In this episode of Rule Breaker Investing: Pet Peeves, Vol. 5, Motley Fool co-founder David Gardner is joined by Motley Fool analyst Karl Thiel to review 5 Stocks Celebrating The 2018 World Cup. Discover how these stocks have performed since they were recommended two years ago. And David shares five pet peeves, ranging from the futility of soccer PKs to the misnomer of tech stocks, stupid questions, obvious answers, and much more.
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This video was recorded on July 2, 2020.
David Gardner: What exactly is a tech stock? What's the single worst way that global sports championships are decided? And have you ever asked, "Can someone ask, a stupid question?" Does this sound like I might be complaining? Well, maybe that's because [laughs] once or twice a year on Rule Breaker Investing, I do complain, it's a Pet Peeves episode, this one is Vol. 5. Plus, we're going to look back at a Five-Stock Sampler from two years ago, this week the World Cup was being played back then 5 Stocks Celebrating The World Cup. Pet Peeves and reasons to believe, this week on Rule Breaker Investing.
And welcome back to Rule Breaker Investing. I want to mention ahead of time, I recorded this last week. Yeah, well, there's a market holiday celebrating July 4, of course, July 4 was on a Saturday this year, so we all took the day off on Friday, but my producer, Rick Engdahl and I decided to do this one Thursday. And so I did this last Thursday, because this week I'm at the beach. I'm in North Carolina. I think I have a mask on, not around the house and maybe not out right there in the sand, but if I'm going to a restaurant, I know I do. And that's where I am right now, having a good time at the beach. I hope you find some beach time or something that means the beach for you somewhere in your summer. This is the trip that we were going to take our 30th anniversary on a cruise around [laughs] Japan, but instead we're going to the family beach house to celebrate our wedding anniversary.
Anyway, enough about me. And yet, I don't think I probably should say that, because this is among the most self-indulgent podcasts I do in Rule Breaker Investing every year. In some ways, you might hear too much from me, but I'm going to try to counterbalance that on the latter half of the show this week by welcoming in my friend, longtime analyst Karl Thiel. Karl and I are going to review 5 Stocks Celebrating The World Cup. Yep, two years ago this week, the World Cup was being played, and I picked five stocks that were looking at globalization and sports and connectedness, and so we're going to see how that Five-Stock Sampler has done. So yes, we will be talking stocks.
But before those 5 Stocks Celebrating The World Cup, I'm going to give you five pet peeves. Now, I'm conscious five is on the mind this week, because this is Vol. 5 [laughs] of my pet peeves. In the past, I've said, one of my pet peeves, people who have too many pet peeves. And so, I think I'm that person, and if I'm doing a fifth episode on my pet peeves -- always new ones, never going back to old ones -- you can imagine, I probably sound like a pretty dissatisfied person. Most people that are around me describe me as a happy-go-lucky cheerful optimist. So maybe this is just my shadow side that I get to share once or twice a year with my fellow Fools. So thank you for indulging me, if you enjoy these next 20 minutes or so, as we go over five of, I won't just say my pet peeves, I'm kind of hoping maybe some of them are your pet peeves too, or maybe I'll make some converts this week. I'll make you a bigger complainer, a more dissatisfied person, another way of saying it is, a more discerning person, as a consequence of sharing these pet peeves together.
Now, before I get started, I do want to mention that last week, I enjoyed sharing Great Quotes Vol. 12 with you, and I really enjoyed sharing some of those great quotations with you from history, thinking in particular of this moment that we're living in now, this summer, this year of 2020. So if you didn't get a chance to enjoy 5 Great Quotes Vol. 12, check it out.
I also want to mention that I think I have something special in store for next week. It's not fully booked, I'm not going to talk about what it is, but if it all comes together, it will be a unique podcast first in Rule Breaker Investing. I think I'll be welcoming in some new friends this podcast, and we might have the first-ever episode -- I don't know how many of these we'll do, but it feels like something I want to do this year -- Uncomfortable Conversations Vol. 1. So that's ahead for next week. But with that said, let's get started.
All right. Pet Peeve Vol. 5, let's go with No. 1. And it's about the single worst way that major global sports championships are decided, that I know of anyway. And if you know of a worse one than this, our email address is [email protected]. We accept feedback for everything that we do all the time. I'd love to hear from you. But I think penalty kicks in soccer, especially when we're talking about at the level of the World Cup, are ridiculous. It's a horrendously bad way to end what is otherwise such an amazing sport and tournament and, really, gift to planet Earth.
When every two years, either the women's or the men's World Cup shows up, I'm not even that big a soccer fan, but I watch it, and I watch a lot of the games even if my country isn't in it, and our country wasn't in it two years ago. I still find myself watching most of the games. So after you've gone through a grueling 90 minutes, and a suspenseful 90 minutes, right, because we're tied, we just went through all of that and we're still tied. There's extra time, I think it's 30 minutes, as I recall, 30 minutes. There's also another way of settling it with a golden goal, there are other ways of doing this, but I'm thinking of the World Cup.
