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Essays From Yesterday, Vol. 1

By Motley Fool Staff – Jun 22, 2020 at 5:27PM

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David Gardner shares some of his writings that are meant to make the world smarter, happier, and richer.

Back in the olden days of flip phones and paper newsletters, every issue of Stock Advisor and Rule Breakers started with a short essay conveying timeless investing lessons. Well, as long as they're timeless, why not revisit them? Today we look back to yesterday's Foolishness with today's fresh eyes.

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 June 2, 2020.

David Gardner: For years and years and years, I wrote essays in Motley Fool Stock Advisor and Motley Fool Rule Breakers. Essays to kick off the issues. It would be May 2008. Wow! Remember 2008? And in addition to our new stock picks and our best buys now that month, the mailed issue of Rule Breakers led off with a page one essay from me, and same with the next month and the month after that for years.

Well, do you recognize any old school references, issues, mailed issues? These days our services are digital. We don't do paper copies anymore, and we don't do opening essays. I'll explain a bit later about why, but I put a lot of time into those essays and as they occurred over a long narrative arc of history, 2002 through 2017, 15 years worth of them, it can be both educational and amusing to go back and see what was being said when.

The purpose of The Motley Fool is to make the world smarter, happier, and richer and that's exactly what I was doing with those essays for years. I've pulled some favorites with some timeless truths, and I want to introduce or for long time Fools, if you will, reintroduce you to our Rule Breaker thinking over time, but this isn't nostalgia or about yesterday. I think it may be a fine way to educate, amuse, and enrich you this week only on Rule Breaker Investing.

Welcome back to Rule Breaker Investing, happy June 2020. It's not a very happy world right now, at least here in the United States and I think a lot of people will be aware of the case. Not only do we have a pandemic, but we also have the epidemic of something far more insidious and probably farther reaching, both looking backward and certainly looking forward and that is racism and it's reared its ugly head once again and it's very unfortunate and a lot of people are upset about it and I feel some need just to speak to this at the top.

I'm not going to go on about this. If you're like me, you're already receiving a number of statements from your favorite content providers or news organizations. It does seem like one of those things that people feel like they want to make a statement about and while I have a little bit of that running through me today, really, I wanted to share what we've done at The Motley Fool, because I'm proud of it. It wasn't my call. It was my brother Tom's and his team and I'm just kind of reading what we sent largely to our employees earlier this week in our community very shortly. I just want to lead off with this short statement of what we've done, because it's more about the walk rather than the talk, but here's a little talk.

At The Motley Fool we believe that diverse voices, insights, and expertise, fuel innovation and human progress in the marketplace of business and the world at large. Our company wants more entrepreneurs, more investors, more leaders, and more innovators from every community around the world. We all benefit. That some voices have been and are marginalized, abused, silenced for long periods of time is anti-marketplace, anti-growth, and antithetical to everything that we believe at The Motley Fool.

We of course reject racism, inequality of opportunity, hatred, and cruelty. We will expand our commitment in helping ensure that our employees are members, that's you, our listeners certainly, our future members and our fellow humans are safer, treated fairly, and given every opportunity to live out their true potential. This week we have allocated $100,000 evenly across our employees, for them to support equality, justice, and peace in a way that's meaningful to each of them.

We encourage everyone to join us in funding organizations that make a priority of fairness, decency, respect, and love for all. As citizens and investors, we all gain in a world and in a business environment that makes it an essential never-ending priority to treat everyone with the dignity and respect they deserve. The world and the markets operate best when the opportunities for growth, impact, and prosperity are clearly available to all, and I love these last four words. Motley's the only where.

Well, one of the things I'm going to be doing this week on the podcast is reading things that have been written in the past and then reflecting on them, and the main part of the show is coming up in just a bit, but I want to establish the rhythm right here because I just read you something that was written by our team here at The Motley Fool and now I just want to reflect briefly on what I shared with you. Just to give you a little bit more of the details, our leadership team let each of our employees know that they'll be getting $250 more on their next paycheck and that is intended for each of them to think about what is an organization that they know that each of us knows that supports equality, justice and, or peace I'll throw in love as well in a way again, that's meaningful to them.

I really like what we did because $250 is a pretty serious impact at an individual level. It made me feel really good, getting that check or knowing about that for next week and it empowers me to make my own call and that's the second thing I want to emphasize about it. This is not a broad brush effort by The Motley Fool. We're not writing a single check to a single organization. We've done that before. I'm sure we'll do that in future. No, this is more for each of our employees to think about how they want to articulate that in their own lives and frankly, if somebody didn't want to do that, they could just keep the 250 themselves, so that's our gift to them but every one of our employees understands the intention, and so yeah, when you do the math 400 plus employees that comes out to about a $100,000.

