Desk, which has just been a spectacular performer, a multi-bagger in just a few years. It always looked like it had already moved and you shouldn't buy it. Again, that just kept going up. It has had some downdrafts too; nothing goes straight up. And many of our best stocks have really bad periods. Tesla -- I mentioned this a week or two ago -- Tesla did nothing from 2013 to 2018, check that stock graph, it's been amazing the last few weeks and last few months. But from 2013 to 2018, we sat there holding the shares -- the market was amazing over those five years -- Tesla was flat, way behind the market. We bought before then, back in 2011, and we've held all the way through here into 2020. So, number three was strong past price appreciation.

Now four, five and the six, I can just rattle these off all together at once, because they're pretty straightforward. Number four, is good management, smart management, smart backing -- the people. Number five, is a great brand. Think about a company like Starbucks, it has a pretty great brand. A lot of these are food often, like, Chipotle has a great brand. It's had some tough times, they've made some mistakes, they've always tried to defend the brand and make the brand stand for something.

Keurig, that was a great Rule Breaker that unfortunately got bought away from us by the German conglomerate JAB Holding, it's an amazing company by the way. I think they're private, they're definitely German. But JAB owns Peet's, they bought Caribou Coffee, they bought Krispy Kreme, they bought Panera. There is a large conglomerate forming in Europe of a lot of U.S.-centered brands. But certainly, Green Mountain Coffee Grocers, which was the corporate name initially for the Keurig machine, but they changed their name to Keurig over time, because it became such a big part of their business. But those are all examples of good brands or great brands; I mentioned Apple earlier.

Number six, by the way, it's just that the company be perceived as overvalued. And that kind of ties into number three, strong past price appreciation. But number three is all about looking backward and seeing how it's already done and wanting to see a pretty sweet looking graph. Number six is what people are saying about it right now. Often, they're looking backward going, "That is so overpriced, there's no way that can keep going up." And it's perceived to be overvalued. And boy! I don't think any company has been thought and called overvalued more sustainably over a longer period of time than Amazon. And it's been one of the best stocks you could ever have owned in your life. And it's one that everybody always said was so "overvalued."

More recently, Tesla has absolutely looked like that. I mean, I still featured in my five stocks that spark joy, a couple of weeks ago, but it had more than doubled in the six months leading up to that. And boy! it's up 37% since that day, in just a couple of weeks. So, yeah, it looked really overvalued six months ago, three months ago, one month ago, a week ago, yesterday it looked overvalued. And since we're recording at an odd time for this -- we're actually recording late-Monday afternoon. So, by the time you're hearing this, I don't know how Tesla has done, I don't actually care that much how stocks do day-to-day. But things might have changed. It's so dramatically volatile right now.

The reason I'm taping on Monday, by the way, is The Motley Fool has its quarterly Board of Directors meeting, so that's why I'm not able to do this podcast normally as it is recorded on Tuesday.

Alright, so if you want to hear slightly longer form on that. Again, Rick will have linked into our show notes links to the first three podcasts where I reveal these signs on these podcasts -- numbers three, four and five -- back in 2015, and you can listen to longer form on those. But those are the six signs that for 20-plus years now I've been using to guide me to select my next, I hope, big winner.

Now, as we get ready for Blast From The Past point number three, you might be thinking, "Wow, Dave, you just hit me up with two lists of five and six attributes," very listee, a lot of information chockfull of bullet points, "Is it going to keep staying like that?" And the answer is, no, it's not going to stay like that. Those were the two listy ones. The last three Blast From The Past I have for me are more storytelling.

Let's go to Blast From The Past number three. And it's one of my favorite stories, that's why when it was August 5^th, 2015 and Rick and I had just been doing this podcast for about a month, I'm like, I got to tell that story, it's the greatest secret of all, I have to tell my greatest secret of all story. And sure enough, I did, so you can listen to it in fuller form, but I'll recreate it, as best I can, here now in February of 2020.

So, the greatest secret of all.

I had the wonderful fortune -- so did my brother and sister after me -- when I turned 25, of receiving a piece of my deceased grandfather's estate. So, grandfather Gardner died in 1972. I was six at the time; I have some fond memories and, of course, the sad final picture of him looking not at all like the man I'd seen just months before. But he had a wonderful life, he was a successful entrepreneur, he loved the stock market and his money was then managed by my uncle Eugene Gardner of Gardner Investments in Lancaster, Pennsylvania; one of the great firms, I think, of the last 25 years or so. It's now Gardner Russo & Gardner. They are kin to us; my uncle started the firm; my cousin helps manage it today. So, naturally, since they were professional money managers, they took over my grandfather's estate.

Now, at the age of six, I wouldn't have known what that was. I didn't understand what an estate was or much about stocks at all. But somewhere, I remember in my early 20s, my dad began mentioning to me that when I do turn 25, my grandfather Gardner had set it up that I would get my portion of the estate.

