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Rule Breaker Investing: 5 Stocks Rolled Up at Random

By Motley Fool Staff - Jan 24, 2021 at 2:00AM

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Surely it's not possible to beat the market with a random roll of the dice!

Surely it's not possible to beat the market with a random roll of the dice! But what if we're dicing in a universe of great companies? What if we're randomizing Rule Breakers? In this episode of Rule Breaker Investing, Motley Fool co-founder David Gardner is eager to find this out. He is joined by Motley Fool Canada editor-in-chief Joey Solitro and Motley Fool Stock Advisor analyst Vicki Hutchison to review a couple of Five-Stock Samplers from the past few years.

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 Jan. 19, 2021.

David Gardner: Every 10 weeks on this podcast, I pick five new stocks and always to a theme, some of them silly, some of them serious or sublime. Last May, it was Five Stocks for the Coronavirus, that was serious. The performance thus far, sublime. Four years ago, April, it was Five Stocks for April the Giraffe, the trick to that one was silly. You could arrange the stock picks' first letters to spell out April as an acrostic, that was silly. The performance, silly good. Five stocks picked every 10 weeks. Six years later, it means we've done it dozens of times and I'll be doing it once again today, the 28th five stock sampler in the Rule Breaker Investing podcast's history. But as I've often said, if you're going to pick five stocks every 10 weeks and do it as a Fool in public, you darn well better score yourself and you darn well better report back. This month's podcast will lead off with two reviews of past five stock samplers. How have they been doing and what can we learn? Well, two years ago this week I picked Five Stocks Shrouded in Mystery. One year ago this same week, I picked Five Stocks that Spark Joy. My pals, Joey and Vicki, are stopping by to update us on those. Then get ready because it's going to be five stocks rolled up at random. I will explain, then pick. Only on this week's Rule Breaker Investing.

Welcome back to Rule Breaker Investing. I'm David Gardner. A delight to have you with me during this important week in the United States of America. I sit here shacked up in my house in Washington, D.C., feeling safe, hoping that there is a safe transition of power, I expect that there will be, and looking forward to the future. I'm not just talking about politics. In fact, I really am not. I almost never really think too much about politics. I'm thinking about the markets, about your portfolio in mind and the future of our culture and our society. I think that America, one of our five core values, in my opinion, is resilience. I believe that we are an incredibly resilient nation. There have been some tough times recently, but when I think about another of our core values, and that would be enterprise, I think that America does free enterprise better than any nation in the history of earth, including all of the nations today. I think in our enterprise there will be a lot of our resilience. We'll see how that plays out, not just over four years or eight years, but how about the next four decades or so?

Anyway, I'm rubbing my hands together because I'm excited about this week's podcasts. We've got a five stock sampler to close it up. But first, we get to review two five stock samplers from one January and two Januaries ago. Now, we're about to go there, but two housekeeping items first. First one up, last week's podcast, Six Principles for the Rule Breaker Portfolio. This is a really important list. I hope that you had a chance to hear that podcast. I've only come up with three lists of six before for Rule Breakers. One was 30 years ago with Six Traits for Rule Breaker Stocks. We've been using those for a few decades. Then three years ago we came up with Six Habits for the Rule Breaker Investor, the right way for you to behave around those great stocks. Because after all, it's one thing to give you a great stock but if you don't treat it right, if you sell it too soon or do something crazy with it, that isn't great advice for you. That was that list. Then last week, Six Principles for the Rule Breaker Portfolio. Rick Engdahl reminds us of what that sounds a little bit like. Next week is mailbag where I'm hoping to get your thoughts, particularly about last week and any additional viewpoints that you have that you'd like to provide because it is a draft list, as I mentioned last week. I'm excited as well for next week's mailbag. All right. Well, without further ado, let me welcome my friend, Joey Solitro. Joey, welcome back to Rule Breaker Investing.

Joey Solitro: Hey, thanks for the invite back.

Gardner: Absolutely. You have graciously consented to review my first five stock samplers we'll cover this week. Joey, it was two years ago and it was Five Stocks Shrouded in Mystery. Now, I certainly don't expect, let alone require you to have gone back and listen to any of that, Joey, but do you remember what's going on with that theme? Do you know why I picked shrouded in mystery?

Solitro: I do not.

Gardner: Why would you? In fact, that's part of the mystery, right? These stocks were shrouded in mystery as I put them forth, two years ago this January. But here was the mystery, I decided this is the 18th historic five stock sampler. I had already done 17 up until January of 2019. I'd had a great time with five stocks picked three years before. Joey, I decided for the fun of it, I'm going to repick those exact same five stocks and I decided to leave that in mystery throughout the sampler until I revealed at the end that these were the exact same five that I'd picked three years before. Those are the five stocks we'll be covering. I'll say one thing. They were absolutely outstanding those first few years. For me to now repick them, two years ago this January, I'm excited to see how they are doing. But before we go there, Joey, how about a brief introduction? Give me 60 seconds on Joey Solitro, the investing life.

Solitro: Hey, Joey Solitro, I am editor-in-chief of The Motley Fool Canada. I started at The Motley Fool as a contractor in 2013 and slowly made my way in-house. For anybody that's followed me on previous podcasts or on Twitter, anywhere on Motley Fool, knows that I just live the Rule Breaker mindset and that's just how I invest. This is right up my alley and I'm glad to be here.

