It is time again to review three of our five-stock samplers from the past three years: 5 Stocks That Will Press On, 5 Stocks for Conscious Capitalism, and 5 Stocks That Got Trouble.
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 Nov. 17, 2021.
David Gardner: Thirty separate times, about every 10 weeks on this podcast, over six years, I picked five stocks, I chose a theme that made sense to me at the time. Sometimes sublime, sometimes silly, and then I thought to myself, what are the five best stock recommendations that I can come up with to fit that theme. Aiming, of course, always to beat the market, the S&P 500. Otherwise, hey, why are we bothering? Then one year later, we review the picks, what was the theme again? How are the stocks doing? How are they doing versus the market and more important for our learning, our way of thinking, why have the stocks done what they've done? A one-year review, and then another year passes, the two-year review, two years later, we never forget, we hope you wouldn't also. We score everything transparently and accountably because we're Fools. You should expect that of us. Then the three-year review, which is going to be the most telling.
Well, first because three years have passed since I pick those five stocks, we really can be smarter about what has happened and why, and what we can learn over that meaningful period of time and that's the smarter part, getting smarter about that. But if I've done my job well-done, then hey, we'll also be happier and richer too. Now that three-year review is also telling because most of the time we end the game right there. We're going to keep holding those stocks in real life, mind you should too if you own them. But if I kept reviewing all 30 of my samplers in years four, and and, and six, etc., we wouldn't have time to do much else on this podcast. Well, 30 separate times I picked five stocks, well, I have also called my five-stock samplers and we're going to review three of those samplers this week. Five Stocks That Will Press On, Five Stocks for Conscious Capitalism, and Five Stocks That Got Trouble. Review them, we will, with my three analysts, my guest stars this week, Alicia Alfiere, Asit Sharma, and Yasser El-Shimy. Shall we get started? Let's go only on this week's Rule Breaker Investing.
Welcome back to Rule Breaker Investing. I'm excited this week to be reviewing how our five-stock samplers have done. It's a funny discipline being a stock picker. You would know this, too, I hope, dear listener and many of us do at The Motley Fool. I'm a big sports fan and when something amazing happens in sports, the feedback is instant. The crowd stands up and cheers. The athlete usually gets to do a dance depending on what sport we're talking about. Everybody celebrates, it's all over the news that night, highlights, final score we all know it. What you and I do fellow Fool as investors is the exact opposite. We take actions that we hope will win, that we think might be exciting but we don't know five seconds later if it worked. We don't know a day later. We don't know usually a year or two or three later if we did it right. Did it work? But when it does work, I do like to celebrate it because this is our moment. This is our time as non-athletes to do a little dance, to put some numbers up on the scoreboard, and to cheer and I'm really happy to say that this week with three more five-stock samplers being reviewed, stocks picked exactly one-year ago this week, two years ago this week, and three years ago this week. Well, we're going to do a lot of scoring and learning, especially about one of these samplers, the final one we review this week, because it is the final time that we will review it. Three years are up and so 5 Stocks That Got Trouble will be retired today for good. Of the 30 samplers I selected on this podcast, that sampler, the 16th, will head to Foolhalla.
The Valhalla where each of the sampler heroes, whether hero or goat, eventually retires yet Foolhalla, the honored hall, festive with mead to which all 30 of these samplers shall one day ascend. 5 Stocks That Got Trouble will arrive in Foolhalla at the end of this podcast to join its brethren and sistren, the 15 that have already gone before. But brief reflections on performance before we get started with the first of our five stock samplers. First, I would like to say that of the 16 that have ascended to Foolhalla, I'm really happy to say 14 of those 16 have beaten the market. Spoiler alert, I'm including the one that we send off to Foolhalla today so 14 of the 16 have beaten the market two did not, that's a hit rate. That's an accuracy that I cannot possibly maintain and that astonishes me, but it is all real and it did happen. Of those first 16 retired samplers, maybe even better, here's my favorite stat, nine of those 16 have actually returned 100% or more. Now that performance ain't too shabby given that most of these last for only about three years. Often a single stock can sink a group of five with a really bad performance. It's hard to maintain high-accuracy hit rate for these. It's even harder to maintain a triple-digit return rate but I'm really happy to say, well, it's happened 9 of the 16 times.