And my recollection is, on that very day that I turned 25 in the year 1991, I flew to Lancaster, Pennsylvania with my dad and we went and sat down in my uncle's offices. He came into the room, he said, Happy Birthday! He said, I've done my best for you in so many words. And he showed me the account that I'd be taking over. Now, I'm not going to mention the amount. I'll say, it was exciting for a 25-year-old, but nothing that I was going to be retiring on. So, glad I couldn't, because that forced me and Tom and a bunch of our friends to start The Motley Fool just about a year or two later. But it was still a handsome amount. But this story isn't about the amount, it's about what I saw that day on a sheet of paper in Lancaster, Pennsylvania.

I'm going to say there were about 25 stocks. I do remember Berkshire Hathaway -- Warren Buffett's company -- was one of those stocks. Almost all of them were recognizable names. But here was the shocking thing to me at the time. I had already started investing my own account. I had, maybe a shorter-term viewpoint than my uncle was managing toward. What I saw was almost everyone of those stocks up-and-down the list, GEICO, I don't know, maybe Capital Cities/ABC. Every one of those positions looked something like this. Cost basis, $6.13 today $88. Next one, cost basis, $12.53 today $743.44. Up-and-down the list I saw that those positions had been held steadily for 20-plus years in most cases. And so, they had tiny cost basis, they had spiffy-pop many times -- even though I didn't know what that term would be yet. That by the way, is going to be Blast From The Past number four, coming up the tale of spiffy-pop.

But up-and-down that sheet I saw, how to play the game of the stock market? How truly to grow rich? You do it over time. You find companies that will endure, that will persist. As I mentioned earlier, there are businesses that win. Do you remember earlier, they're going to be pleasing multiple stakeholders, solving real-world problems, they have a long-term orientation, they evolve. And I hope a lot of the time, they created fun. Those are the companies that I was looking at and that was the account that I would take over.

Now, since then, we started The Motley Fool and I was reflecting in our early days. And Tom and I started giving speeches here and there, writing essays. And I thought, I have to tell that story and so I did. I wrote an article called "The Greatest Secret of All," I'm googling it right now. And in fact, I rank number nine across all the internet. So, you can actually just google the phrase "greatest secret of all," and read that article.

But here's the punchline. I said, the greatest secret of all, scribble this down, put it on your fridge door, "find good companies and hold those positions tenaciously over time to yield multiples upon multiples of your original investment." That's how to go about finding the real stock market winners, the mega winners that multiply over time. And it's what we're doing teaching and advising through our services every day.

If there's any sad note to this story, it's that it's still a secret largely. Our company has worked hard over the last 27 years to spread this word, but it's amazing how few people truly act long-term. But you know, if I could have every young person see that brokerage statement, the cost basis and the prices they were that day, boy, would we be a smarter, happier and richer race of humans worldwide.

So, maybe -- since I made it my Blast From The Past number three and brought it back out of the past, my mental image is -- let's go back to Star Wars, here we're on Dagobah, remember? And Luke Skywalker has the ship submerged in that swamp before he meets Yoda. But it gets lifted up, I think, by the Jedi Master himself, and it's just dripping. And that's kind of how I see the secret, we've kind of lifted it back up and it's dripping, but I'm holding it up high and I'm saying, "Share it! let's not make this such a secret."

Alright Blast From The Past number four. This is the tale of spiffy-pop, again, an abridged version; I wouldn't even say the long-form version of the tale of spiffy-pop is one of my best, but I definitely want to make sure here on the Blast From The Past, with a lot of new listeners, that you know what a spiffy-pop is. These days, when I speak to a room, I ask people to raise their hands. Now if there are Motley Fool Molly members at one of our events, I'm going to say, 70% or more of you raise your hands and say, yes, I do know what a spiffy-pop is. But, for example, I'll be in Phoenix in a couple of weeks -- at Phoenix Startup Week, of course, in Arizona -- and if I ask people that day, a start-up crowd, raise your hand if you know what a spiffy-pop is? There will be maybe 5% of the hands will go up. So, in my experience, most people have no idea what the heck I'm talking about, which is why I'm sharing this with you today. So, reification is when you come up with a term to make a thing real.

So, a quick example would be the I.Q., the intelligence quotient. That was never a thing until somebody said, "Okay here's a test and you're going to answer all the questions to the best of your ability and whatever the number is, that is your I.Q." I think most people these days feel like intelligence takes many different forms, there's not just a single number you can put on you or me and say that's how smart you are. But when somebody invented the I.Q., he or she reified intelligence.

So, I decided, I wanted to make this awesome concept a thing by giving it a name. And the awesome concept, which I don't think anybody had invented previously. I think we did this -- we innovated with our Rule Breakers community back in the year 2007, history will show. But I said, there should be a thing that we can celebrate as investors as long-term players, and how about this, what if we celebrate the day when you make more money that day with the stock -- with a stock -- than you paid for that stock way back when?