Gardner: A delight to have you back, Joey. You're too modest to mention this, but you've also been, if not always, the single highest rated player on Motley Fool CAPS, always top five, often No. 1 for years now, on and off. It was a delight to think that it would all lead one day to full-time employment here at the Fool. It's a pleasure to be working personally together now. Well, Joey, thank you for that introduction. Now, let's get to this five stock sampler. OK. Five Stocks Shrouded to Mystery, picked January 23rd of 2019. First off, the S&P 500 since that day to this recording, which is right near market close on Tuesday, January 19th, 2021, the S&P 500 up 43.8%. Now, I'm going to round that to 44%, these are live numbers. That's the bogey we were trying to beat with these five stocks shrouded in mystery, which was simply a repeat list from three years before. By the way, I should mention the original group of these five, the theme I picked, I wrote down myself at the time, five lesser known Supernova stocks that I like right now. But Rick Engdahl ended up retheming it as 'Five Stocks for the Next Bear Market.' The bear market didn't really ever hit. But these stocks did great over a few years. That was the original theme, Joey, that we picked them into. But now they're just, once again, Five Stocks Shrouded in Mystery. Well, let's start to take the mystery away one stock at a time. I always like to start with the worst performer. As I look over this list, I regret to say that in this list was Carter's (CRI 4.62%), ticker symbol CRI. It was around $81, a couple of years ago, it's around $99 today. Not bad, up 23%, Joey, but the market up 44%. For this stock, in each of the five, I'd love to hear what is the No. 1 reason in your mind why the stock has done what it's done. So, Carter's.

Solitro: For Carter's, it has posted a great performance, but it was a victim of the pandemic. It had a great 2019. But you got to think, they have wholesale partners that they're selling into these brick and mortar locations. They've got their own brick and mortar locations. Both of those channels were absolutely obliterated, but their e-commerce has been strong. You see the stock has held up relatively well. But yes, it hasn't kept up with the market.

Gardner: Baby clothing, it's a timeless company. One of those companies, Joey, I know you've had some little kids in the house in recent years. I don't know if you've bought Carter's yourself, but it's one of those timeless American brands. It is nice to know that it's still up 23% given the pandemic and the shutdown of so much bricks and mortar. Any final thought about Carter's going forward?

Solitro: Well, I do think it's an incredible brand. I have a five year old, a three year old, and a recently turned one year old. I know the strength of the brand and I know it's one of those more expensive, but they do justify the quality. I believe this is one of those brands that will stand the test of time, but I feel like they will rethink the brick and mortar strategy of their own. Maybe focus more on e-commerce and maybe focus more on selling to the Kohl's and Targets rather than the smaller players that could get hit worse by continued weakness from the pandemic.

Gardner: Thank you, Joey. Let's move to stock No. 4, the fourth best performer. This is Planet Fitness (PLNT 2.10%), the ticker symbol PLNT. It was at about $58 two years ago, it's about $80.5 today. Stock's up 39%. The problem is the market is up 44%. Planet Fitness trailing the market by 5%. Joey, you are one of the fitter guys that I know. What is your take on Planet Fitness? What's happened over these last two years?

Solitro: Planet Fitness. It's another one that's been a victim of the pandemic. But what people don't realize and why it's held up so well and come back so strongly is it's one of the most difficult franchises to get in the United States. I believe Wingstop and Planet Fitness are top five, and Wingstop is another Rule Breaker name. People need to look at this as, this is one of the toughest franchises to get, which means the franchisees are highly liquid. They usually own multiple locations. These aren't people that only have a couple of months' rent. They're usually very wealthy, have other lines of work that they're in. That's why they held up so well, and then they just lent relief to their franchisees. I believe Planet Fitness will emerge from the pandemic stronger. Unfortunately, that means a lot of these mom-and-pop gyms will go out of business, but that's an opportunity for a franchise like Planet Fitness.

Gardner: Thank you for those words. What I really love about this company is how it democratizes fitness. Joey, you are a high performance guy. You probably don't need a Planet Fitness membership, but for most of the rest of us, it's like in some ways the way the Motley Fool's been positioned over the years, democratizing the ideal that everybody can be an investor, everybody can be on a treadmill, get more financially fit and more healthy. Maybe a little bit of planet Foolness here. Let's move to stock No. 3. This was an interesting one because it's no longer publicly traded. Ellie Mae, ticker symbol ELLI, is the third best performer from this five stock sampler. It was at $70.25 two years ago. However, it was just months later, Joey, in fact it was three months after this five stock sampler that Ellie Mae got bought out at $99 a share, so we closed it out. Then, it was up 41%. The market at that time was up 10%. We got a nice 31% in the win column, which now takes us into the overall winning column with the sampler. Because to review, Carter's was 21% behind. Planet Fitness was 5% behind but Ellie Mae, even though it's no longer publicly traded, gave us a plus 31%, got us in the win column. Any reflections, Joey, on Ellie Mae?

Solitro: Ellie Mae is one of those companies I feel like it just got away for the market too quickly. As investors, a lot of people always hope for that big buyout. I actually hate them because it takes away one of those growth machines that we could have owned for decades to come. They were scooped up by ICE and now it's rebranded as the ICE Mortgage Technology Platform. I feel like Ellie Mae was really just coming into its own as the real estate market is one of those that is really right for disruption and really could use some technological advancement. Because anybody that's bought or sold a house, the 30-, 45-day process, it's so broken and needs this technological advancement that I feel like Ellie Mae was one of those companies leading the charge. I wish it would have never been bought out, but it was a win for the scorecard.

Gardner: It was, and for many Rule Breaker members and this stock, like every one of the ones recovering this week, was a preexisting recommendation before it ever came to a five stock samplers. We certainly had a lot of lower cost bases than this and many Fools own this for longer than three months. But as you just pointed out, Joey, we only had the stock for a few months. It was up 41%, which wasn't bad enough to give us a win overall for the sampler. Now, let's rub our hands together. Ellie Mae, by the way, the mortgage originating platform, a hero to the mortgage lending industry and now owned by ICE as Joey mentioned, which owns the New York Stock Exchange, which is by the way also a Rule Breaker, ICE. But let's move now to the second best performing stock. This one, IPG Photonics (IPGP 0.00%). It was at $126.25 two years ago. Today, it's $258 and change that gives it a gain of 105%. That's against the markets 44%, so that's a 61% further in the win column. Joey, you and I were talking earlier this morning, IPG Photonics in the news in a weird way, even just today.