Each of us is in a different place in this world so some businesses could probably afford to do well more than what we did for our employees. Others might not be able to do $250. Maybe they could just do $25 per employee or $2.50 per employee but I think it's a great model and if you feel inspired by it to do it in your organization, go ahead and steal a page from us. We love it when people copy what we're doing. That's part of how we hope to make the world smarter, happier, and richer.

In conclusion, we're not under any illusion that $100,000 from us is going to fix anything big, broad, and broken in this world, but it is an effort. It's our effort and I wanted to communicate it to you, our listeners, because you're part of our community and in a lot of ways, this week of FoolFest, which is our annual gathering of Fools, we do it once a year -- last year, we had the most ever Fools, it was over 800 all in person at National Harbor in Washington, D.C. -- this year, of course it's virtual and it's on Thursday of this week and we have far more people attending FoolFest this year than all other years combined up until now. That's a sign that while it's unfortunate we had to go virtual when it's kind of a press the flesh event once a year, that we all have loved over the years, we are also excited to be reaching far more people than ever before through FoolFest.

A special week for us here at The Fool, but a hard week for us as a country. Just a couple of bookkeeping items before we get started. I want to mention that if you are a fan of these three things in order, the University of North Carolina basketball team; No. 2, sports; and No. 3, investing then I think you're really going to enjoy an appearance that I made on another podcast just in the past few days and that's the Carolina Insider podcast, the May 29th edition.

Now, if you're within the space of the Venn diagram, that includes all three of those, I think you're really going to enjoy that and I'll mention that you need to click through the first 20 minutes or so. Although if you're a big fan of Carolina hoops, you'll enjoy hearing the hosts talk about it, but I show up somewhere in the middle of the show, which you'll find now. If you're not fully in that special space of the Venn diagram, let's say you're just a sports fan and investor, I still think you'll enjoy it. Even if you're just an investor, you don't care that much about sports or Carolina basketball, you might still enjoy it because we talk a lot about investing and overlaps between sports and investing. Of course there is a lot of Tar Heel running through that, but that was a lot of fun.

I want to underline the Carolina Insider podcast. It's of course available wherever you download this podcast and all podcasts, whether it's iTunes or Google Play or Spotify, or what have you. And then, I want to mention next week, it's going to be one of those five stock samplers. Whatever my next five stock samplers is, the 25th historically in this series, I'll be presenting that and I'll also be updating you on the performance. A little bit of review-a-palooza next week as well for a couple of five stock samplers I picked in June of years past.

In fact it's been kind of dramatic to be following them and I'll be interested to see how they're doing by next week, because both of these were significantly underwater just a few months ago and I was already getting ready to come out with my June review-a-palooza and say, I apologize for these samplers. They've been dogs. I've had mostly some great winners among my five stock samplers, but this was not going to be good until the last week or two when stocks like Axon Enterprise, given police body cameras and police safety these days and how [...] all of a sudden Axon fired up this week and then Wayfair shot up on Tuesday and so all of a sudden, both of these five stock samplers are in the green.

It'll be exciting to see where they are next week, along with my new five stock sampler. The week after we'll be playing the latest installment of the Market Cap Game Show, so a lot of June pleasures. Well, I got a note recently celebrating my birthday from one of my longtime favorite Fools here at The Motley Fool, Rex. Moore Rex, who himself in just the past few weeks celebrated his 20th foolaversary here at The Motley Fool. Rex has done so much wonderful work in our community, as a writer, following things like the Foolish 8, for those who remember that approach to investing well back in the day, right through to doing so many fun videos, getting out into the world of technology and seeing what's up.

Rex, what a wonderful friend and longtime fool, but he was reminding me of an old essay that I'd written. It was called, No, sorry. You can google "No, sorry, David Gardner" if you'd like to read this one, I'm not going to on this podcast, but he said it was one of his favorite pieces that I'd written over the years and it gave me an idea for this week's podcast and that was to go back to some of the things I'd written a long time ago in our services that are mostly forgotten. That are old links somewhere on a site and realize that some of these pieces I hope speak to the here and now.

As I mentioned at the top, this is something that I did on a regular basis. Starting with March 2002, which was the first issue of Motley Fool Stock Advisor. Two years later in October 2004, Motley Fool Rule Breakers debuted and so 12 times a year in Rule Breakers and six times a year, my brother writing the other six in Stock Advisor, I wrote essays to lead off each issue. They were short essays. They'd come to about 500 words or less and I put a lot of time into them because I think first and foremost, I'm a writer.