In fact, a little later this week, I think I'll tweet out the list of Foolhalla samplers. If you follow me on Twitter @DavidGFool, I will put out a graphic with the names of the 16 and the performances of each, including those two losers because yes, we're transparent and we publish all our losers as well. Anyway, let's cue it up here, in fact, let's crank up the wayback music machine right now because even though it was just a year ago, well, it's been quite a year and it was a year ago. Let's go back in time and start to reflect on the five stocks picked a year ago this week. [MUSIC]
Well, the day was Nov. 11, 2020. On that day because I keep a calendar of what I did every day for the last decade plus I can tell you that I just celebrated my wife's birthday the night before and we had one of those let's go to a restaurant. I know this sounds crazy in November of 2020, but let's sit outdoors. It'll be dark. It was cold. We're in Washington, D.C. in mid-November and yet I still remember the joy of having a few friends together all with masks, even outdoors, celebrating my wife's birthday. That's what I was coming off of as I picked 5 Stocks That Will Press On and joining me to cover these five stocks is my friend, Alicia Alfiere. Alicia, welcome back to Rule Breaker Investing.
Alicia Alfiere: Thanks, so glad to be here.
David Gardner: I'm just so glad to have you looking over these stocks because while it's one thing to pick them, the real work comes in doing some research about why they've done what they've done and this is a fun group of five stocks to look at. Alicia, 5 Stocks That Will Press On. Do you remember why we used that phrase or the theme not that you need to?
Alicia Alfiere: I do it was from Calvin Coolidge, "Nothing in the world can take the place of persistence" was the quote. The idea here is to press on through the good times, press on through the bad times, just keep going, keep trying, keep building, and keep growing.
David Gardner: Love it. There's an energizer bunny going on there that I truly appreciate and I'm so glad we use that theme because it did feel where I was spiritually and where a lot of us were in, not to say we are not still there, there's a lot of pressing on that still needs to happen as we enter this new year of 2022. It felt right at the time and I wanted to pick five stocks that really embody the companies that have been there or done that, been resilient through long periods of time. Those are five stocks that will press on. Now, we're about to start that review, Alicia, but I've got an icebreaker question for each of my analysts today. I guess, I'll answer it at some point myself. My question for you, Alicia, is, what is something remarkable about you that most people probably don't know?
Alicia Alfiere: I don't know if it's remarkable but I like to write and I've written a children's book for my nephew, unpublished of course [LAUGHTER] but I wrote it for him and it's called Larry the Left Sock. It's about a sock that looses his way. He separated from his other half, from his pack [LAUGHTER] and he learns to make friends.
David Gardner: That is wonderful because it's not published yet, you may not want to answer this question, but would you give us a little bit of a spoiler alert on the ending?
Alicia Alfiere: [LAUGHTER] Well, I will ruin the ending for you. After much priming and a lot of adventure he does meet up with his other half and the rest of his pack. Happy, I think.
David Gardner: That is delightful. It is a kid's story, but you know, we're all kids at heart. We like happy endings. That makes me feel whole that the left sock hangs out with the right sock somewhere [LAUGHTER] near the end. That's lovely. Thank you for sharing that, Alicia, and I hope that gets published one day and I know, in the meantime, your family's enjoying it, good for you.
Alicia Alfiere: Thank you.
David Gardner: Well, let's have a little talk about this set of five stocks that will press on. The first thing I always like to do is just mention how the stock market itself has done over the last year. I'll just emcee this. You'll be adding the intelligence, but I'll be talking numbers, Alicia and so here are the numbers. The facts are that since Nov. 11, 2020, through market close today we're recording at the end of the day, Tuesday, Nov. 16, 2021. The S&P 500 is up 31.6%. I say, wow, what a year for the market.
Alicia Alfiere: Agreed, incredible.
David Gardner: If we could have every year that the S&P would go up by about a third in value we would all be a lot richer than we even ever will be, no matter how well we do, because that is a remarkable year. That's the bogey, that is the goal that we're trying to beat with these five stocks, 31.6%. The company names alphabetically were the following: Canadian National Railway, Cirrus Logic, Ecolab, Old Dominion Freight Line, and Zebra Technologies, five stocks that will press on. We're not going to cover their individual stories again. I do encourage anybody to go back Google, five stocks that will press on and listen to the podcast a year ago to learn more about these companies. We're here more to account for them. Alicia, you're going to explain why the heck they've done what they've done. It is our tradition to start with the worst performer. Let's go to ticker symbol, CRUS. I am happy to say the worst performer is still up. It's up 5.2% as of market close today. Unfortunately, the market's up 31.6. We started in the hole about 26 percentage points. Alicia, what has or has not happened with Cirrus Logic?
Alicia Alfiere: First, let's talk about what Cirrus Logic is. It's a fabless semiconductor chip designer, which means they outsource their manufacturing. They're best known for audio and voice processing chips in smartphones. Let's talk about the big issues that they experienced. Like many in the semiconductor segment, they face supply chain issues, and as a result, demand outpaced supply. Also their largest customer is Apple and they supply iPhone's audio integrated circuits. But with that comes a seasonality because there's often a ramping up of components just ahead of new smartphone launches. But Cirrus has been working to grow beyond their audio domain. Even though they didn't quite beat the market, they've been moving, and growing, and pressing on. They're moving into their mixed-signal business, which supplies things like camera controllers, sensing chips, and fast charging components, and they've been making great progress here. Mixed signal revenues increased about 118% year over year for the first six months of their fiscal year. This diversified growth, along with seasonal demand from smartphone launches, drove revenue gains of 26% year over year for the first half of their 2022 fiscal year. This story about pushing forward isn't anywhere near, close to being finished.