And we solicited what the term should be, we got more than 200 submissions from our Rule Breakers community back in 2007. The winner was Carol Binion. I always remember Carol's name. She was the one who said, "What if it's a spiffy-pop?" And I just kind of looked at it, and I thought, that's great. And when I googled her some years later to get into contact with her to thank her again, I noticed, she's on the Internet Movie Database, because she seems like a very accomplished costumer, wardrobe designer. So, for example, if you saw the movie Guardians of the Galaxy Vol. 2 in 2017, I sure did, she's credited with the specialty costumer. She's actually credited in that one as Carol Brinion, but regardless, that's the woman who came up with that phrase spiffy-pop that caught my eye and I decided we're going to call it that.

But the concept, again, you're making more money in a single day then you paid for the stock way back when. And let me give a very real-world example, I had mentioned this company earlier on this podcast, but Tesla just did it today, Monday, February 3^rd. It did it for Rule Breakers members, because on November 23^rd of 2011, I recommended Tesla at $31.45 and today February 3^rd, the year is 2020, the stock actually went up $129.43 to $780. So, it's gain was $129, our cost was $31. That wasn't just a spiffy-pop, that was a spiffy-four-pop, an amazing move for Tesla shareholders today. That was a spiffy-pop.

In fact, for those counting at home -- and I'm one of them -- that's Tesla's fifth spiffy-pop for Rule Breakers. And my brother Tom picked it in Motley Fool Stock Advisor, and that's his third spiffy-pop. So, now you know what a spiffy-pop is.

And that's really my sole goal here with this Blast From The Past. There is a little bit more lore to this. The publication of The Motley Fool Rule Breakers issue in May of 2007, for the fun of it, happened to be on my birthday, which is May 16^th. And so, we revealed to the world and to our members what a spiffy-pop was that day: The concept and the name. And then literally two days later, aQuantive, which was an ad measuring firm, got bought out by Microsoft, it rose $38 on that Friday May 18^th 2007, our cost had been $25. So, it was amazing, two days after we revealed spiffy-pop to the world that we actually scored our very first one. We've gone on to have hundreds of spiffy-pops in our services. And as a lot of you will know -- who know the whole spiffy-pop lore and language -- we stopped counting them after 13 for a given stock. So, when Tesla does this eight more times, we'll call that 13th the Baker's dozen, we'll call that, it's forget-me-pop, and we will no longer score those anymore. Because at that point, when stocks make small moves, they can spiffy-pop and it's boring, it just sounds like needless bragging, as if it already doesn't sound like bragging.

Anyway, but, yeah, so that's how we count and then stop counting spiffy-pop. So, a stock like Netflix does it almost every other day, it's not worth counting anymore. We like to celebrate the first. You never forget your first. And that Baker's dozen forget-me-pop. And in-between the first and the 13th, the other 11. But at that point we stop counting. But just to get a single spiffy-pop.

And I see it a lot on Twitter these days. I see people saying, "Got my first spiffy-pop." That is what gives us our greatest joy, I think. So, I'll always remember AQuantive, because even though it wasn't my first spiffy-pop as an investor, it was the first public spiffy-pop of all time.

And often with these lists, I think a lot of you know I try to save the best for last, I think I've done it once again this time, but maybe not, maybe it's just what I like the most. But let's go to Blast From The Past number five. Now, on August 19^th, of 2015, I was doing my second in a series called "Losers," my regular listeners will know that I review my biggest losers at the start of each year; which I did just a few weeks ago, David's Biggest Losers Vol. 5. But kicking off the podcast, years ago I decided, let's just start talking about losers. So, the previous week I've covered by five biggest losers ever. You can still listen to that if you like, but this following week August 19th, I started talking about the positivity of losing. And that one of my superhero powers -- maybe my only one -- is the ability to lose constantly. I love the Winston Churchill line, "Secret to success is stumbling from failure to failure without losing your enthusiasm." That very well describes me and my approach to investing.

The pain of loss, psychologists tell us, is three times the joy of gain, which is amazing. It's been lab-tested behavioral economics agree, it's three times the joy of gain, the pain of loss. Why is that amazing? Because investing directly reverses that. The ratio goes the other way. For investors the joy of gain is infinite times the pain of loss. The worst loss you can ever have would be 100% unless you're doing something really silly. The worst loss you could ever have is 100%. The best gain you can have, well, let's talk about that in just a little bit, but I think you know, it's unbounded. And so, think about what psychologists have told us our bodies are hard-wired to do, to fear loss, to grieve over it far more than we enjoy gains. And yet for us, as Rule Breakers, we know it's the exact opposite and so we invest accordingly.