I will mention, I certainly don't write from internal motivation for the most part. I need the compulsion of deadlines to be productive, but starting in 2002 and running all the way through 2017, I poured my heart into what were the 500 words that I could say to educate, to amuse, and to enrich a growing base of subscribers. Later, we started to call the members over the course of those 15 years and I thought, I did put a lot of time into those and I hope some of them still speak to us today so what I have for you are four of those past essays and for each one, I'm just going to share it. Flat out. I hope it will read fresh and then I'm going to reflect briefly on it before moving to the next one.

I should mention a couple of ground rules for this. The first is that I completely randomized which ones I'll be sharing. Anybody who knows my love of randomization yup, of those four tray icons on my smartphone at the bottom those go-tos that each of us has, the first three of mine are pretty standard. I've got my calendar, I've got my email and I've got my task to do organizer down there in the tray but my fourth one is my dice rolling app and for those who care, I use the Natural 20 app, which is a Dungeons & Dragons reference, but it's a great polyhedral dice randomizing app.

It's the Cadillac in my mind of polyhedral dice randomizing apps. I use that to randomize my way through years and years of essays and the four that I came up with. Well, I'm simply presenting them to you in chronological order from the earliest to the latest. Since I've already read them through, I can say, they're not terribly off base. Otherwise I probably wouldn't have shared them but if you like what I do this week, let me know on the mailbag at the end of this month and this could become a new series if it seems like something we want to do. On the other hand, if you feel like, yeah, Dave, why are you reading me something you wrote in 2008? And you can let me know that and we won't do this again on Rule Breaker Investing.

All right. Let's settle in here and go to the first of these past essays. Rick Engdahl, if we could please have some music from the way back machine, we're time traveling. All right, and we've alighted upon May of 2008. Remember 2008? Wow, what a time! And here was the introduction to Rule Breakers in May of 2008.

Has the market's nasty sell off left you sitting on the sidelines? It can be scary out there, but if you're going to succeed as an investor, you've got to invest.

Rule Breakers returns fell dramatically from November through March. Six months ago, the average return for our 70 plus recommendations was a copacetic 43%. By last month, our average return had fallen to 4.5%. That's just a stunning loss. I try to lead with my optimism but rest assured that I do not enjoy such periods. Yes, you are getting a better deal on your new investments and yes, they're for the long-term but no, I do not enjoy watching BIDU on the NASDAQ dropped from $400 a share to 200. My most recent purchase for my family portfolio was at 345. Ouch. Did I think Baidu was a great buy so low, you bet. I even flagged the stock for our Motley Fool Advisor round table last month, around $275 a share so I hope many Fools took advantage of that price.

Are you still waiting it out? Get into the game. At least buy a partial position, half of your eventual stake or a third or even a 10th. Start with Charly Travers's or Rick Munarriz's selections this month. Both of which have been on my personal watch list for more than a year or buy into our Rule Breakers core. Have you looked at our latest best buys now? We have so many great companies in our service. Just don't be a wallflower. Wallflowers react based on a stock's most recent swing and either way they end up not buying. If a stock went up, they say, "No, it's up again. Why didn't I buy last week? Now I'll never buy this stock." If it went down, they boast "Yes, I knew I was right. It was overvalued. I think I'll wait some more because I bet it's going to keep going down," and they never buy. Great stocks leave them in the dust.

I know how to write about this feeling because early in my career, I felt it. I felt it enough times that I developed my own three step approach. Decide the total amount of money you want to put into a stock. Divide that amount by the number of months, you're going to be buying. Buy your first increment in the first month, let's say tomorrow the 17th, and then on the 17th of next month and of each month left to fill out your position by the next increment, whatever the stock's price. It's unemotional, it's effective. I find it totally appealing.

Most people, dollar-cost average because they have a limited amount of new money to invest. I'm saying you should do so even if you already have all the money you want to invest. Use dollar-cost averaging to take your emotions out of the equation. Take out the psychological fallibility that follows when you're guided by what happened to a stock yesterday or last week or last month. Just start buying dear Fools. The only way you'll make great investments is by investing. Fool on!

And so ended that essay and I remember I used to end each of my essays "Fool on!" back then and then I decided I could save those two words because it was such a tight word count that I started dropping the Fool on!, even though of course, I rock Fool on! every day, all day, social media emails, et cetera.

Three reflections really, thinking back now to that essay and the first one and I think the biggest, most important point is that concept of dollar-cost averaging or as we've often phrased it at The Motley Fool over the years, buying in thirds. I hope the essay was pretty explanatory on its own. I don't want to repeat the points, but I'll just say that for a lot of people they're paralyzed in the face of market volatility and so a great antidote to that paralysis is simply to put a portion of your money into the market.