David Gardner: It is somewhat ironic that we're talking about pressing on, it's just one year later. This is certainly too early to judge this sampler. That said a year counts. A lot has happened in the last year. It's interesting to see which ones are doing well and sometimes the ones that aren't doing as well, it's not even really their fault. The supply chain problems are affecting a lot of companies Cirrus Logic, as you mentioned Alicia. Do you own a smartphone? I got to believe the answer is yes. [LAUGHTER]
Alicia Alfiere: Yes, definitely.
David Gardner: Have you bought a new one within the last year or are you still using what you had 13 months ago?
Alicia Alfiere: I bought one just before the pandemic, so I have not. But my parents just bought some new phones.
David Gardner: Excellent. They're helping Cirrus Logic [LAUGHTER] in their own way a little bit. I have to admit the first seven or eight iPhones, I think I bought the new one each time, but somewhere around seven, eight, or nine, I start going, I don't need that. I can wait two years maybe for a second cycle. That's where I am now. But I'm definitely always looking to upgrade and I know Apple and Cirrus Logic benefit. Again, the market up, we'll round it to 32%, Cirrus Logic up 5% so it's in the hole. Let's go from the worst performer to the best performer. This is a little bit of a surprise. I think not all of us would think a trucking company would be up over 80% in the past year, but Old Dominion Freight Line, ticker symbol ODFL is up from a $198 a share a year ago to $361 today, that's 82.5%. That's basically 51 percentage points on the market averages. Alicia, what is going so well for Old Dominion Freight Line?
Alicia Alfiere: Before we dive in, I just want to say Old Dominion delivers less than a truckload of goods to destinations throughout the continental U.S., Mexico, and Canada. For the first nine months of the year, revenues were up almost 31% year over year and that's due to strong domestic economy and massive demand for their services, but they've had challenges, too. The interesting thing here is how they've pushed through them. We know that a shortage of truck drivers has been an issue in the supply chain. Old Dominion has increased starting salaries, giving signing bonus to attract employees. They've also use third parties to supplement some of the capacity challenges that they've had for both people and their fleet. But they plan on reducing their reliance on these third parties as they continue to hire people, and as they receive their new or replacement equipment.
David Gardner: That's great. First of all, it's $41 billion company today. I recognize Old Dominion Freight Line because when I'm watching Major League Baseball in the post season, I'm seeing their brand up there. They are a partner of Major League Baseball. Some of us may have got another brand that way, but I think a lot of people probably still unaided wouldn't be able to identify Old Dominion Freight Line which is based in the State of Southern Virginia, much about the company, but it has a remarkable history and I do appreciate Alicia, how you are underlying the pressing on, push on nature of each of these companies speaking to, of course, to our theme.
When we think about trucks, we are often hearing that there's a shortage of truck drivers, but then other people say there's not really a shortage of truck drivers. But one thing is, for sure the difficulty of what Old Dominion Freight Line does far exceeds many of its peers in the industry. You mentioned that less than truckload logistics capability, this company, it really does focus on making multiple deliveries. You're filling up the back of the truck, not just with one good going from one Point A to one Point B. No, you're filling it up with eight different things going to eight different points. In a lot of ways, technology is what enables Old Dominion Freight Line to make these multiple deliveries in a way that raises their margins and the difficulty of competing with them because they're so doggone good at LTL trucking. Really like this company, Alicia, I know we're delighted. This is a Stock Advisor pick of some vintage. Keeps speeding the market, not just for Motley Fool Stock advisor members, but if you look at the history of this company, it's been resilient pressing on and winning for decades. Delighted that this one is the top performer, one year later. That leaves us with three others and I always leave it to my analysts to pick and choose what they want to speak to. Let's talk about just the performance of the three others. We have two other losers, Ecolab and Canadian National Railway unable to keep up with that 32 percentage point boost in the S&P 500. Trucks, I guess move faster than trains, at least they have from an investment return standpoint. But Canadian National up 19%, Ecolab up 11%, so distantly behind the S&P 500. Do you want to say anything about them or about the one other winner here, Alicia, Zebra Technologies up 70% against the market averages?
Alicia Alfiere: If I could, I would love to talk about Zebra.
David Gardner: I would love you to do so. In fact, I do think focusing on what's winning is probably a better use of our time in general than what's losing. We always show all our losers and three of these five stocks are losing to the market after our first year, but I think often we can learn from what's working and build on that success in our portfolio. What is working, I'm going to ask, at Zebra Tech?