Solitro: Yes. Lasers. There's a lot of industrial components with lasers and it is a growing industry. But looking at the financials and what IPG has done over the years, you wouldn't think this would be the second best performer on this scorecard or in this sampler. But yes, you do have the Coherent buyout by Lumentum. There's more speculation that this is an industry that's right for more M&A. You can see where the industrial components are in the expanding use. But I feel like the reason this stock has performed so well since March is because of the EV boom where electric vehicles are all the rage. This is one of the leading providers of fine processing when it comes to electric vehicle batteries. I feel like this is one of those that is just benefiting from everybody else getting into the EV game and looking for one that plays like the charging stations that have taken off. This is another way to play that EV boom.

Gardner: Very well put, and Coherent, which by the way was on my watch list. My next guest, who'll be joining us shortly, had completed a research report for me last year on that company, and it did indeed get snapped up this week assuming regulatory approval. IPG Photonics cold fiber laser is a company that has superior technology, a great CEO and the Russian born founder, Valentin Gapontsev, and one of the better performing stocks we've ever had at Rule Breaker history. Long standing Rule Breaker, we have great hope for it going forward, which is really all that matters now. But since we're spending time looking back two years at the sampler, wow, more than a double over these last few years outstanding. Well, Joey that all closes it out then with the No. 1 performer for this five stock sampler, this next stock, just on its own outperformed all of the others combined. The way I like my five stock samplers when we can pull that rabbit out of the hat, the ticker symbol, MELI. This is a stock known to many listeners to this podcast, so many Motley Fool members own some MercadoLibre. Of course, the Latin America e-commerce platform. History will show we picked it on Jan. 23 of 2019 for this sampler. It was at $328.88. Joey, as the market nears close this Tuesday, it's gone from around $330 to around $1915. It's more than a 5-bagger. In fact, it's up 482%. That's pretty good compared to the market's 44%. That has put Five Stocks Shrouded in Mystery in a huge win column for five stock samplers. From your point of view, Joey, what is the No. 1 reason over the last two years that MercadoLibre is up more than five times in value?

Solitro: Well, as e-commerce and digital payments continue to grow, this is the top way to play it in Latin America. So we see this with Sea Limited in Southeast Asia. You see the rise of Amazon, PayPal, and Square in the U.S. and around the globe. So these guys are the best way to play e-commerce and digital payments in Latin America. You see they've just come into their own. They still have so much optionality in that platform if they want to get into the Cloud Services side of things and their logistics network is so impressive. It's no shock to see that MercadoLibre is the best performing stock in the sampler. One of the most exciting things as you know, this is still less than a $100 billion market cap. So I still see significant growth going forward for these guys. I think much like a Sea Limited, this will be a $1 trillion company over the long term. While it has posted an incredible performance, I think the best days are still ahead of this one.

Gardner: Well, thank you. Not just for the optimism, Joey, which you're always pretty good at, but for the analytics which you're also really good at. Again, one of our most decorated players in Motley Fool Caps history, you've got to hear from him directly on this podcast reviewing this five stock sampler, five stocks shrouded in mystery. Well, as Joey just mentioned, the future is really what matters. A reminder that this five stock sampler, like the vast majority of my 28 over history, was picked as sort of a three-year game. So this game is not over. This is two years in. Perhaps we'll have Joey back on one year from today as we close out this particular five stock sampler. But at this point, the market averages and this is factoring in Ellie Mae's buyout when the market was only up 10%. So across the five stocks, the S&P 500 average is a 37.1% gain. This group of stocks up 137.9%. That's 100.8% per pick ahead of the market, a really promising two-year start for five stocks shrouded in mystery. Joey Solitro, thanks so much for joining us on Rule Breaker Investing.

Solitro: Thanks so much for having me.

Gardner: All right. Well, two years ago it was Five Stocks Shrouded in Mystery, and one year ago this week, it was Five Stocks that Spark Joy. Now, some of you, especially if you know the name, Marie Kondo or if you remember last year's podcast, it was after all just 12 months ago, you may remember the phrase 'sparking joy.' It was the turn of the New Year at the start of 2020. I certainly did not know what the year had in store for me or for our world at large. But just like you get spring cleaning feelings around March, I often start the new year with some resolution. I thought it was sort of fun because Marie Kondo has made a career of helping people clean out their houses and reduce their stuff. Her big phrase is you pick up something, let's go with that old trophy you won, most valuable goalie for your high school soccer team, and you start asking, does this still deserve a place on my shelf? Boy, do I have a lot. Do I have too much stuff? So you're supposed to pick it up, look at it and say, does this spark joy for me? If it does, then you leave it right there on your shelf. But if it doesn't, maybe snap a photo of it and then toss it and simplify your life. A lot of Americans, I think it's fair to say I'm one of them, have too much stuff. So Five Stocks that Spark Joy. The idea of the sampler was to, what are five companies whose products people pick up or the brand and they love it? It sparks joy for them. Well, here is somebody who sparks joy for me, Vicki Hutchison. Now, a Motley Fool Stock Advisor analyst, but longtime Motley Fool member. Vicki, welcome to Rule Breaker Investing.

Vicki Hutchison: Thank you.

Gardner: Well, how about in 60 seconds or so, Vicki, where did you come from, and what do you do today?