Too often, I think people think in black or white terms or they think binary and you don't have to think that way. There is a lot of gray out there and there's a lot of opportunity not to just buy or just sell, but do a little bit of both here and there and often for people with large positions, they can sell off small pieces over the course of time. If they like to raise some income and reduce it, you don't have to sell it all at once. Especially the concept of buying in thirds, just sort of imagines that you would take whatever you want to put in a position and if you're not comfortable taking that Fool position today, and I'm going to talk more about that in just a minute, if you are not comfortable, why not take one third of the money, let's just say you want to put $3,000 into that stock total.

Put in a $1000 today and then add a regular interval, maybe a month from now or a quarter from now, or whatever makes you happy, put in $1000 more and it doesn't matter where the stock is at that point. Assuming the world hasn't dramatically changed or your thoughts about that stock haven't changed then put in that last third as well and so you've dollar-cost average yourself into a $3,000 position and really smoothed out the wrinkles and the anxieties that a lot of people feel and that's a great way to not be a wallflower.

In the essay, I said increments. If it's buying in tenths for you, if that makes more sense, great or buying in halves or as I've said, buying in thirds. I like that. Now, one footnote about that and I've talked to some about this on Rule Breaker Investing over the years, most studies will show that if you dollar-cost average, you underperform relative to simply putting all your money in that stock or in the market in the first place and it's fairly easy to explain why studies show that.

It's because since the stock market tends to rise nine or 10% a year, and so for any given month, it tends to rise even though we've seen some dramatic falls in 2020. For this reason you could imagine then that the longer you wait to put some of your money into the market, you're paying an opportunity cost the gains you would have had and that's why for anybody who feels confident, either as an investor or in a given stock, I'd be the first to say, go ahead and take your Fool position out right now and sure enough, that's what I do most of the time I'm buying and selling in the market.

However, if I'm anxious or worried or just for whatever reason distracted, I feel really good about going into the market in thirds to establish positions instead. That's the top reflection I have on this essay that was written 12 years ago this month, randomly pulled from my dice randomizer, but two other quick thoughts. One is, I mentioned the phrase RB core and I say buy into some of our RB core stocks in that essay. Well, that was referring to what we today call starter stocks. If you're a Rule Breakers member or a Stock Advisor member and I hope you're members of both and all of our other services besides then you'll know, I hope about starter stocks.

When you join our service, we have a list of five to 10 stocks in our services and we say, "Hey, get started investing right now." And these are the bigger, safer companies that we feel good about in a timeless way. Don't necessarily wait for whatever my next pick is. Just go ahead and start investing now, smaller positions, if you like in these starter stocks.

Well, back in the day before we came up with starter stocks, we called it the Rule Breaker core and in fact, the concept of starter stocks we innovated with in Rule Breakers which over the years has been a service that we've often tested and learned new things and because a lot of our Rule Breakers members are Rule Breakers themselves in a lot of ways, they're open to innovation, to us trying stuff and so we tried out the concept of the RB core back in the day, more than a decade ago and clearly it stuck.

People enjoy it and use it. I hope every bit as much yesterday as 12 years ago and indeed we have far more members yesterday than 12 years ago. That's the RB core and of course the best buys now, which were also in innovation in Rule Breakers. Those are very big and vital parts of services today and I know since so many Stock Advisor and Rule Breaker members are listening to me right now, you will recognize those and I hope you're making good use of them, and then my third and final reflection on that essay is Baidu.

It's fun to think back on that. Baidu over the years has been a stellar performer for Motley Fool Rule Breakers. It's had its ups and its downs and in recent years it hasn't been too hot but since we established the position with our first recommendation on October 18th of 2006, Rick Munarriz's pick, you remember Rick from our mailbag podcast last week where he made a guest star appearance. Yep. Rick picked it back in 2006 and it wasn't looking too great by May of 2008 when it had dropped from 400 down to 200. Well, fast forward to today and Baidu is at $107 a share as we record this podcast the afternoon of Tuesday, June 2nd and you might say, Dave, wow, you just said it went from 400 down to 200 and you're saying, this is a good stock. It's only at 107 today. Here's the good news. It's split 10 for one, some years after that essay was written.

Baidu has been a wonderful long-term stock, a 12 bagger for us, which is much better than the market's 200% since 2006. That said I should mention, I did rerecommend it a couple of times since most recently in February of 2015, it's been about cut in half from where it was five years ago. This has not been a great stock in recent years. Although over the only term that counts the long-term for me, it has been a great winner. I hope for you too and I trust and hope that it will do well over the only term that really counts next, which is the future. We'll see how Baidu does, but it's fun to go back and read these essays and see where things were and then learn in retrospect what has happened and gain some wisdom as a consequence.