Alicia Alfiere: Sure. First, let's talk about what Zebra does. Zebra might make you think of bar codes and you'd be half right. Bar codes and other products that Zebra designs like scanners, mobile computing devices, and real-time locating systems are used in asset tracking. Most of 2020 was challenging for Zebra, but that turned around in the fourth quarter of 2020, as many businesses that had closed or paused in the middle of the year due to COVID started to really come back. This year, Zebra has shown growth with revenues increasing 32% year over year for the first nine months of 2021. That was driven by broad-based demand as more and more businesses digitize, optimize, and automate workflows. Zebra actually believes the pandemic accelerated a lot of the trends that are beneficial to their business, like the desire to track data across the all important supply chain.
David Gardner: Really well said, and you're right. The supply chain, which is all important. We're all realizing that now toward the end of 2021. There are other important things, too, but while some of us were probably underrating the importance of logistics and supply chains, but Zebra that's their business.
I'm delighted to know that this leader in its field continues not just to win as a business, you mentioned that 32% revenue gain, but the market was up 32%, speaking of 32 over the last year and Zebra stock up 70%. Let's do the final accounting for this first year review of this first five-stock sampler.
Alicia, 5 Stocks That Will Press On one year later up 37.6% as a group averaging their five gains together. That's against the market's 31.6%. We are ahead pressing on, ahead of the market by 6.0 percentage points per stock one year later. Instructive to note that actually only two of the five is actually beating the market. But sometimes that one winner or those two big winners can just pull everybody up forward. A great lesson we're always reteaching here at Rule Breaker Investing.
Alicia, I want to thank you very much for throwing some intelligence out our way. When another year passes, let's talk about this together. In Year 2, I'll be really curious to see what happens with the supply chain, which really does affect, think about the trucks and the trains that are in this five-stock sampler and then Cirrus and Zebra affected by it. Everything is tied together, everything is connected. I'm always reminded that whenever I look at one company, I start to realize, well, actually that company is dependent on these other factors, some of which are other companies we could research, others are factors they can't even control. We're all just sometimes getting wagged by the tail of whatever happened in the last 12 months. Alicia Alfiere, thank you for joining me. See you soon.
Alicia Alfiere: Thanks for having me. Bye.
David Gardner: One down, two to go. The next five-stock sampler was picked, well, one year ago before that, or two years ago this week. I think we need to go even farther back, Rick Engdahl, into time.
[MUSIC] In fact, the day was Nov. 13 of 2019. What was I doing that week? This time every year for years now we've done our all-company off-site which we call Foolapalooza. It's a celebration of the year that was and a reconnection point. A lot of us, especially these days, aren't seeing each other that often. But even back in 2019, I was playing golf that week at Foolapalooza with an Australian Fool and a Colorado Fool. Even before pandemic, we were reconnecting or in some cases connecting for the first time at Foolapalooza.
Ironically, although maybe not, that's what we're about to do this week. After I do this podcast, we'll be celebrating Foolapalooza at The Motley Fool this week, virtually, sadly, still. I will point out that was my last round of golf. I haven't played any golf in a couple of years which just means a, I'm not a very good golfer and b, I probably should get back out and play golf at some point but shout out to my Australian friend, Aaron Shaw and my Colorado friend, Matt Ellis. We had a lot of fun that threesome two years ago. But also happened in that week was 5 Stocks for Conscious Capitalism and I want to welcome my friend Asit Sharma, a longtime Motley Fool contributor, a fellow Tarheel and Asit, your debut here on Rule Breaker Investing, I'm just delighted to have you with me.
Asit Sharma: Same, David. I'm thrilled to be with you today.
David Gardner: Thank you. Do you remember what you were doing two years ago this week? Why would you? I need to look at my calendar to know. This is an unfair question.
Asit Sharma: I'm sure that I was walking somewhere on a sidewalk around this time of year. I take a mini-assessment of where the year has gone and I either finish with a big smile on my face, it's been a good year. I've achieved something of what I set out to do or a slight frown like I got to do better. [LAUGHTER] Somewhere in there, [LAUGHTER] that week, there was a walk in the woods where I was trying to take stock of my life.
David Gardner: Good for you. You're reminding me how much deeper I could be as a person if I just spend a little bit of time reflecting a little bit more often but thank you Asit for sharing that. Speaking of questions where I'd like you to share a little bit more, I think you know the icebreaker question this particular week on Rule Breaker Investing, I asked Alicia, I will ask you. Asit Sharma, what is something remarkable about you that most people probably don't know?