Hutchison: OK, so I retired early and I joined Motley Fool as a member in 2010 in order to diversify my portfolio away from the 80% or so I had invested in company stock. I started as a Fool-line guide in March 2014 and I joined your Stock Advisor team in April 2019.

Gardner: Just two years ago, we're coming up on that two-year anniversary. It has been a delight to have you, Vicki. Because not only are you just crack smart, whip-smart as a stock market analyst and observer, somebody who's commanded her own portfolio to great heights over the years, but you're also a longtime member. So often you see with the eyes, the emphatic eyes, of a former member who now works directly for the company as a contractor. But you really helped always remind us of our roots. So thank you very much for that. Let's now get into Five Stocks that Spark Joy. Just as we did with Joey will start with the worst of these five stocks. Before I start with it, I should mention the S&P 500 performance, we're always trying to beat the market with these five stock samplers. So from one-year ago this week, the S&P 500 is up 14.3%. We'll just round that right to 14% dropping a fraction in this case, and see how these five stocks have done. So Vicki, stock No. 5. This is the worst performer, it's up 19.6%. Good news here, Fools, the worst performers beating the market for this one, ticker symbol DIS. It is of course, Walt Disney. Vicki, a year ago, Walt Disney at $144, right now around $172. It's been a crazy year for Walt Disney. The stock somehow is still up 20% beating the market by 6%. Vicki, in your mind, what best explains over the last year what's happened with Disney's stock price?

Hutchison: OK. So Disney basically trailed the market through most of the year because of the closing of the theme parks and the cruise lines. So about a month ago as vaccines started becoming available and hope really started to cause the stock to rise as we have pent-up demand for families to visit Disney World or take a Disney cruise.

Gardner: Yeah, you bet you. Disney+, I don't know, are you a subscriber to Disney+?

Hutchison: I'm not. But I think there's a really large number of intended folks who are.

Gardner: Yes, many of us are subscribed to Disney+. Perhaps in years to come, although you probably don't need that much more entertainment in your life, but some of us do, Vicki. That has certainly helped Disney through the pandemic. Well, looking forward to the world reopening here. My big word, my thematic word for 2021, has been "comeback." I'm going to continue to use that and hope for it. Let's hope that Disney does that too. Again, up 6% over the market though not a bad way to start reviewing a five stock sampler. Well, Vicki stock No. 4, the fourth best performer, the ticker symbol, I think a lot of us recognize this company, AAPL. Yup. Apple. One of my pet peeves. I've shared it before in this podcast. There are people who think that Apple's ticker is APPL, it is not. It is AAPL. Apple, $79.50 a year ago, $127 and three quarters today. The stock up 61%. The market up 14%. That puts Apple plus-47% in the win column. Vicki, what's been going on with Apple?

Hutchison: Apple has continued to post record results as people who depend on their devices to connect work, school, family, or friends have been buying new phones and laptops. There's also a lot of excitement around 5G as iPhone owners everywhere are looking forward to upgrading to the new technology.

Gardner: Vicki, do you rock any Apple devices in you and your family's life?

Hutchison: I have an ancient iPod that I used to listen to that podcast, but that's it.

Gardner: I know you have a next gen in your household, nobody is using Apple devices even at the younger crew?

Hutchison: No. Just we're a Samsung family.

Gardner: Very nice. Well, certainly much of the world is. But because so much of the PC world is spread out among many different brands, and you have Android coming from Google, and that's a much larger world even than Apple. But since Apple is in charge of its own ecosystem, basically the dominant brand within all that it does, it ends up being the most valuable company in the world. It's just delightful to think that despite the difficulty of the last 12 months, Apple's stock is up 61% in 12 months. That's the biggest company in the world today, and wow. All right, well, these are five stocks that sparked joy. A lot of people, when they pick up their Disney Princess dress or they look over their brand new iPhone 12, they're happy. That's the idea behind this sampler. It's not a bad way to find stocks or people in your portfolio with some of the most humanizing human brands out there in the world.

Let's go to the third best performer in this sampler. Its performance is very much along the same lines as Apple and its size not so far from Apple either. For a lot of us, we love Amazon (AMZN 2.16%). I will put it out there right there, front and center "I love Amazon." Amazon has done so much for me. As somebody who does not enjoy shopping, I constantly have cardboard packages showing up. Here in Washington, DC, we are forced to recycle everything, so we have to punch out the cardboard, fold it up, and put it in our canisters but I'm happy still to do that and have Amazon serve me up the world's such a wide selection, such reasonable pricing, often free shipping, sometimes day of. Amazon stock, $1887 a year ago, today $3118, up 65%. Again, the market up 14%. We'll take a plus-51% from Amazon. Vicki, I'm going to guess you use Amazon more than you use Apple?

Hutchison: I am definitely an Amazon user. I have packages arriving daily.

Gardner: How do you and I explain to the world how Amazon stock has risen another 60% over the last year?

Hutchison: They've really been there for us. As everything has been shutting down, they've been delivering everything from toilet paper to tennis shoes in a day or two. That build out of their delivery network, it's really enabled them to meet the increased demand.