All right, essay No. 2. We're going to fast forward through time. We're going to go to June of 2010, and this was the Motley Fool Stock Advisor introduction. So, Rick, I guess we don't want way back music. We want to fast forward through time music because now we're up to June of 2010 and here's how Motley Fool Stock Advisor that month opened.

There are two types of people in the world, the old saying runs. Those who like to divide the world up into two groups and those who don't and I am the first type. When looking at a large collection of people, ideas or data, I look for commonalities and patterns so I can sort them into groups, the fewer the better and that's what I've done with you, our Stock Advisor member. I believe you are in one of two primary groups, groups that I call after the Budweiser ads of [...] tastes great or less filling.

If [...] tastes great, you want lots of ideas, activity, learning, and engagement. From Motley Fool Stock Advisor to you investing is more than just a hobby, it's a passion. You probably subscribe to more services. The Motley Fool Stock Advisor, because for you, stock ideas taste great. If you could, you would attach a fire hose of investment information, ideas, learning, and data into your mouth and flip on the faucet. You apply your nearly endless intellectual curiosity to your savings and capital as much as to everything else in your life. You may well aim to master our subject of investing. If you're looking for tastes great, I know exactly what you mean because I'm in your group.

If you're less filling you subscribe to Motley Fool Stock Advisor in order to build a successful investment portfolio with an absolute minimum of time, attention, and energy invested. You care about your money just as much as the next Fool, sure, but if you could punch a big green button once a month, beat the market and have done with it, bonk, the more the Motley Fool Stock Advisor might ask of you, the less helpful you find it. You're looking for less filling. You have enough other things going on in your life. Thank you very much.

For those who want our service to tastes great. I can't think of a better, more dependable place to get regular exposure to a large and ever-growing universe of vetted long-term market winners. On top of that, we give you ongoing coverage and streams of information on these companies. Type your stocks into my scorecard on the site, because you're going to love the information flow on your stocks that we aggregate for you there and more coming. For those who want our service to be less filling our list of core stocks and our monthly best buys now lists give you simple marching orders each month to constructing your own long-term portfolio fool of winning stocks.

For the price we're charging with the performance we're generating, I know, I know, call me biased. I don't think there's anything close. Motley Fool Stock Advisor has grown to become the largest service of its type in America today because we are serving both the tastes great crowd and the less filling crowd. I don't believe we're super serving either group yet, but our growth suggests we're doing OK at catering to both. Lots of room for improvement exists as we work to become more effective for each of these distinct oppositely inclined groups.

In closing, I will ask of you and only if you have time, less filling crowd, that you let us know how we can better serve you. Fool on!

All right and just a few observations now from the present day looking backward. The first one I want to make sure I correct is that sometimes I would make mistakes in these essays just as I make mistakes on this podcast, I try to correct them. Try not to make them in the first place but in this case, I blew it with the Budweiser reference. I certainly do remember and love the Tastes Great!...Less Filling ad campaign, but it was for Miller Lite for those who remember it or who might be fans of the beer today.

In fact, I was noticing that Advertising Age once called the Tastes Great!...Less Filling campaign, the eighth greatest in all of advertising history. In fact, I was doing a little of my due diligence on Wikipedia, of course, noticing that I think the Tastes Great!...Less Filling campaign started in 1973 and it was still alive three decades later. You won't see it used any more by Miller Lite, but wow, if you want to get lost in this, you can watch a lot of those ads featuring athletes arguing over whether Miller Lite tasted great or whether it was less filling and it would end up being kind of a bar fight, even though no punches were ever thrown in these ads, but it was a shouting match and of course they were advertising that Miller Lite is both. It tastes great and it's less filling.

Well, whether or not Motley Fool Stock Advisor can make the same claim, I leave it up to you but I do want to say that I still think in these terms. I very much think that there are kind of two crowds who frequent The Motley Fool, and they are the tastes great crowd that loves what we're doing and you're probably one of them if you're listening to my podcast because I suspect I way over index among my worldwide listener base for this podcast for people who think it tastes great. It strikes me that many fewer are listening to me right now who want to make investing less filling and who enjoy that about what we do with The Fool. Bonk.