And they do extra time, and then after 30 minutes, sometimes the players maybe were too tired, maybe they're not playing that aggressively, sometimes they really are going for it, but often we, kind of, end in a tie after 120 minutes. And now we're going to penalty kicks? 71.5% of the time, a player stands there with the ball in front of him, right in front of the goal, runs up and kicks it. High left, low right, right at the goalie, whatever he does, 71.5% of time it works. So we're basically flipping a coin that comes up about three-quarters of the time, and it's about that random, it's about that lucky. Many studies have looked at this, there is no real rationality to how to play this. So we're flipping a coin five times for each team, and one of the teams is going to win the World Cup.
One of our core values at The Motley Fool is innovation, which is more commonly phrased around Fool HQ as "top it." That's something that my brother Tom and I have said to each other over the years. You're not allowed just to denigrate my effort or your effort; you gotta to actually top it. And so, I'm going to try to top it. I said these same things a couple of years ago, and I'm going to welcome in my producer Rick Engdahl in a sec, because, Rick, you had at least one good criticism back at my solutions, which I kind of agree with, but I still like it more than PKs, as they say, penalty kick.
So the two solutions, one of them I heard from a friend -- you might have heard this one before, this was years ago, but the friend said -- you know what you could do is, you could have the 11-on-11 players, and every few minutes one of those players would be taken off the field. So after three minutes, it's 10-on-10; after six minutes it's 9-on-9; 8-on-8. At some point, before too long, somebody is going to score, and boy! would that be exciting. I mean, if you were down to, like, 3-on-3, or how about the ultimate 1-on-1. Two goalies trying to figure out how to outrun the other guy and put it in the net. That would be so dramatic and exciting.
And soccer would just be a better sport, right, because you have the players in the flow of the game, which is what everybody loves. This artificiality of having people stand in front of the net and kick the ball and get a goal or not is about as silly as having basketball come down to who can hit a few free throws at the end of the game after a wonderful game. So part of the reason we love basketball and soccer is they have serious flow to them, and so why can't soccer break out of a decades-long addiction to penalty kicks? I'm sure some of that has to do with television and the game needs to be over. There are lots of other reasons, but, boy! If you're a sports fan, don't you want something better?
And then my other idea was, I came up with this, I now realize, I listened a little bit to the podcast I did two years ago. I was watching the World Cup at the time with my kids, who are adult kids, but we're kicking this around. I was saying, "What if you did the penalty kicks before the game as a perfunctory thing you do every time? There's a little bit of drama, maybe not everybody is in their seats yet, but some people are showing up to see it. And you get to see ahead of time who's going to win the penalty kicks. That way, for the 90-minute game you're about to play, you already know who has the advantage, and wouldn't that add a lot of suspense and juice to the sport, as you watch, one of the teams knows that if the whistle blows, they're going to lose." So to me, that makes soccer better.
Rick, do you remember what you criticized me about, though, two years ago?
Rick Engdahl: You know, I don't. I don't remember what I was criticizing you for two years ago, but I can give you a fresh round of criticism now, if you like ... [laughs]
Gardner: ... please do.
Engdahl: Well. So after 120 minutes of playing at top speed, you're going to ask these players to play with fewer men on the field? You may get a goal eventually, but you're probably going to get some horrible muscle injuries before that; it's not safe for the players to ask them to do that. Imagine three players per side, on a field that size, running the way they do.
Gardner: Well, it would be a stamina contest, but that's a big part of the sport anyway. I do hear you. I suspect it wouldn't get down to 3-on-3, because if people are that tired, someone is just going to run for it and get it and put it in 7-on-7. But keep going.
Engdahl: As for PKs before the game. That sounds good in theory, but you're incentivizing one of the teams to play for a draw, and that can lead to a really boring game.
Gardner: And you are consistent, Rick, because while you may not have relistened to that podcast from two years ago, [laughs] I can tell you that that's what you were saying then, you were pointing out that if you did do it ahead of time, one of the teams has an incentive to just sit back and not do much.
Engdahl: The last thing I want to say, David, is that you, of all people, as a baseball fan, you're really complaining -- think of the pitcher and the batter situation, here, all right ...
Gardner: ... yeah, but that's the sport. I mean, that's the whole sport.
Engdahl: So I encourage you, every time you see a PK situation in the future, check out the guy who's kicking the ball, what are his stats on scoring PKs; check out the goalie, what's his stats on saving PKs, and I think you'll find it a little more interesting, when you're looking at your stats and just giving the 75% go in, you're not looking at the individuals and play there. And I'm not -- I hate penalty kicks too, it's not my favorite thing in the world, but it's more intense than you're giving it credit for, that's all.
Gardner: All right. Awesome, Rick, thank you for that. Yeah, you are consistent. I do agree with you on that point, they're probably doing it ahead of time, even though I think that's kind of cool and better than what we have right now, probably is broken and maybe wouldn't actually be that much better.
I will mention, just in conclusion, a game that had happened -- some of us will remember these two years later; I had forgotten -- but a game that had happened just before that podcast was Spain and Russia playing for the quarterfinals. And here again is where I just think soccer could be better, like, this didn't work for me. So some of you'll remember this, most will have forgotten. But Spain and Russia played to a scoreless tie for the quarterfinals. Russia over the course of the full game, until penalty kicks, had one shot on goal. One. And then Russia wins the penalty kicks with one extra goal. They're actually called goals; I think that's a little silly too. But to me, that was soccer, a sublime sport at its worst. And so maybe Russia would be incented by my bad idea to not even put one shot on goal if they had the advantage instead of the PKs.