Asit Sharma: David, there is one thing I don't know if it qualifies as remarkable but it is different about me. I have been experimenting with a pasta sauce for, I would say the last 30 years. I'm trying to find the right combination of just a wonderful Italian red tomato, fresh tomato taste combined with an Indian curry taste. The working title is Red Raja. That has to be like colonial connotation, so that's not going to be the actual name when I finally put this in the stores. [LAUGHTER] But I'm forever working on this recipe. Every few months I come back to it and serve it up to my family and they give me some pointers.
David Gardner: Wow. A lot of people are hearing that for the very first time right now on this podcast and probably you'd have some buyers. If you want to set up stand up, a quick URL Red Raja, you may not want to go there.com, although it is alliterative which can be winning from a brand standpoint but Asit I have to admit, my mouth is slightly watering now as a consequence of you simply saying that on this podcast.
Asit Sharma: Glad that I could make you hungry, David. [LAUGHTER].
David Gardner: Well, speaking of mouth-watering, this is a really bad transition. Let's look at how the stock market has done over the last two years. I'm delighted to say that the stock market over the last two years is up 51.8% from Nov. 13, 2019, to the day we are recording here, Tuesday, Nov. 16. Let's just start with wow. Asit, were you expecting the market two years ago to go up 52%, by the way, including a global pandemic nobody really knew about two years later?
Asit Sharma: Yeah. This is something that was unexpected to me but I have a terrible track record with this kind of thing. I waited after the 2008, 2009 great recession period for the market to implode again before it started going up and it showed me that the market is going to do what it wants to do. I can only try to find great companies to ride along whatever the wave is. Eventually, they'll do well, hopefully.
David Gardner: Really well said Asit and you're reminding me of one of the core tenants of Foolishness which is that we're focusing on the companies, not on the market. We're thinking about being a part-owner of one of these five stocks or maybe all five of them, I'm about to say their names but we're focused on the companies and what they do and thinking that over the long term we're going to win. Let's see if we did with 5 Stocks for Conscious Capitalism.
Now, insert mini stump speech about Conscious Capitalism and its for tenants, except I've done that before in this podcast and anybody can and should google the phrase Conscious Capitalism. If you don't know about companies that have a higher purpose, above profits, that are trying to win for all stakeholders, not just one group that embody conscious leadership which I often think of as servant leadership. Finally, the fourth tenant that have conscious cultures, that have cultures that have been created, crafted, done intentionally to make these great places to work. So many of these companies that embody Conscious Capitalism are the employers that everybody would love to work for because the culture counts and it's well-tended by good leadership. Five stocks for Conscious Capitalism.
Now Asit, what you might think is consciously capitalistic might differ from me. There's no ESG litmus test that says this one is great at it and this one's not. A lot of its beauty's in the eye of the beholder which I think is just a fundamental truism in life. These were the five that I identified five years ago as stocks for Conscious Capitalism.
Alphabetically by company name, Ecolab. Did I just say the name of a stock that we reviewed with Alicia that had lost to the market? Let me keep going. The second is Etsy, the third is NextEra Energy. The fourth stock is Old Dominion Freight Line and the fifth and final stock for Conscious Capitalism from two years ago this week was Salesforce.com. Asit, let's take it in our traditional order. The first one we're going to cover is the biggest loser in this group and the market is up 52% in the last two years, Ecolab ticker symbol ECL is up just 23%. We're sitting 29 percentage points behind the market, as we cover this first stock. Asit, I don't know how often you try to recycle or clean up your neighborhood or notice trucks going around, whether it's waste management or Ecolab cleaning up hospitals but I like these businesses that try to clean up our world.
Asit Sharma: I agree, David. I think with Ecolab, you have a company that in terms of purpose, is beating the market handily over the last few years. But we have to remember you created this stock sampler just before COVID-19 hit. Different companies responded in different ways somewhere, just set to prosper, others were set to get walloped by the pandemic. Ecolab was set to have a wash, in my opinion, looking over what happened with them. Of course, they work in water purification, hygiene, infection prevention solutions, all industrial treatments, even rodent control and these are widespread businesses trying to clean up the world, as you say. But they had parts of their business that were flying high during the pandemic sanitation, working with hygiene for hands.
These are in their health and life sciences segments but they had other revenue streams that are dependent on businesses being open like supplying commercial laundries to hotels or supplying sanitizers to quick-service restaurants that may have been temporarily closed during the pandemic. You would think, after the pandemic, maybe now the market is going to recognize the strength of this company but of course, now, life sciences and health is facing very hard comparisons over all the momentum they gained last year and then the industrial segments are in turn, they're starting to rise. It's almost like the strength and resilience of this business, the diversity of the revenue streams is temporarily working against it. But I like the characteristics that I see in the Ecolab and I like their capital allocation. I'll pause here to get your thoughts and maybe talk a little bit more about that capital allocation.