Gardner: The company still with the visionary leader Jeff Bezos, certainly one of the great CEOs of our time, certainly one for the record books, and the company does so much work globally for so many people. I realize not everybody will love Amazon. Amazon has had some tough moments. I remember a New York Times article saying it was not a nice workplace some years ago. It was, of course, disputed by some who work in that workplace. But overall, I don't think any company is perfect. I don't think Disney's perfect. I don't think Apple's perfect. I don't think Amazon's perfect, but I do think all three spark joy, and boy, have these three companies not just carried us in many ways through the pandemic into, not still out of yet, but through the pandemic, but they have ended up prospering for our portfolios as well. Yet, of the five stocks that spark joy, the two we haven't talked about yet, have done even better, and I'm going to say way, way better than those three winners. Vicki, let's go to stock No. 2. The ticker symbol is ETSY, the company's name is the same as its ticker symbol, Etsy. Etsy one year ago was at just over $50 a share, $50 and change, today it's at $221. That is a gain of 340%. That is in one year of appreciation, ladies, gentlemen, and Fools. That really helps lift up the performance of Five Stocks that Spark Joy. Again, this is a three-year game we're playing. Vicki, this is only one year in and you and I both know these numbers could come well down. Who knows, over the next year or two, I'm never going to make market predictions, but in the meantime, what happened for Etsy in 2020?

Hutchison: Masks, masks, masks. The pandemic was a strong free marketing campaign for Etsy and any of its sellers who were willing to produce masks. The biggest hurdle for Etsy was getting people to try it, and once you tried Etsy, you're more likely to come back. So, a lot of those customers are there for good.

Gardner: I appreciate that. Etsy, in particular, feels like an Amazon-proof company. Now it does operate in e-commerce, which is Amazon's domain, and not everybody can compete that well. I don't know if you use Etsy, I'd be curious about that in a sec. If you could tell me, Vicki, perhaps you bought a mask or two? But what I love about Etsy is that what you buy on Etsy is generally unique to Etsy, you can't just pick it up anywhere else, whereas most of what Amazon sells is not unique or proprietary to Amazon. There might be some private label brands there, but for the most part, they're things you can find in retail anywhere. Etsy occupies a special place, I think, in e-commerce, and wow, 341%. Vicki, have you bought anything off of the Etsy platform in the past 12 months?

Hutchison: Yes. I bought masks. That was my first Etsy purchase, and I have actually gone on to buy some other things. Presents for people.

Gardner: Thank you, I appreciate that. I'll say Etsy for gamers, even geeky board gamers like me, sometimes people produce nicer components than you actually got shipped in the game box that you bought. Right? You can bring out your games with the help of Etsy craftsmen, handicrafts really appreciate the site and wow to Rule Breakers everywhere, appreciate the stock. What a huge winner for The Motley Fool. Well, the past is yet prolonged because one stock has just about doubled Etsy's own performance over the past year. Boy, am I glad one year ago that I picked up Tesla, looked at it, and said, "It sparks joy for me." I think for many other people too. Tesla one year ago, $113.91. It is at $845 as we speak today. The stock up 642%, the market up 14%. As we can all imagine, this is turning into one of the great five stock samplers we've ever had on Rule Breaker Investing. So many crazy things have happened last year, Vicki, and some of them have had something to do with Tesla. What do you want to point to as a reason that Tesla would be up seven times in value over the past year?

Hutchison: Tesla is really executing on Elon Musk's vision. They've been ramping production. They became profitable and they finally joined the S&P 500. Electric vehicles are a lot of fun to drive and rooftop solar to power them puts into my best hope for the future.

Gardner: That's great and I really appreciate that allusion. Thank you very much, Vicki, for that. Make your portfolio reflect your best vision for our future world. A lot of people have electric vehicles as a vision of a better future than what we have today. I do trust that Musk, and of course, the rest of the industry trailing and trying to catch up will electrify the roadways in coming years and that definitely leads to a better, safer, greener planet. I think a lot of people recognize that. Again, Tesla, not a perfect company, and Elon Musk, not a perfect individual but we're here in the business of finding companies that make our portfolio shine and help the world at large. This week with this sampler one year ago that sparked joy. Vicki, thank you. You have sparked joy for all of us as you've helped explain how these five remarkable stocks could combine into a sampler that is up on average 225.4% against the market's 14.3%. That means each of these five stocks averaged out a 211% gain over the S&P 500. That's smoking. Vicki Hutchison, thank you so much for joining me on Rule Breaker Investing.

Hutchison: Thank you.

Gardner: Quick note, Vicki, before I let you go, I mentioned earlier just before you came on, Coherent was a company that you and I had on our watchlist on Motley Fool Stock Advisor and I was just checking this morning to see that you had written on February of last year a research report and we were thinking about it, and I do now regret that I did not pick ticker symbol COHR, because, wow, it went up more than 30% today, which for podcast listeners would be yesterday since this comes out on Wednesday. But what a start to the new year for Coherent, I guess we'll just cross that one off our watchlist?

Hutchison: Maybe so.

Gardner: All right. Well, Vicki Hutchison, thank you very much, and thanks to Joey for their reviews of the five stock samplers, picked one in two years ago. Now it's time for this year's January five stock sampler. I mentioned it briefly at the top. If you were listening carefully, you might have thought, I'm sorry, you're doing what? Because I entitled, and we will be entitling this five stock sampler, Five Stocks Rolled at Random. Now, for any of my longtime listeners, you might remember, well, it was just October 14th of last year in the Mental Tips, Tricks & Lifehacks episode No. 9, toward the end of that episode, I mentioned my love of randomization. Mental Tips, Trick & Lifehacks No. 9 was me finally pulling back the wizard's curtain on something I've talked on and off about over the years in this podcast and other places, and that is the great importance of randomization for me, maybe my ultimate lifehack.