All right. Well, enough with soccer. Admittedly, I'm not the most knowledgeable or ardent fan. I am, though, a fan of the World Cup, which we'll be talking about a little bit later.
All right. Pet peeve No. 2: tech stocks. Let's talk about it. I think one of the earliest times I was on CNBC, I think -- and this is in the 1990s -- I think I said something like, "I don't use tech stocks, I don't think tech stocks, what do you think is a tech stock?" I think I said to the interviewer, I certainly have written about this before, I've said it a lot over the years, and yet, I still -- clearly, I'm not winning this battle, because I still see so many people talk about tech stocks. "What do you think about tech stocks? Dave, what's your favorite tech stock? Are tech stocks overvalued? What about tech stocks five years from now?" Tech stocks ...
Well my short answer is, just about everything is a tech stock. When just about everything is described by a certain label, that label doesn't have much meaning anymore. And really, over the 27 years of The Motley Fool's history, there's only more and more technology [laughs] replacing what were, in some cases, legacy nontech businesses. I was saying years ago, Walmart is a tech stock, because the technology that Walmart is doing to make logistics happen across running that business every day is deeply technological.
I heard a recent debate, a fun one on Motley Fool Live -- that's our new Fool TV channel. If you're a member of The Motley Fool, you can point your browser at Live.Fool.com and you can watch 9:00 to 5:00 programming every single weekday on our website. A wonderful Motley array of different topics and different presenters. We do a Rule Breakers Hour every few weeks there. I love Motley Fool Live. And I heard a recent debate at Live.Fool.com about whether Apple is a tech stock; it's even starting to reverse. Because the new argument that one of our presenters was making is that Apple is no longer a tech stock, it's more just a consumer-packaged goods company, it's a brand.
And while I appreciate, one Fool to another, the contrariety, the going against conventional wisdom, I will assert here that Apple is a [laughs] technology company, and so is Netflix; although is Netflix? I mean, yes, they use technology, but isn't just home entertainment? Or what about Zillow? That's an interesting one. I mean, on the one hand, they're now flipping houses. A lot of people point their browser just to see their neighborhood or things that are being listed. If you actually think about it, it's a massive big data company and there are so many machines running Zillow. Is Zillow a tech stock?
MercadoLibre. We recently on Motley Fool Live last week, had the Head of Investor Relations, Federico Sandler, who was outstanding, gave me a lot of confidence in this longtime Rule Breaker pick. Is MercadoLibre a tech stock?
Intuitive Surgical, I think most people would say the leader in so-called robotic surgery, if you will, robot-assisted surgery, is probably, I guess, a technology company or a "tech stock," but what about Amgen? Amgen, one of the world's largest biotechnology companies. It's a pretty slow-moving, big, profitable giant this year with solutions like Epogen. Is Amgen a tech stock? I mean, biotechnology is.
Tesla, is Tesla a tech stock? What about Teladoc, telemedicine? I mean, you're sitting there basically Skyping or Zooming with your doctor, is Teladoc a tech stock? SolarEdge, solar inverters, is that a tech stock? The list goes on.
I would say, privately -- well, not so privately; I'm saying it publicly to all of you, my fellow Fools. I think they're all tech stocks. I don't use the phrase "tech stocks"; I think it's the wrong question. I don't think it's a meaningful label. And since I'm ranting, this is a pet peeve of mine after all, I haven't thought it's a useful phrase for 25 years. I challenge you to find many citations of me on the internet speaking, or on YouTube or on [laughs] my podcast or any articles I've written saying "tech stock," because I don't think the phrase means much at all.
So the wrong question to ask me, the next time you come up to me is, "Dave, what's your favorite tech stock?"
All right pet peeve No. 3. This one is less of a rant. I do admit, I think I was ranting a little bit too much, I hope that I'll show more self-discipline over the next 10 minutes. But No. 3 is the phrase "social distancing." It is, of course, au courant, it is in the news, it's being used by you and me all the time these days. I've made this point before, it's not original to me. I think I heard some smart person point this out a few months ago, I think a better phrase is physical distancing. I sure hope you're not social distancing. I will say this, for a couple of months we had our adult children back in the house and we had probably more family suppers together, played more games together than we had in years. And we play a lot of games. We weren't really socially distanced at all; in fact, in a lot of ways, it was a more socially close and meaningful time, and something I think I'll look back on with some nostalgia years from now.
We were physically distanced though, and I do think physical distancing is really important. And I think as America tries to reopen, somewhat unsuccessfully, we're reminded of the importance -- or, as I once said in this podcast, wash your (bleep) hands. I've never washed my hands so much in any given year. I'd love to see a histograph of "Washing hands by year for David Gardner," and my golly! 2020 probably beats the previous five years combined. I sometimes ask myself, was I washing my hands before 2020? I'm washing them a lot these days. I'm physically distancing as well. But I sure hope you and I won't socially distance from each other.
Now, I realize this may just sound like pedantry. The concept is the same whatever words we choose to use. And yet, part of what I believe is that words matter. Words tell us a lot about what you and I are thinking. And when we say them back and forth to each other, we are in fact influencing each other constantly. And so I think we could make the world a little bit more positive if we talked about physical distancing. Pet peeve No. 3.