David Gardner: Well, thank you very much, Asit. This is not a company that I study or I have followed very carefully. I tend to know my internet companies. I tend to know my entertainment companies, whether it's streaming or video games. But I think I have always not tried to be shy about picking companies outside of my real core competency because otherwise we never would have had Intuitive Surgical, let's say or Ecolab, although it's a loser right now. No, I can't say that I have any particular insights about their capital allocation any more so than the next common Fool, I will say though, that we've seen this dynamic play out with other peer companies. Waste Management is another leader in this clean-up the world. Waste Management has also underperformed. The irony for Ecolab and for Waste Management is they're underperforming because there's not enough waste being generated because we're not all out there wasting stuff, so that's a little bit ironic to me but that's about all I have to offer. What more do you want to say about Ecolab?
Asit Sharma: Yeah. I think that this company has some really fun characteristics. It grows at a decent rate and turns out net profit, usually in maybe the 8-10% range which is not bad as a percentage of revenue and over time they've built up a pretty strong balance sheet. What do you do with that when the market is ignoring your potential? Oftentimes, if a company goes out and makes a big acquisition that's seen as a negative, why aren't they generating that growth organically? But I like it here. One example, Ecolab announced, I think last month that they're going to acquire a company called Purolite which works in, so listen to this David, high-end ion-exchange resins for the separation and purification solutions industry. This is something I like. They're investing in higher-end tech but it's the same mission to clean up the world working in purification, working in the tough stuff.
They're doing this transaction which is close to four billion bucks with a little bit of cash on their balance sheet but because that balance sheet is in such great shape, money is cheap. They're going to finance the brunt of that. This is a signal to the market that we're going to keep doing what we're good at and at some point in time, maybe it'll help to pay attention to us again. I think that growth prospects will improve because of this. Now, how much? I don't know, I'm not an expert in this field but it did catch my eyes. I think for those who are interested in this company, maybe do some due diligence could be a buying opportunity at this point.
David Gardner: Thank you for that. It is an underperformer up 23 percentage points. Again, the market up 52 points and yet I think it's a wonderful company. It's been around for a long time. It will be around for a long time doing some important good stuff in this world. We don't always win with them in the near term but I'd like to think this one will press on. We shall see. Asit, let's move from the worst performer to the best performer. We have a pretty good story to tell here with Etsy. Etsy, a stock I've talked about a lot over the years, picked multiple times in Rule Breakers, built a little bit of our market cap game show around Etsy. It has some history there for a long time, listeners who would know what I'm talking about. Two years ago, the stock was at $40.68 the day after this podcast. Today, it's gone from $41 to $286. It's up 605%. That on its own, is going to ensure that this five-stock sampler, not just beats but crushes the market, I think so. Six hundred and five percent points against 52, we are way, way up when we factor in Etsy. Asit, would you consider maybe selling your red pasta sauce one day on Etsy? A lot of homebrew, a lot of craftspeople use it as a platform to create value buyers and sellers. Anyway, it's been a wonderful winter. What do you think of Etsy?
Asit Sharma: I would consider that David, I think there's something about this brand which is so powerful. Etsy from the start focused on artisans. They weren't out trying to ramp up and take on Amazon. They have their own niche. It was great to see in the early days how much they focused on this global distribution, trying to help out even small entrepreneurs in Africa and other regions which aren't as economically developed as the U.S. I've always admired that about them. What I really like about Etsy is that it's a platform business. Its economics look really nice on paper, they don't hold the inventory, they're the middleman for transactions, so you combined a great business characteristics with a model that so many people appreciate that's doing good in the world. It's an investment you can just feel great about it. Not just because it's mission-oriented, but because the stock has performed so well.
I think there are a few businesses that characterize this intersection of great business performance, stock performance, and socially conscious values. I will agree with something you said earlier. It means something different to everyone when you talked about ESG principles and I haven't found a company yet that ticks off every last box for me, and I find that sometimes you have to concentrate on the really strong characteristics. Etsy has that in spades, just in the mission that it promotes through the world, and the fact that it helps people move away, maybe from work that they don't want to be in, and they can sell a product or work on their hobby or craft where their passion lies and make a living out of that; they've paved the way there. Last thing I'll say about this briefly, as I love their use of technology, they are really great at working on their product pages, making it easier for buyers to find what they want, making it easier for sellers to sell. They just work on the basic, it's that basic blocking and tackling, which is a characteristic of super strong businesses. Hard to say right now much that's had a potency.
David Gardner: Thank you for that analysis, and that look back, I'm curious, Asit, do you think that this company has been accelerated by the global pandemic, is that something that has contributed to the seven-bagger that the stock represents two years later?