Why do I love randomization so much? Well, it starts with dice. As a little kid, I grew up loving to roll dice. I remember, I was in the musical Guys and Dolls in high school. It's all about shooting craps. Whenever I go to casinos, which is not very often, I never invest in them, but I have no problem losing a little bit of change myself from time to time. I'm always there at the craps table because that's fun, because it's dice. You're going to lose money if you go consistently to any casino, but why not have a little fun doing it? Dice are fun. Dice also enable you to generate random results. Now, for me, a big dice baseball fan, I'm a lifetime Strat-O-Matic baseball fan for any longtime Strat fans out there. I've talked elsewhere about my love of baseball statistics and sabermetrics. My homage to Bill James and money, but a lot of that is rooted in my initial love of dice baseball and other dice sports games, throughout Dungeons and Dragons, all kinds of games over the years. I won't summarize now, even more than I already have what I talked about in that episode. But randomizing from your to-do list, I found as a great productivity hack. It keeps me from avoiding all the ones I don't want to do. Cherry picking my own to-do list for all the good stuff, nope. I randomize and it forces me sometimes right away to do the thing I want to do least. More disciplined people than I am, probably can make themselves do the hard thing first. I find that dice enable me to get those things done in my own time.

Well, my producer, Rick Engdahl, and I were talking about our love of dice, he's a gamer too, in recent weeks and he actually suggested out, what about rolling up a five stock sampler? I thought initially, what a crazy thought, and then I thought, what a perfect thought. Perfect in two regards. First of all, it makes so much sense. We're here to have fun on this podcast. I mentioned at the top, some of these five stock samplers are sublime, some of them are silly. A lot of them perform silly and sublime good, so it can work either way. But reason No. 1, we're having fun on this podcast, and I'm literally going to be live rolling randomly through my stock picking universe to pick this five stock sampler. I'm doing that live with you on this podcast. That's reason No. 1, that it's perfect that we're doing it. It's just me, it's so me, I have fun with this. Second, we've done a lot of studies over the years that show what it would be like investing just in the stocks that I pick in Stock Advisor and Rule Breakers, and generally the studies have come back pretty positively. Just like if you paid attention to the performance of our five stock samplers, and you just imagined, what if I randomized only a few of those samplers above those stocks? You've done pretty well. The reason I think this works is because we're finding great companies. It's a stocked pond that we go fishing at ... gets pulled with our own little fishing rods, we go fish. A great place to find great stocks. A lot of other people are casting their lines into oceans or into swamps. Big open spaces are not so attractive places to find great companies.

Well, the Rule Breaker methodology and mentality in our history has us focused on such good companies, that if you just cast your line into that pond, it's a stocked pond. We've done studies that show that if you've randomized up to 20 years or so of the stocks that I have, you have something like a 95% chance of beating the stock market. Again, I'm having fun with this. I'm not quoting you the exact studies, but we have some of them internally. We've done them over the years. Anybody could conduct their own, I guess, but I hope you get the point. Stocked pond. I am comfortable randomizing which five fish we're going to find in this stock pond. Now, before I start rolling up the sampler, I want to give one ground rule. I have approximately 230 stocks in my universe of picks. I've handpicked every single one. Many of them have been from a teammate. Like let's say Vicki, or Joey, or Aaron Bush or Matt Argersinger, Emily Flippen, so many people who've worked with me over the years, they've put forth a lot of the ideas, but in the end, I've said this one, not those three, and so I own all the results, good and bad. Anybody, you heard David's biggest losers open up this year, knows I can generate bad. Yup, I'm pretty good at that. But you should know that I feel very comfortable up and down this list of 230 stocks, and yet longtime members of The Motley Fool will know that some of the stocks, even though they are active recommendations, we don't like them for new money now. Maybe the CEO just resigned and we're trying to figure out what's happening. Or maybe there's a new disruptive upstart in that industry that has us questioning the stance of our existing long-term player.

There are lots of different stories behind these 230 companies. Some of the ones we don't favor as much we will put in what we call the penalty box. If you're a Rule Breakers member, you'll know which stocks are in the penalty box. I could randomly roll up because I'm going to be generating random numbers from 1-230. I could randomly roll up a stock that's in the penalty box, that I would not recommend for your money today or for this five stock sampler. It's on hold, if you like. For this reason, here's the ground rule: out of the 230 stocks, I will be randomizing 10 numbers. That will give us 10 company names, and right here with you on this podcast, I will think through the 10 and come up with the five that I like most from that randomly selected group of 10, and that will be five stocks rolled up at random. So mostly random, but not purely random, and here's what's not random at all. All of these are active recommendations stocks that I like. Of course, every five stock samplers have always been drawn from our active recommendations.

Well, I hope that explains why I'm comfortable doing five stocks rolled up at random, and why you can decide your own comfort level in your willingness to follow or believe in this particular five stock sampler. Without further ado, let me get my dice out and let's get started. Let's get that dice rolling sound going please, Rick Engdahl. Now, truth be told, while this can be done with, I would say percentile dice, for those who are familiar with decahedrons, which is what a 10-sided die would be. You could roll three of them and it would take a number of times to get numbers from 1-236, which is how many of my stock picks? We have under-coverage. But truth be told, I'm not going to actually roll dice. I'm going to use, a free plug for this website. Certainly, one of my go-to websites, probably not, but perhaps one day it will be one of yours, allows me to generate very quickly and easily 10 random numbers, 1-236. I will be tagging each of those alphabetically to stocks. From the very first alphabetically, which for the record is 2U. Because numbers come before letters and the No. 2 and the letter U is the first alphabetical company in my so-called Supernova University, universe of all my stock picks. The very last one would be Zynga, Z-Y-N-G-A, and all the ones in between. So around, around, around she goes and where it's going to stop nobody knows. Here come 10 random numbers. I will not read all of these out. It would be extremely boring podcast listening. But, for example, 125, 140, 200, 117, 154, etc. Those are the numbers that I have just generated. I will now be tagging those alphabetically, the companies, and here is the list of our 10 rolled up at random companies. Abiomed (ABMD 0.90%), ticker symbol, ABMD. No. 2 is Apple, ticker symbol, AAPL. No. 3 is Atlassian (TEAM 3.05%), ticker symbol, TEAM. No. 4 is BMW, ticker symbol BMW. No. 5 is Corning Glassware (GLW -0.51%), ticker symbol GLW. No. 6, Gartner (IT -0.11%), yup, the IT consulting firm. Their ticker symbol is IT. No. 7, Monster Beverage (MNST -0.58%), ticker symbol MNST. No. 8, SolarEdge Technologies (SEDG 1.14%), ticker symbol SEDG. No. 9, Starbucks (SBUX -0.59%), ticker symbol SBUX, and we randomly round it out with Teladoc (TDOC 1.30%), ticker symbol TDOC. All right. Well, I had to step away from the microphone just briefly to think briefly about which five of those 10 that I just shared with you will make up this five stock sampler. I did put in a little bit of requisite research time, which I hope you'd want me to spend, and here we go. The five stocks that will make up this historic sampler that I'll probably never do again, five stocks rolled up at random. Alphabetical as always, by company name, company No. 1.