All right. Pet peeve No. 4. Well, have you ever heard the phrase "There are no stupid questions?" I bet you have. It's usually used quite compassionately, sometimes lovingly. Somebody says, "Now, does anybody have questions? And by the way, there are no stupid questions." And what that person is trying to do, often it'll be a teacher or somebody who is in authority. They're trying to make it possible, they're building a bridge to anybody who might think, "I don't want to open my mouth because I might look stupid, so I'm not going to ask a question that I actually really do have." And so, that person in authority is creating comfort for the room by saying, "And remember, there are no stupid questions." But the Fool in me, the one who likes to take the other side, the one who likes to challenge conventional wisdom, who can't -- in almost any argument, can't not take the other side, devil's advocate, the Fool in me, anytime I hear that, I'm like, "Yes, yes, there are. There are stupid questions." I've asked them myself.
Here's a great example of a stupid question. Somebody has just explained something beautifully, maybe in depth, spending a good amount of time, not too much time, speaking to a group. And then I raise my hand and I ask something that had been answered one minute before by that person. Why? Because my attention wandered, I wasn't listening, I was distracted. I'm asking a question that everybody else in the room already knows the answer to. I somewhat self-indulgently am taking away everybody else's time, because I was an idiot who didn't listen clearly, and I raised my hand, and that's a stupid question.
And in fact, I was doing some more research into this, there have been articles written on this. What are some categories of stupid questions? And the three that I'm seeing, one of them says, those questions that have already been answered but the asker [laughs] wasn't listening or paying attention. And I agree, that's a stupid question.
A second one: questions that could be answered on one's own with complete certainty, or let's say, near certainty. For example, googling that. I sometimes obliquely refer to my favorite 25 websites on Earth. One of them: QuoteInvestigator.com. Anytime you want to look up a quote, to see if that person actually said that quote, QuoteInvestigator.com is your friend. Well, here's another one, it's LMGTFY.com. It is one of my 25 favorite websites. This one is pretty snarky. It's an acronym, of course, for Let Me Google That For You. We had one of our staffers on Slack earlier today ask a question that was a technical question, asking about jargon, a specific phrase from financial statements. And it was asked in good faith and it was answered in good faith. But, of course, the Fool, arguably fool, in me couldn't not be a little snarky. It was very evident to me, this person could have spent an extra minute googling it and gotten the same, maybe even a better answer. And so, I sent him a link LMGTFY.com. And when you click on the link from this magical website, it pops open the browser, it brings you to a page where it types in that word or phrase that your friend was asking you about and then sets up to hit the search button on Google. It is incredibly passive aggressive and maybe the most beautiful way, admittedly very snarky. But this, for me, is one of the top 25 websites. And it reminds me that there are stupid questions, and there are ways that you and I, more respectful of others, can save time and maybe get even better answers to those questions.
So the third, by the way, identified in this article is, questions of which the answer should be painfully obvious to any person with a pulse [laughs] who's lived on this Earth for more than a decade. Well, that's a little subjective, but I still directionally like it.
So as I move to my final pet peeve, I do want to assert that it's a lovely thing when people say that, "There are no stupid questions." And yet, I don't believe it's true. Every time somebody says that, I'm like, "You're lying!"
All right. Well, my final pet peeve, for Pet Peeves Vol. 5. This one comes, admittedly, with a little bit of poignance, because it derives from an experience I once had on an airplane. And I'm sad that airplanes are less accessible to you and me today, as I speak here in July of 2020, than they were a year ago. And I sure hope they will be just as successful, as you and I are used to, perhaps two years hence; I'm making that up. I have and will be taking a plane at some point later this year, 2020; it's just that I don't do it as often.
But, you know, here's what I don't miss from my modern-day airline experience. And ask yourself whether you have shared my same experience and whether this for you is a pet peeve as well. At some point in the last few years, the airline companies got wise to this idea -- I think they knew it all along -- that we're a captive audience. We're there in seat J-17, and we're going to be there all 3.5 hours of the flight, and they're not going to take up all of our time, but you know what, they are going to take up about three minutes of our time every single flight to give us their airline credit card offer over the loudspeaker system. And if it sounds like I have a little bit of edge here, is because the last time, the umpteenth time this had happened to me, a few months before COVID, I was asleep already, blissfully so, trying to enjoy the hospitality of an airline that prides itself on hospitality, as I believe every airline should.
I was already asleep in the comfortable chair, and the speaker was directly over my head and began blasting so loud that I was woken up instantly. As the flight attendant comes on for a read, it's always the same read of three minutes' duration. By the way, I wonder, does the CEO feel good about this treatment of his guests? I mean, I guess it must work -- about the credit card offer that will then be followed up with the flight attendant the, in many cases, I think "poor" flight attendant having to start from row one all the way to the back of the plane walking down, looking left and looking right with a smile to see if anybody is going to go for the credit card offer.