So, I trotted out in that podcast one of my favorite stats and I'm updating it here with this Blast From The Past. I mentioned at the time that in Rule Breakers history -- again, we started this service in October 2004, two stocks every month since then, 24 a year, now more than 15 years. So, more than 360 stock picks. But back in 2015, the numbers read like this. I had 41 stock picks up to that point. From 2004 to 2015, I had had 41 stock picks that had lost 50% or more of their value.

That was horrible, I said, every single one of those 41 stocks I picked, I'm the one bottom-line responsible for every pick that we make, every good thing, every bad thing. I get a lot of help from my teammates, but I make the calls. And 41 separate times in the first 11 years of the service. So, that means about four year lose half or more of their value. This advice is being sold to you, our dear members, who are paying us for advice. So, you pass us for our advice -- that's payment A -- then you pay dearly -- payment B -- by losing 50% or more with that stock pick. And I hate it, I hate each one and I'm sorry for all of them.

But here's the good news, I said, back on August 19^th, 2015. The good news is that the 41^st best pick for Motley Fool Rule Breakers back then was up 190%. And if you do the math with me, you just imagine how that works out? You start seeing, you're happy to lose 50% all the time if you need to in order to get the winners that we come up with in Rule Breakers, Stock Advisor, etc. So, I was curious, here we are now, February 3^rd, we're recording, 2020, to update these numbers.

And here they are. As of today, we now have 59 50% or more losers. So, in the intervening years, the last four years, I've picked another 18, which is about my average per year. Horrible, I know. My very worst pick was CLDX, Celldex Therapeutics: A horrible stock pick. The record will show, the day I picked it, it was at $208.5, we exited at $2.28. I know. Oof! So that was the worst of the 59, the best of those 59 50% losers was actually XM Satellite Radio, which was down 52% for the one year that we held it from 2005 to 2006. Of course, the company kept going, but I just sold out disconsolately after the stock had been more than cut-in-half over one year. Of course, XM Satellite Radio went on to merge with Sirius Satellite Radio. And today, Sirius is actually on our Rule Breaker scorecard. It's been kind of a dog for us, it's down 40% in the roughly seven years that we've held it, a volatile stock, SIRI is the ticker symbol, a $31 billion company today.

Anyway, those are the 59 present 50% or more losers. And the average loser in that group has lost about 70%.

But here's the good news. The 59^th best Rule Breaker stock pick is Zillow, ticker symbol is Z or ZG, if you will. And Zillow is up 322.9%. And that's the 59^th best. The best is Mercado Libre, which as of market close today, was up 4,592 percentage points, that is 46-bagger. Mercado Libre on its own more than wipes out all 59 of those minus, on average 70% losers, do the math 59 times -70 is less than we've made with Mercado Libre alone. And that leaves us 58 multi-baggers underneath our top performer to compete against all those minus 50s.

So, I hope I haven't overwhelmed you with numbers, but I hope the point is clear. You can be very successful stumbling from failure to failure without losing your enthusiasm, assuming you're going to continue using the six signs of a Rule Breaker I presented earlier. Looking for businesses that win, I presented earlier, following The Greatest Secret of All, which is hold, hold, hold. And looking, point number four, for spiffy-pop. So, tie it all together with a bow around it. Remember that statistic: 59 of our stock picks, roughly one in six, has lost 50% or more of its value in Rule Breakers. And we're utterly destroying the market averages up-and-down that scorecard because of all the winners that we have, and in particular, how much they win.

A reminder, the most you can ever lose, unless you're doing something silly, is 100%. We've still never done that with any of my stock picks, but I've gotten awfully close. But the big point here is, by holding, you're going to win so much more than your losses lose.

And that was Blast From The Past number five.

Alright, coming up on next week's show, I haven't done a Great Quotes episode in quite a while. In fact, I see it wasn't since last June of 2019 we did Great Quotes Vol. 10. So, I think a lot of you know, I love to hold on to quotations, I save them in Evernote, I organize them and I trot them out from time-to-time to educate, to amuse and to enrich you. And we're going to do that next week, it's going to be Great Quotes Vol. 11. But this one is going to have a twist, because the first ten volumes -- five quotes each, 50 quotes from me, a whole series, anybody can go back and enjoy, if they're really, really bored. They're there for you. But all 50 of those were kind of gathered and shared by me.

This time, I want you to participate. I want you to help me out. Send me one or more great quotes that you think will educate, amuse, and enrich Rule Breaker Investing podcast listeners. Next week, I will read through them all, I will pick my favorite five, I will credit you and I will present them in next week's show.

So, how do you reach us? Our email is, [email protected]. Of course, on Twitter we are @RBIPodcast. My producer Rick Engdahl, thank you again for another great show, Rick. And I await your inspiration, your great quotes. We'll share them next week on Rule Breaker Investing, in the meantime, Fool on!