Company No. 1, you may have heard of it before, we talked about it earlier in this podcast, it definitely sparks joy worldwide, Apple, ticker symbol AAPL. This company's market cap, get this, is $2.18 trillion. I've consistently been predicting the $1 trillion mark and the $2 trillion mark, when nobody has reached it yet. People asked, I would say I think it's going to be Apple. Why was I always saying Apple? Because Apple was out ahead of the others, like Amazon or Alphabet or other companies that had a shot at it. Similarly, I predicted Apple is the first company to a three trillion dollar market cap, and I sure hope that would happen in the next three years, which will be the length of this randomly rolled up sampler. Apple will, of course, be helped in the here and now by continued sales of its iPhone 12, but that shift to software and services in particular is going to be important for this company going forward. The hardware sales are a little bit more with each generation of iPhone, but once just about everybody who wants one has one, there isn't a lot of worldwide growth there. But their shift to services, which Apple has been benefiting from, has really helped power the stock over the last year, and I predict over the next three years. Did anybody hear rumors of an iCar? All right.

Alphabetically, by company name, randomly rolled up stock No. 2. The ticker symbol is TEAM, the company is Atlassian. Now, this company originally came to Motley Fool Rule Breakers in 2016 at a much lower cost basis. My pal and fellow Fool, Aaron Bush, was the one who brought it to Motley Fool Rule Breakers members. It was at $30 even back then. Today, Atlassian tipping the scales much closer to up $226 or so, as we talk here at market close now on Tuesday, January 19th. That stock is a seven bagger. But here we are, the past is the past. All we care about is the future. Here we are at $135 or so a share. Looking forward to Atlassian being part of this five stock sampler over the next few years. The stock, by the way, over the last year, up from $135 to $225. It has performed well. Many of you will recognize Atlassian, if you're a long-term Motley Fool member, as an Australian-based company, a maker of collaborative software platforms. In particular, we use one of them every week for this podcast. Rick Engdahl takes in all of your questions, all of your stories, poems, and thoughts for our mailbag each month, and he drops them onto a Trello page as a document that I click open and read the 35 or so pages that come from one month to the next. I'll be doing that again in next week's mailbag, is the address. Thank you, Trello. Thank you for acquiring Trello, Atlassian. Thank you for the performance you've given us thus far, Atlassian. I'm looking at the future now. By the way, Atlassian, a much smaller market cap than Apple at $56 billion. All right.

Stock No. 3, this is a return appearance for this company, not from earlier this podcast as was the case for Apple, but rather from two five stock samplers ago. It was September of 2020, not four months ago, when I picked five stocks indistinguishable from magic, and one of those companies is SolarEdge Technologies. The company ticker symbol is SEDG. This is an $18 billion market cap company. Happy to say that it's up 34% for that five stock sampler. But for this one, the starting line starts at zero, which is right where the S&P 500 is for our purposes as the race touches off for five stocks rolled up at random. SolarEdge Technologies, really well-positioned in a world where, increasingly, we're putting photovoltaic cells on our roofs and using the sun to power our world. SolarEdge makes inverters, which is basically a technology that's part of your array if you have a solar array on your property. In time, I hope we all will. But it converts that direct current energy that we get from the Sun into alternating current, a DC to AC conversion, which your home can use. SolarEdge is a leader within that field. It's been a spectacular performer, I should mention. A year ago this time, it was at about $100 a share. Today, it's at $295, so it's about tripled over the last year. We're recommending it right here for this five stock sampler. I will point out that the stock has dropped from $365 just a few months ago down to $295, so those dips, who like to buy on dips, there's a dip for you. All right.

Stock No. 4. This is the first time this lauded company I think has ever been featured among my 28 historic five stock samplers, Starbucks. The ticker symbol, of course, SBUX. Starbucks, a company with a $120 billion market cap. Some people would think Starbucks is maybe as big as Apple. Not even close. Starbucks is about 120th the size of Apple these days, but still such a big dog globally, one of the best known purpose-driven brands, I would say, in all of capitalism today. The stock I first picked in 2006, it was $14.79. It's been a 7-bagger since then. The market is about half of that, so it's about doubled the market now, 15 years later. For those who are longtime Fools, you'll remember our original Fool port, which we called the Rule Breaker portfolio back when it was a free offering on a webpage starting on AOL way back in the day, and Starbucks, we had at a very low cost basis from there. This is a company we have a long association with. I trust you do as well. It's done pretty doggone good through the pandemic considering that a lot of its business had to slow down or shut down for periods. But I think Starbucks has done a really good job. We haven't seen any big story about a breakout of COVID, thanks to Starbucks. I see a lot of safety. I also think Chipotle, which is not one of our randomly rolled up stocks, but is one of my stock picks. Chipotle is another example, I think, of a company that has done well through this pandemic. Of course, both companies do well with takeout, and in some cases may deliver. There are our first four stocks.