Now, again, clearly this must be working, since every flight in the last few years that I've been on is doing this, but in closing, let me perhaps rhetorically ask this: How much money are airlines making from the in-air credit card offer? Let's just pretend, and I'm going to make this up right now, that it's $3.37 per passenger. I bet it's more than that, but let's just go with $3.37. I would gladly pay $13.37 more per ticket to opt out of them ever reading that. Yep, please don't tell the airline CEOs, because they'll raise rates, and I'm setting myself up to be bribed or maybe blackmailed. So don't tell the leadership here, but I would be willing to pay up a little more to opt out forever of airline in-air credit card offers at volume 11 over top of my seat every single time.
All right. I was saying just off the air, because I can also hear in my ear, my producer, Rick Engdahl, and sometimes I just talk to him, not to you, and I was just saying, "Rick, you know, that's so cathartic for me." I do feel like the last one, No. 5, is arguably the least important of all of them. And yet, I feel as if I made it sound like the whole world hangs in the balance, the future of creation depends on airline in-air credit card offers being removed [laughs] from our lives. Admittedly, it's not that big a deal, but it is cathartic, and I probably should only do this once or twice a year.
I was just checking my notes. The last pet peeves was October 2 of last year 2019. If you find yourself, for some reason, enamored of my pet peeves, you can always google "Rule Breaker Investing pet peeves," and encounter all previous four episodes, because I don't repeat any of them, I just keep coming up with new ones.
Well, enough with that, now for a horse of a different color. Two years ago this week, I picked five stocks celebrating the 2018 World Cup, which I mentioned a couple of times earlier. This, by the way, was the 15th historic Five-Stock Sampler. The very first one I ever did was 5 Stocks For The Next 5 Years, that was on September 2 of 2015. We launched just a month or two before. And I thought, should I pick stocks in this podcast? Why wouldn't I? So that was the first. Fast-forward to July of 2018, two years ago, the 15th was 5 Stocks Celebrating The 2018 World Cup.
And to help me look over these is one of my favorite Fools, longtime analyst, partner of mine, Karl Thiel. Karl, welcome back to Rule Breaker Investing.
Karl Thiel: Thanks for having me back again.
Gardner: And, Karl, could you just briefly introduce yourself for those who may not have heard you before on this podcast? And if you have a pet peeve that you'd like to share, I mean, love is in the air.
Thiel: Yeah, I've been on the Rule Breakers team since 2004, I believe. So around for most of the service. And now, I've been on this podcast a handful of times. So I don't feel like a complete stranger to it. And, you know, pet peeves, I just feel like I'm not going to be able to do it in the just good-spirited and lighthearted way that you do it. So I'm going to just say, wear your masks and leave it at that. [laughs]
Gardner: That was well put, and an important line. And thank you very much. You know, I will say, and let me just go a little bit further on that. I saw a great tweet from my friend Brian Stoffel, who is a longtime contributor. He does a lot of Motley Fool Live these days, for fans of Brian S., you can also follow him on Twitter, as I do. And I thought he put this really well last week or so. His proposal was that for masks, what if people decorated them? And for all I know, some great entrepreneur is listening to this right now and will start cranking this out. And if you do, credit Brian Stoffel, because it's Brian's idea. He said, you know what, if masks said "For _____." And the blank would be somebody in your family, an older person, somebody you love. Because that's what we're doing when we wear a mask, we're doing it for others, it's not for ourselves. It can be for ourselves in some ways, but mainly you're doing it not for you but for me, and for all of us.
So Karl, if people made it real, made it about a family member or what they're doing it for, that would be a pretty cool movement in the latter half of 2020. The "For ____" mask movement.
Thiel: That is great. See, you're stoking me up a little bit. It was part of my peeve that early on, when even the government, or people in the government, were saying a mask isn't necessary, part of the explanation was, well, it's not really going to help you, it's really more about helping other people. And it just spoke to, I thought a terrible lack of, sort of, civic responsibility that I would really like to see changed.
Gardner: I agree. And civics, not taught that much in schools anymore, and some people may not learn manners at home. I'm not sure. But I think those things are really important and extra needed, and actually, at a premium these days. So people who do demonstrate real concern for others, really separate themselves in our society today and lift the rest of us up. So anyway, thank you for that brief, certainly briefer than any of my rants, pet peeve. And Karl, let's get now to these 5 Stocks Celebrating The World Cup.
Now, typically the way that we review these is I start by saying how the market has done, and I'll do that. So the market, over the last two years, is up 15.3%. And I can give an exact number. Remember we taped this podcast last week, we did after market close on July 2. July 3 was a holiday and July 4, was when we did this podcast two years ago. So this is the exact two-year mark. So the market is up exactly 15.3% from July 4, 2018, to July 4, 2020. That's the bogey, that's what we're trying to beat.
Now, as I look over the numbers here. And, Karl, typically what we do with these, Karl, is I like to just put out the five company names right now and then we start with the one that's done the worst. So here were the 5 Stocks Celebrating The 2018 World Cup. Alphabetically: Booking Holdings (BKNG 1.56%), ticker symbol BKNG; Dassault Systemes (DASTY 3.26%), ticker symbol DASTY; Electronic Arts (EA +0.41%), ticker symbol, EA; MercadoLibre (MELI 1.47%), ticker symbol MELI; and Yandex (YNDX +1.45%), ticker symbol, YNDX. Booking, Dassault Systemes, Electronic Arts, MercadoLibre, Yandex. And off these five, Karl, which is the worst-performer two years later?