If you could just hit that big green button and once a month buy your next pick and go on with your life while you're obviously a less filling person. Now, while I predict I highly over-index with this podcast into the tastes great crowd and I'm glad that you're with me, because I think it tastes great too. I do want to say in the world at large tastes great has to be a small group of people. I'm just going to make up that approximately 10% of the world thinks investing tastes great and something like 90% wants it to be less filling. Now among that 90%, some of that group of people, and I'm probably speaking to a few of you today, really still love investing or the idea that they either don't have time for it, or don't want to spend time for it, but they recognize its importance. But that leaves a whole bunch of the world that doesn't even understand investing or recognize its benefits.

They're not the less filling crowd. They are the ignorant crowd and a lot of what we're trying to do is make sure they're included too and that they get educated and learn the benefit of investing the great benefits for your life, not just your financial life but your life overall. Whether you want ultimately investing to be tasting great for you and, or to be less filling for you, our organization is hoping to reach everybody. Nobody's not included. I will mention part of what we'll talk about at FoolFest this year is The Motley Fool Foundation, which we're really excited that we recently got 501(c)(3) status approved.

We now have a public charity that we are in [Earnest Building]. We have our new Executive Director, Jennifer Gennaro Oxley leading our team. I'm the chair of The Motley Fool Foundation and the big thing we're going to be going after are all those people who it wouldn't even occur to, to invest because they may not have savings or knowledge and darn it, I think we can put a real dent in that in the decades to come. One other final reflection about that essay. I mentioned my scorecard, which is a dearly departed feature on our site. I know a lot of you loved my scorecard and we do have watch lists today and favoriting stocks and I'm sure there are other tools that we're going to keep building to provide our active tastes great member base with tools that you really value and want to use.

I know there's a lot more work that we have to do there. Anyway, I'm glad I randomize my Tastes Great!...Less Filling essay because it's an ongoing construct that brings a smile to my face when I think about all of those ads back in the day, but feels still very much here and now and maybe it's kind of an instructive thing for you to hear and ask, which do you fit into and are you making sure that you're maximizing the benefit of this podcast or our services given who you are.

All right, round and round she goes and where she stops nobody knows. We're moving from dice. Let's go with a roulette wheel this time and up. The ball just landed in December of 2011. We're going forward into the future. No. 2, the one I just shared with you tastes great versus less feeling was 560 words. The last two I'll be sharing with you are just below 500 words because we started to shorten the essay. We took out about 10% off of it and so they started to get shorter. At the end by the way, I'll mention why we don't do them anymore and a little bit of reflection on all four of these to close but for now, here we are.

December 2011 a close out for the year that was. The title, Stocks Are Like Wine.

Barring any shocking December surprises, the investing year 2011 will be exceptionally forgettable for me. Extremely volatile and ultimately flat. The year was dominated by 2008 like worries about systemic risk. Constantly called into question was the health of two key institutions on which billions of lives rely, sovereign governments and national banks. Systemic risk is the risk that I hate because it's intimidating. It can take everything down with it and it's all pretty opaque to me.

Though a third generation Washington resident, I am no Washington D.C. observer, quite the opposite. We bounced wildly between on the one hand, recognizing the amazing future that business and technology keep bringing to us and on the other being unable to figure out which banks and governments will even be around in two years, but even when not a market winner every year is to be appreciated, happy to be alive. We have lived and grown and laughed and yes even cried through another year together as fellow Fools. Even though despite good effort, most of us find our net worth essentially unchanged from January 1st. I'm still in a holiday frame of mind and I'm here to tell you in the holiday spirit that stocks are like wine. Stocks are like wine.

Pretentious and intimidating industries. Step away and look at the industries that surround stocks and wine. You can't help but see the similarities. They attract "experts", many of whom make us customers feel like [Tyros] are Yahoos. We lack their technical expertise. We don't know their jargon. This, even though many wine experts, routinely failed taste tests designed to figure out which wine is the more valuable. Sounds a lot like market "experts" who don't regularly match let alone beat the market averages.

Second, not for everybody. Many people will never join Motley Fool Stock Advisor because for perhaps too many people investing is an acquired taste. It feels exclusive. Similarly, many people for religious or personal reasons don't drink at all or if they do are happy enough with beer, mutual funds, most of the time. Picking a wine intelligently feels like picking a stock intelligently. It can be done, but most never will. Third, huge number of choices. At Fool HQ, we have counted more than 45,000 stocks with ticker symbols worldwide.

Similarly, you can spend your money on even more types and brands of wine, different appellations, different years, without anything to guide you, which do you pick. Finally, fourth, they age well. Despite the above, I'm very grateful for both stocks and wine, stocks more than wine. Not only is my life enriched by them, but they share a critical property. They get better with time. That's one trait that I think most wine experts understand a lot better than stock experts.