How could we not close it out then by going to the letter T? Another stock that is a recurring performer for five stock samplers and has made many a Rule Breaking Fool, capital F, happy over the years. That would be stock No. 5, rolled up at random, Teladoc, ticker symbol TDOC. The stock, we first picked it at $34 in November of 2017, and my golly, 6-bagger later, Teladoc is today a $34 billion company, having recently announced its merger, emerging with Livongo Health, which was another winning Rule Breaker. These days, Teladoc is tipping the scales again at a market cap of $34 billion. When you think of all the companies out there with great tailwinds behind them and behind their business, I'm not going to say you could be an idiot and still do a good job as CEO, because I don't think that's true of a complicated platform like Teladoc, but as Warren Buffett once said, he loves companies where a monkey could manage that company or a total, he might even say, moron would, and he makes the joke, sure enough, at some point, somebody will, who's like that. When the business can still do well besides, he would've said Coca-Cola was that kind of a company, or maybe See's Candies. These kinds of companies have great tailwinds. Now, Buffett prefers companies with just one future, very predictable, GEICO.

Now, recently, certainly, Buffett has bought some Apple and has now a massive holding for them. But traditionally, Warren has looked for companies that are very predictable in the most wonderful and delightful way. Well, I love companies with technology-based tailwinds. You think about Teladoc in a pandemic world that wanted to go, and in many cases, needed to go to distance learning with your doctor, distance checking in telemedicine, a huge tailwind. We certainly had identified it years ago because we've held Teladoc stock for more than three years at a low cost basis. But again, that was then, this is now. For this five stock sampler going forward, none of the past matters, all that matters is what comes next, and Teladoc joins this five stock sampler as stock No. 5. Well, I was saying offline to my producer, Rick Engdahl, I probably won't do this anytime again soon, but I sure have had fun, as I hope you have as well.

Rolling up 10 out of the 230 stocks in my universe at random. One in 23.6 got randomly selected, and from those 10, those are my five best shots. If anybody wants to track the performance of the other five and see whether I beat that, I'll remind you, they were alphabetically. Abiomed, ticker symbol ABMD. I also did not select this time BMW, ticker symbol BMW. I've bypassed this particular five stock sampler. Corning, ticker symbol GLW. Finally, Gartner, ticker symbol IT, and Monster Beverage, ticker symbol MNST. Now, let's be clear, all 10 of these are active recommendations. I like all 10 of these companies, some clearly more than others, which is why I selected five for this sampler and didn't select the other five, but all of those are companies that I would recommend for your portfolio. In many cases, I own them too. From Five Stocks Shrouded in Mystery to Five Stocks that Spark Joy, we close up with the first ever, and maybe last ever, Five Stocks Rolled Up at Random. I'll be adding them to my spreadsheet, we will track them over the days, months, and years ahead. I'll report back a year from now on their progress. In the meantime, I am looking forward to our mailbag next week. I hope you had as much fun as I did this week. Fool on!

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Stocks Mentioned

Planet Fitness, Inc. Stock Quote
Planet Fitness, Inc.
$64.79 (2.10%) $1.33
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,096.25 (-1.09%) $-23.15
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$63.87 (-0.23%) $0.15, Inc. Stock Quote, Inc.
$2,127.01 (2.16%) $45.01
Zynga Inc. Stock Quote
Zynga Inc.
$8.18 (-2.04%) $0.17
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
$1,281.61 (1.18%) $14.97
Corning Incorporated Stock Quote
Corning Incorporated
$33.10 (-0.51%) $0.17
Tesla, Inc. Stock Quote
Tesla, Inc.
$660.00 (5.07%) $31.84
Starbucks Corporation Stock Quote
Starbucks Corporation
$72.29 (-0.59%) $0.43
Monster Beverage Corporation Stock Quote
Monster Beverage Corporation
$86.98 (-0.58%) $0.51
Kohl's Corporation Stock Quote
Kohl's Corporation
$41.15 (13.74%) $4.97
Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
$719.15 (2.76%) $19.30
IPG Photonics Corporation Stock Quote
IPG Photonics Corporation
$95.02 (0.00%) $0.00
ABIOMED, Inc. Stock Quote
$251.43 (0.90%) $2.23
Coherent, Inc. Stock Quote
Coherent, Inc.
$261.30 (-0.65%) $-1.71
Bayerische Motoren Werke Aktiengesellschaft Stock Quote
Bayerische Motoren Werke Aktiengesellschaft
$83.83 (0.76%) $0.64
Gartner, Inc. Stock Quote
Gartner, Inc.
$247.99 (-0.11%) $0.27
Carter's, Inc. Stock Quote
Carter's, Inc.
$75.64 (4.62%) $3.34
2U, Inc. Stock Quote
2U, Inc.
$8.87 (-16.32%) $-1.73
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,094.42 (-1.14%) $-24.10
Etsy, Inc. Stock Quote
Etsy, Inc.
$72.17 (2.79%) $1.96
Wingstop Stock Quote
$71.35 (3.33%) $2.30
SolarEdge Technologies, Inc. Stock Quote
SolarEdge Technologies, Inc.
$251.06 (1.14%) $2.83
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$31.27 (1.30%) $0.40
Lumentum Holdings Inc. Stock Quote
Lumentum Holdings Inc.
$83.92 (0.32%) $0.27
Atlassian Corporation Plc Stock Quote
Atlassian Corporation Plc
$169.18 (3.05%) $5.01
Sea Limited Stock Quote
Sea Limited
$76.81 (7.67%) $5.47

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

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