Thiel: That would be Booking Holdings.
Gardner: Ouch!
Thiel: [laughs] Maybe, ouch! I don't know. I mean, I guess this one, when we talk about, sort of, the reasons why it has outperformed or underperformed, I don't think there's any big surprise here. And in a way you could say the "ouch" is surprisingly light. I will point out that if we were doing this podcast back at the beginning of the year, Booking would actually be up from where it was when you picked it in 2018.
Gardner: And that's kind of the ouch for me, Karl, a little bit, because I'm thinking about how this business, in a nontraveling or lesser-traveling world, has gotten spanked, but yeah, part of the ouch is this has been such a big winner, and was up until the start of this year, and I hope will be again. But keep going.
Thiel: Well, right. So I thought, in a way, it's interesting. So at the beginning of the year, Booking was up from where it had been in 2018, but it was not outperforming the market. It had kind of flattened out after a long, long period of just amazing outperformance. Why is it down now? I mean, I think you should probably have a big red button that you can hit there that just pulls up a sample of Cardi B saying, "coronavirus." Obviously, with people not traveling, the business is hurting. And like I said, I think it could be worse.
Prior to that, you know, it had leveled out a little bit. They hit an all-time high back in April 2018. And management of that company has always kind of had a habit of, kind of, lowballing guidance and just really, really outperforming. After that period of time, they were just kind of a little bit outperforming [laughs] over their guidance. And I think, you know, some of the enthusiasm just damped down a little bit. But this is a great company in a tough position.
Gardner: It really is. And part of the reason I say "ouch" is because it's one of my largest holdings. So it's a bummer to see it underperforming. It's not the worst ouch. Here are the numbers, the market, as we mentioned, 15.3% -- we'll just round that to 15%. So the market is up 15%, Booking down 18.9%, we'll call it 19%. So it's 34 percentage points behind the market. That's not a tragic loss, it's certainly disappointing, but the ouch for me is. I mean, it's just been such a spectacular performer, and the only reason it's one of my largest holdings is because I let my companies win over time. And it certainly has been a big winner. So it's hit me a little bit more than most other people.
With that said, Karl, Booking Holdings, which started as Priceline. William Shatner, the front man singing his Priceline tunes and people using Priceline to book flights or hotels in an increasingly global... And the company buys Booking, and booking is the European, kind of, Priceline. And then renames itself Booking Holdings, much more recently, just in the last couple of years. So yeah, this is still a global leader, but for a business that is under stress.
Thiel: Yeah, I mean, Priceline's acquisition of Booking is really one of the greatest pieces of corporate M&A in history.
Gardner: Well said. So that is unfortunately the worst performer, 34 percentage points behind the market. I'm going to save the best for last here. So we're prepared to talk about the best performer, but before we get to that one, Karl, let's look at a couple of the others. I see another underperformer: Electronic Arts, now this is a company that, when I'm thinking about the World Cup, I'm thinking about FIFA, the longtime video game soccer franchise, and EA is, of course, behind all of the FIFA games, and that's part of the reason I threw them into this Five-Stock Sampler. I mean, it's a great company, a lot of us are playing video games, maybe more than we would have thought in 2020. And yet, unfortunately, Electronic Arts is down 5%. So 20 percentage points behind the market over these last two years.
Thiel: This one, it's a little bit just comes down to some of the timing. I don't know if -- you may know this right off the top of your head, I don't know if you do -- but Electronic Arts hit an all-time high on July 13, 2018, so literally just a few days after you called this. That was the peak for the stock. And then it started going down later that year. Now, actually, Electronic Arts has been a fantastic performer. It took a brief dive back in March, but it had been going up, took a drop in March when just about everything, and is well above where it was prior to the pandemic outbreak, and no mystery why. I mean, COVID and video games go together like chocolate and peanut butter, you know, so they're doing well, and I think they'll continue to do well.
I think part of it is, like I said, just some unfortunate timing. Now, they had had some, kind of, later in 2018, some sort of so-so earnings that I think had taken some wind out of the sails after it had done a really strong run-up. And yeah, I mean I think that's the main factor; this company still looks great going forward.
Gardner: I agree. We certainly should point out that if you look at a graph of EA stock over the last year, you'll see it's had a great year. I mean, it's up more than 30%. It did dip with everything pretty badly in March, but nope, it's at 52-week highs pretty much. It's not at all-time highs. Apparently, I can pick them, because you pointed just nine days after I picked this sampler, EA hit its all-time high, it hasn't been [laughs] back since. But it is a great company.
By the way, since we're all market cap fans here at Rule Breaker Investing, $39 billion market cap, for anybody who's just wondering, what's the size of EA these days? And to compare that to what I think is the industry leader, and of my very favorite stocks, Activision Blizzard, Activision Blizzard is at $60 billion. So EA is much smaller than that. And as long as we're talking about market caps, I'll just mention that Booking Holdings has a market cap of $71 billion. I mean, each of these companies is global. And that was part of the theme of the 2018 World Cup, kind of a global celebration. So we hold out big hopes for them, but we have to say, flat out, that both of those companies have underperformed by 20 and 34 points, that puts us -54 in the hole.