Asit Sharma: I think it has David. But it's interesting there are some competing platform businesses, I don't mean competing in a sense that they go head-to-head with Etsy, but they compete for your and my personal capital. Pinterest is one. They also had a lot of pull-through during COVID, but they're not seeing this type of follow-on effect that Etsy is. I think that COVID was an accelerant, but it brought forth the characteristics that so many people in the investment community admire about that. Its ability to continually attract new users, its rising metrics and engagement. The fact that the company has the seamless, almost Shopify-like quality store that you can partake in with really easy-to-use tools. I think the strengths have been highlighted and the acceleration is, looks like it's here to stay even [LAUGHTER] when you pull out their mass revenue, which they still have a lot of. It looks like a strong business underneath.
David Gardner: One day, maybe a purveyor of an amazing combination of tomato and curry for my pasta. I'm looking forward to that and I don't know if you're making an official announcement on this week's podcasts or not, Asit are you? Is it going to be available on Etsy?
Asit Sharma: I must disappoint my future [LAUGHTER] purchasers and say that I'm so busy with great, Foolish stuff now. It's going to be years, and besides I have been working on this recipe for 30-some years. That's a bad signal, David. That doesn't mean it's going to hit the shelves next week.
David Gardner: Before we look at the other three stocks, briefly, I want to mention Asit you've been doing a great job on Motley Fool Live. A lot of Motley Fool members know that they can find you and see you on what I've called the television channel on our website, whether it's the Backstage Pass for a lot of Motley Fool members or more broadly, sometimes "Morning Show" or other contributions in the morninglive.fool.com/backstagepass at The Motley Fool. That's how a lot of us have got to know Asit and many others a lot better. A lot of our analysts starring on that TV channel on our website. Before we move on Asit, thank you for all the time you've put in to educate so many of us, me included.
Asit Sharma: David, thanks for the opportunity. Most of all, it's been so great to exchange ideas with other analysts and just take our business relationships to a whole other level with a great audience, we learned so much from our audience. The interaction on that is wonderful for whoever is subscribing hasn't checked it out. Go to Live. Go to our Backstage. If you subscribe to one of these products.
David Gardner: Yeah, it's like CNBC except we actually think long-term and we're interactive and I think we're a little bit more fun, too. But anyway, thank you Asit. Let's take a quick look at the three other stocks in this sampler and you tell me which one jumps out to you from the ones we haven't talked about yet. NextEra Energy, Old Dominion Freight Line, and Salesforce. By the way, I'll mention all three of them are beating the market. NextEra Energy is basically one percentage point ahead, it's up 53%. Whereas, Old Dominion Freight Line has more than doubled up 179%. Salesforce somewhere in between those two. What jumps out to you Asit among these three?
Asit Sharma: I love all of these businesses. I think though I am focusing on Old Dominion Freight Line. This is a smallish company which has very family-oriented approach to its employees. The less than truckload freight industry is a really difficult one to operate under. You've got regulation that's always there, there's a chronic shortage of drivers, technology is everchanging. You have to intersect with modal transportation, so think trains, all types of different ways and modes of shipping. But this company manages to increase its results quarter after quarter. I think it's because they focus so much on their people. I was just reading through some reviews on the site, glassdoor.com where you can see how public companies and some private ones, too, are rated by employees. I love the comments by truckers that talk about the decent hours, their belief in management, how friendly their other team members are compared to other trucking companies. This part of the freight industry is cutthroat, and I think this is a prime example of where focusing on people produces financial results that are persuasive and shareholders recognize this. The stock has performed well because of this. You need to have extremely good management skills in a business like this. It's not only about the purchases of trucks, the control of fuel costs, the investment in platforms to match up this less than truckload world of pulling in all kinds of heterogeneous freight and then shipping it back out. I think to me what stands out is that the people aspect, the employee-oriented aspect of the business.
David Gardner: Yeah, I totally agree. That's the thing, as you mentioned, happens probably more likely, more often at family oriented multi-generational family commerce. I think human capital to use rather a cold phrase for you and me. I think that human capital is better managed, often, more lovingly cared for in these longer-term businesses. That's part of the Conscious Capitalism that I see in Old Dominion Freight Line. Well, let's go to the bottom line for this five-stock sampler. Again, we're two years in, so we have another year to see how five stocks for Conscious Capitalism will go. I will mention I'm on the board of the national entity Conscious Capitalism. When I picked these stocks two years ago, I was like, I hope this one does well, otherwise it will make this, it's not really fair to take five stocks and judge somebody, but if they did poorly, maybe there wouldn't be as many Conscious Capitalism fans. While I'm delighted to say with the market up 51.8% over the last two years, as a group, these stocks average a gain of 189.5%. We are up triple-digits on the S&P 500, just two years in with five stocks for Conscious Capitalism.
I couldn't have hoped for any better. I couldn't even hope for half that good. But Etsy being a seven-bagger, has really powered this group of stocks and Asit I want to thank you very much for that thoughtful review of these five companies. This is the first time you've been on this podcast. There will be a next time soon again. Because I really appreciate your spirit and the intelligence that you bring, and I'm hoping this gets me a free bottle of I don't know, pasta sauce someday.