Now back to the present day, reflecting on that one. I really hope that speaks for itself of these four. It's probably my favorite. It's just fun to compare seemingly radically different things to each other and find similarities, pretentious and intimidating industries, not for everybody, huge number of choices, but they age well. I am happy now in retrospect that I was saying at the time that on the one hand, you need to recognize the amazing future that business and technology keep bringing to us to think that that was written at the end of 2011.

Now to reflect nine years later on some of the changes and new introductions of technology that have really benefited me anyway, I hope you too, and to think about the growth of technology and business and the stock market, how about the last nine years even though we were faced with systemic risk in a way that I really can't remember from earlier in my lifetime back in 2009, '10, '11, look how things played out. I would say I've often gone through this world with rose colored glasses and while I think the implication or the connotation of that phrase is naive, I do remember once writing one of these essays about the benefits of going through life with rose colored glasses. It's helped me anyway with optimism, continue buying stocks all the way through and boy, hasn't that been the right call.

Finally, this week essay No. 4. As it turns out, I randomized this one from Rule Breakers one year later. It's December of 2012 when I wrote this.

In the midst of such market weakness, Rule Breaker stocks especially, it's helpful to remember that this has all happened before. The nine years of our service have witnessed some dramatic sell offs. We closed out 2007 with our average Rule Breaker up 31% versus the average S&P 500 gain of 13%. That's 18 points ahead of the market per stock. Not bad for four years of work. By November 2008 though, get this. Our average Rule Breaker was down 33%. The S&P 500's comparable average was also minus 33%, so goodbye outperformance.

Closing out 2008, all of our picks, taken together, over five years of Rule Breaker's average, having lost one third of their value. Puts today's present underperformance to shame. As we near the end of 2012, it's easy to wring our hands, which we humans typically do only after most of the damage has been done, so a contrary indicator. Further, some will start to get highly safety conscious, concerned, and doubting our approach. Doubting quite naturally their decision to join Rule Breakers in the first place.

If you've had these feelings recently, join the team. I have had those feelings recently. Peter Lynch used to say that the time to buy was when people avoided him at cocktail parties. For the past month or so I've been avoiding myself at cocktail parties, but more history. From that amazing 2008 lows, within less than three years here were our numbers in April 2011. Average Rule Breaker stock up 76%. Average S&P 500 up 13% so Rule Breaker outperformance versus the S&P 500, 63% per stock.

Thus, from lows that were so low that they make today's problems look like presence. In less than three years we took a minus 33% average return across the whole scorecard up to plus 76%. Could it happen again? Sure. Will it? Who knows, but I believe we're a very likely three years from now to be showing a higher gain per pick over the S&P 500 than we do presently. As I write four years after those incredible 2008 lows, our average Rule Breaker pick is plus 39%, the S&P by comparison up 15%. We're 24% ahead of the market per stock.

Our team and our community should take pride in this long-term outperformance. That said, despite our best efforts in the past 18 months, we've lost roughly half our historical gains. When I see that much erosion on our scorecard, I'm of two minds. First, it sucks to be us, pardon my English. I never like seeing it and feeling it is even worse, but second, I believe most of the damage this time around has already been done. I know there's anxiety all around us and fear-mongering about the state of our economy and our world, but this hasn't, doesn't, and won't stop great things from happening in our world. Many of them driven by Rule Breakers like Intuitive Surgical, Facebook, Proto Labs, Google, IMAX, LinkedIn, MercadoLibre. The list goes on.

All right, and now just a few reflections on that one. First, I was writing that because for the December issue of Rule Breakers, it was always printed and sent out in November. I was writing that on, I believe November 16th of 2012. Now, at that point, the S&P 500 was at 1,360. By the end of the year, just a month and a half later, it would be at 1462. From that point forward, the closing six weeks of the year, the market was up about 8% and that's important to note because when I look at the overall performance of 2012, it was actually +16%. It was quite a good year for the S&P 500, but the market had sold off and especially our types of stocks, the Rule Breakers really had sold off into the mid middle of November and so it's kind of funny to think back on how things shifted, even in the six weeks ahead, so that's thought No. 1.

Thought number two, it's helpful isn't it? To get back in that 2012 mindset, there was still a lot of fear and doubt about the economy. It's pretty easy Monday morning quarterbacking as we're all infinitely capable of doing to look back and say, the market was so strong from 2010 on, but the truth is all the way through, the market was climbing a wall of worry. In the earlier essay, you heard me wondering about systemic risk and asking which banks and countries and governments would still be around two years from that point. Well, even here in 2012, a few years distant from the great recession, you still had a lot of worry about systemic risk and people saying the market's overvalued and look what it did in the seven or eight years since, and then my final thought about this essay.