Two other companies, a little ahead of the market, Dassault Systemes, Karl, and Yandex. Do you want to say anything about those two companies? Dassault Systemes, one of the only French companies that I've ever picked, and I'm sure glad I have, because it's been a great winner over time. But a French software company that develops 3D design, digital mock-ups, product lifecycle management software as well. But you know, a lot of the things that would be in Electronic Arts online games might have been designed by somebody using Dassault Systemes software, so.
And then Yandex is, and this is always a little unfair, but we'll go with the Google [Alphabet] of Russia. And so both of these companies, Karl, in contrast to Booking and Electronic Arts, which are American companies. Both of these European companies are in the black, ahead of the market by 10 or 20 percentage points.
Thiel: Yeah. And I don't have an enormous amount to say about these companies, I may be missing some subtleties of what's happened in the last couple of years, but both of them are just kind of, I mean, Dassault -- I just want to say that "Dassault Systemes" [laughs] has, you know, the rationale for it is growing use of augmented reality, virtual reality. They really make software that plugs right into that. And I think that's played out. Revenue actually accelerated in 2018 over 2017, then again in 2019, and so far in 2020 is actually still picking up the pace of growth. So it's just been a great performer. I don't think there's been any big surprises there unless I'm missing them.
So Yandex was maybe for you an unusual pick, in that you singled it out Yandex when it had not been doing all that well. It had been doing, sort of, poorly on our scorecard overall. And then had also actually had kind of a lousy 2018 going into it. So I think this is kind of a, you know, it's had a bounce back from weak performance, but it's also just done very well. I mean, this is a great -- even if you look at the bottom line, you know, it looks very expensive, but it's a really great cash flow business. They spend a ton, they just, they get a lot of operating cash flow, they're able to plow a lot of it back into capex, which for them has been, kind of, building out some of these industry verticals. I mean, they're kind of expanding, both, horizontally and vertically.
So it's a really interesting company. I think you often get a little bit of a Russia discount. I think that was probably more true when you picked it out in 2018 than it is now, but yeah, I think that probably still holds.
Gardner: And thinking about these two companies -- and thank you for that, Karl -- Dassault Systemes has been a very quiet winner, we first picked it in Motley Fool Stock Advisor, September 2009, it's up 558%, which is pretty awesome. The market -- I mean, this is over 11 years, just about -- the market is up 265%. So it's been a great 11 years for the S&P 500, but Dassault Systemes is a six-bagger for us, and most people don't know a thing about the company, especially in the United States of America, but it's definitely a leader.
And then Yandex is one of those companies that we picked and have patiently held. It's doubled since 2012, however, the market is up more than that. But, yes, in 2018, perhaps emboldened by my picking it in this Five-Stock Sampler, a month or two later, I would rerec it on our Rule Breakers scorecard. So Rule Breaker members listening to me right now will perhaps remember that in August 2018, we picked it, it's up 55% since then, but that's whomping the market, the market up just 13%.
So yes, both of these companies, Karl, contribute with some positive vibes to this Five-Stock Sampler. But we've avoided mentioning intentionally one of these five companies till the end, and which one is that?
Thiel: Which one is it? Umm, oh! it's MercadoLibre. Wow! [laughs]
Gardner: Yeah. And I think a lot of my listeners know, I like to save the best for last a lot of the time. And MercadoLibre was at $297.43 on July 3 of 2018, just short of $300. And as the markets closed this Thursday, July 2, it had gone from $297 to $988 a share. I mentioned earlier, we got to interview the head of investor relations last week, and boy! Was he smart, full of information, and just so member focused, answering so many questions from Motley Fool members. You know, I love the companies that don't spend as much time with Wall Street as they do with Main Street. MercadoLibre is one of those companies that makes itself accessible to mom-and-pop investors like me, and I really appreciate leadership that does that.
And certainly Federico Sandler, their head of investor relations, does that, but he has a great story to tell, doesn't he, Karl, because from $300 to $1,000 over the course of just two years has levitated this 5 Stocks Celebrating The World Cup Five-Stock Sampler to amazing highs.
Thiel: And, yeah, I don't know how many bags it had under its belt when you picked it out in 2018, but some. So yeah, it's been fantastic. Just a slight anecdote here. This will sound like I'm complaining, but I'm really not, this is a company that I do not own and I have wanted to own, and I have tried to buy it several times in the past, but The Motley Fool has a very strong policy about, you know, we can only buy our stocks at certain times. You can't buy it right before a service recommends it, you can't buy it right after a service recommends it, there is other reasons why. And we have a whole system for it to make sure that everybody is staying on the right page about when they're buying stocks. And I [laughs] have gone through periods where I was literally, like, we have recommended this company so many times in so many Motley Fool services that I have tried on multiple occasions and found myself just stymied from being able to buy it. And no, it's actually great, because I think what that means is that a ton of Motley Fool members own this company, which is great for them, and that's much more important that a lot of people have gotten into the stock than whether I happen to get to add this particular one to my portfolio.
Gardner: Well, that's very gracious of you, but I certainly, as a fellow Fool, I agree with that, and I've had the same experience. In my case, I do own Mercado Libre, which I'm very happy about, I've never owned any shares of Shopify, though. It's hard to get a word in edgewise on that stock, because a lot of Fools are focused on it. Yeah, and anytime that I mention a stock on this podcast, the days before the podcast and the days after, I can't take any action in it. So in this case, we're taping this last Thursday, I wouldn't have been able to buy any of these stocks a few days before, when we taped, a few days after, and then this now comes out on Wednesday, and so if you're now hearing us, we can't act on any of these stocks for a few days after this. And that's not just true of Karl and me; it's true of all Motley Fool employees, and that's how we always rolled.
But enough about us, back to MercadoLibre. Karl, if you think about what exactly is happening here. How could a company more than triple in just two years when Latin America, in many ways, has some weak economies and is traditionally viewed as unstable?
Thiel: I think that's exactly it, actually. Sometimes people use the phrase "wall of worry" in investing. I don't particularly use that phrase much, but I think this is an example of a company that is, you know, one part great performance in its own right and then one part just having always been held back by a lot of doubts, I think, about it.
I mean, at the time you picked it out in 2018, there were a lot of these, sort of, short-term concerns about trucking strikes in Brazil and what the unique buyer number had looked like, whether that was growing fast enough, and, I think, a bunch of stuff that weren't -- you know, is not really relevant to the long-term trajectory of the company. And in fact, you know, it sailed past all those things. I mean, registered users had been up 19% on average each year in the four years prior to you picking it out. Registered users were up 20% in 2019. I mean, the company hasn't slowed down at all. It's arguably even accelerated somewhat.
And I think there is a little bit of that United States-O-centric view, I guess, where you look at Latin America and you think there's plenty to worry about, you worry about the economy, you worry about currency issues. And I'm not saying that you should ignore all these things, but you step back from all that, I mean the larger story is, Latin America still has one of the fastest-growing middle classes in the world. They have a fair amount of the population that's still only getting online with broadband internet that's giving them a lot of opportunity. And so the company has great reasons to grow, and it has! It's performed really, really well.
Gardner: Yep. And in fact, the MercadoPago, which is basically its PayPal equivalent, is such an important part of that company's story and such an important thing for Latin America. And there are a lot of unbanked people and a lot of people are going to be coming online in the coming years in Latin America using MercadoPago. Of course, MercadoLibre functioning kind of like an eBay and Amazon within many Latin American countries.
Founded, by the way, in Argentina, not the best economy out there, but boy! MercadoLibre is such an important part now of Argentina's economy, but it's operating throughout Latin America and will just keep growing. So it's been a remarkable stock. We first picked it Feb. 18 of 2009, it was at $14.13, so it literally is now the best-performing Rule Breakers stock pick for The Motley Fool Rule Breakers service of all time. It's up 69 times in value. There are a lot of Fools who own this. As you mentioned, Karl, that makes you and me very happy because that's why we do what we do. And it's just a pleasure to see a company like this grow so well, have done so well, and yet I'm not looking backward, I hope you aren't either, Karl, you still can buy the company, anybody listening to us can and I think should too. This is a great story over the next 20 years.
Thiel: Yeah, and, of course, I can't buy it now for the next few days, [laughs] but I will hopefully remember to go in and take a look. And honestly, I think some of the same things are still in place. I mean, there's always a lot of worries. And honestly, I mean, Brazil right now, if there's a country that seems to be more out of control with the spread of coronavirus than the United States, it would be Brazil. You know, [laughs] there's always plenty of reasons to worry, but I don't think it holds back MercadoLibre in the long run.
Gardner: Well, thank you, Karl, and thank you for your time this week. And just to put some final numbers on this. MercadoLibre is up 232% since it was picked two years ago this week. And that means it outperformed the market by 217%, when you take it all in all, this Five-Stock Sampler reads like this; after two years it's up 55% on average. These five stocks averaged that return. The market, as we mentioned earlier, 15.3%. We're going to give ourselves a 39.7% advantage per stock over the market for this Five-Stock Sampler. This is a big winner. I do want to mention, most of our samplers are for three years' duration. That's the way we typically play the game for reasons we've explained over the years. Doesn't mean we'll sell these stocks or not like them after a few years, most of these we hold for long, long periods of time.
This particular Five-Stock Sampler, in keeping with the World Cup, was set as a four-year duration, so we're at the halfway point. And when we finally conclude two years from now, with a podcast about these five stocks, the World Cup will be happening again. And we can see whether they're still doing PKs.
Thiel: I certainly hope it is.
Gardner: I want to thank, again, Karl, thank you so much for illuminating what was happening with these companies, thanks for joining me on Rule Breaker Investing.
Thiel: Thanks very much for having me again.
Gardner: All right. And keep bringing good fortune to these Five-Stock Samplers. Boy! We do have a pretty remarkable record with the performance of these Five-Stock Samplers. Picked for free every 10 weeks or so on this podcast. So it's great to see these companies outperform. I will remind ourselves, though, sticking with the sports theme. Hey, this is only the halfway point; we're at halftime right now. We'll see how these five stocks do the next couple of years.
Well, thank you for joining us. Thank you for suffering Fools gladly this week on Rule Breaker Investing. As I mentioned, I think we may have something special brewing for next week. In the meantime, stay safe out there, wash your darn hands, maybe enjoy a little beach -- whether or not you're at the beach, just beach in your head, that's good too -- and Fool on!