It doesn't present quite as well in audio form because there are a lot of numbers in this essay, but the numbers have always been really important to me. How has our average stock pick done? How has the S&P 500 by direct comparison done? And are we winning or losing? You can hear in some of the numbers that are a little bit hard to share out in a 495 word essay. You can hear my focus on counting and I'm always going to be focused there and if you've been listening and following along as a fellow Fool to this podcast or to The Motley Fool for any of our last 27 years, I think you're going to see our focus for all of our services and for you, our member, on how you're doing and how the market's been doing.

The aim of course is to beat the market. I wouldn't be spending time every week with you on this podcast if I didn't think you could do it, if I hadn't done it myself and if I didn't love sharing the ability and belief that you can beat the market with you. Of course, I take great enjoyment, reading back your stories, mail bags, and other episodes of real people who like me might just have an English major from their university experience. They're not a finance major and they're not a mathematical genius and yet they are whomping up on the stock market by following the precepts that I've laid out, certainly the six signs of Rule Breaker stocks and then of course, the six traits of you, the Rule Breaker investor.

If you're a new listener and you don't know either of those, you can certainly google them and find them. They've guided me all the way through as an investor and part of the fun of this particular episode of Rule Breaker Investing is to get back into my 2008, '10, '12 mentality, show you what I was saying back then, and then how things have played out in the decade plus since.

All right, well, a reminder that on next week's podcast, it's going to be my newest five stock sampler. I will admit I'm not even sure what my theme is right now. Sometimes I've thought of these months ahead of time. This time I'll be kind of making it up, but it will be our 25th historic, I think therefore 25th, five stock samplers since we humans seem to like round numbers, so yeah, we like our 25th, our silver anniversaries and in this case it will be our silver -- maybe that's giving me an idea for next week's podcast -- our silver anniversary five stock sampler.

As I let you go for this week, I have two final thoughts. The first is, if you like this series, let me know and I'll do it again. It was awfully fun to randomize my roles through time and see what I was writing and share those back with you. Truly, the first four that I randomized were these four, but if I hit one that felt purely nostalgic or not instructive in the present day, I would have skipped it, but I didn't have to and so there's a deep vault of linguistic gold, I think, in these essays and it was really fun to share them with you, but if you didn't think they were fun or I could do better with this podcast, I'm the first to say, we won't do this again if you don't want me to.

Then finally, a number of times in those essays I quoted the overall Motley fool Rule Breakers performance. You remember earlier in the show, it was May of 2008. Our average return was just 4.5% per pick and since we started in October of 2004, that was about three and a half years worth of picks, the average stock performance of those picks was at 4.5%. You heard me mention in December of 2012, our final essay that I just shared with you, our performance at that point average Rule Breaker pick was up 39%. The S&P 500 by comparison was up 15%.

Well, let me just update that number since we're going to timestamp it here in June 2020. Since that essay I have picked 178 additional stocks in the Rule Breakers universe, that's been picked from my talented team. People like Rick Munarriz, who's been with me from the start or more recent employees like Emily Flippen so a wide variety, many Fools me included have all contributed ideas and as a team to update those numbers. The S&P 500 over the course of those years now averages 75.8%, a lot higher, right? How about that stock market over the last 10 years? So versus the S&P 500, 76% return. The average Rule Breaker picked today, 204.6%. That's across a few hundred companies, all of which average these days, a three bagger for our members. Wow!

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Baidu, Facebook, Intuitive Surgical, MercadoLibre, and Proto Labs. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Axon Enterprise, Baidu, Facebook, Intuitive Surgical, MercadoLibre, Proto Labs, Spotify Technology, and Wayfair. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Axon Enterprise Stock Quote
Axon Enterprise
$113.24 (2.34%) $2.59
Alphabet Inc. Stock Quote
Alphabet Inc.
$97.50 (-0.68%) $0.67
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$134.40 (-1.45%) $-1.97
Baidu, Inc. Stock Quote
Baidu, Inc.
$119.27 (-0.17%) $0.20
IMAX Corporation Stock Quote
IMAX Corporation
$14.49 (3.28%) $0.46
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$186.38 (-0.83%) $-1.55
Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
$804.69 (0.64%) $5.11
Proto Labs, Inc. Stock Quote
Proto Labs, Inc.
$35.39 (-0.09%) $0.03
Alphabet Inc. Stock Quote
Alphabet Inc.
$98.09 (-0.73%) $0.72
Wayfair Inc. Stock Quote
Wayfair Inc.
$35.92 (0.53%) $0.19
Spotify Stock Quote
$89.50 (0.40%) $0.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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