Asit Sharma: Just watch your mailbox. [LAUGHTER] Again it could be years. Really don't watch that mailbox. One day, a surprise in your mail box. Thanks so much David.
David Gardner: Yes. Thank you so much and Fool on my friend.
Asit Sharma: Fool on.
David Gardner: Well, two down and one to go. Did we save the best for last? Well, let's find out. [MUSIC] The day was Nov. 14, 2018. I went back and checked my calendar. Yeah. That particular week, let's see I had a game night with my friends, back when we did game nights together in person. I went to a campaign supper for the Folger Shakespeare Library, which is a great asset in Washington, D.C. The most amazing collection of Shakespeareana in the entire world. The majority of First Folio's that still exist today are at the Folger Shakespeare Library. There's a little bit of Chamber of Commerce tour guiding on my part, bragging about something whose board I served on for many years. Anyway, motley week, but in addition to those things, it was time to pick some stocks, 5 Stocks That Got Trouble. Here to discuss them and educate us about these five companies that have what's happened over these three years, my friend, Yasser El-Shimy. Yasser, welcome back to Rule Breaker Investing.
Yasser El-Shimy: Thank you, David, happy to be here.
David Gardner: Delighted to have you back. The question I've been asking my guest this week, I'm going to ask of you, too, I'm really curious because you've lead such an interesting life Yasser, I'm really curious what you're going to answer to this question. Yasser El-Shimy, what is something remarkable about you that most people probably don't know?
Yasser El-Shimy: Well, if I was to name one thing, it would probably be the fact that I did not speak a word of English until I went to college. I learned English in college. In fact, I have almost completely Arabic education and going through primary, middle, and elementary school. Then I went to an English language-only university of the American University in Cairo. There I was actually forced to just learn on the go and started learning economics in English, and psychology in English, and political science which is eventually what my major was. That's probably one thing people don't know about me.
David Gardner: That is remarkable and I shouldn't not have known that about you, Yasser. One thing I do know about you and the way you and I first got to know each other is that you started taking a real shine to investing and the possibility like you're doing right now of sharing your thoughts and insights with people who want to learn more about the world of investing, want to make better decisions with their money, and you did that despite your public policy background, you transitioned to Georgetown University's business school and you started coming to Conscious Capitalism conferences here in Washington, D.C. That's how you and I met. I'm mentioning that in particular because I just did five stocks for Conscious Capitalism with us, but thank you for that as well, Yasser, and for all you're doing for us at the Fool.
Yasser El-Shimy: No thank you, David, for all the work you are doing on Conscious Capitalism.
David Gardner: You're so welcome. Now, I know I'm thanking you, but I almost need to not thank you briefly because you're about to talk about the worst performer and I never like to lose. I hate talking about my losers, but I invite you on in part to do that. So I'm not really going to thank you for analyzing what has gone wrong with the worst of these five stocks. But before we start that, let me mention 5 Stocks That Got Trouble, which is headed to Foolhalla at the end of this podcast, were five companies, all of which I think it declined 20% or more very recently, back in November 2018. Now, old hands have been following the market for years. may remember, Yasser, you do too. That the fourth quarter of 2018 was a really bad time for stocks. I think you took the time to listen to that podcast three years ago. Thank you, sir. You told me before you came on that my own portfolio, as I mentioned to everybody at the time on the podcast was down more than 20% that quarter. I think I guess I was looking for things that had some trouble because it was troubled waters for the stock market.
Yasser El-Shimy: That's absolutely correct. This is one thing that we talk a lot about at The Motley Fool, which is the need and the importance of holding through thick and thin. We try and be long-term investors, we're minded toward the big picture. We're not easily swayed by volatility and we do not let the market dictate our investing decisions. So when some people head for the hills, when they see a 20% drawdown on their portfolio, we start getting a little adventurous and say, what can I add maybe there are some winners that would like to build up the position split for. Again, you played a big role on articulating this kind of long-term-oriented investing mentality, and this portfolio is the best example of that.
David Gardner: Thank you. speaking of this portfolio which has survived through thick and thin, two words, by the way, that start with the letter T. That's another thing that united this five-stock sampler. Having a little bit of fun, all five companies start with the letter T. Stocks that got trouble, like trouble in River City for those who know the music man. Here are the five company names. 2U, Take-Two Interactive, Teladoc, The Trade Desk, and Trex. So those are the five companies. I should mention, how has the stock market done over these three years through last Friday when this one ended for good and went to full. While the stock market over those three years up 72.9%, which is a pretty great three years. I would love it if the market will go up 73% more over the next three years, I doubt that will probably happen. It's not a safe bet, any three-year period. But well, Yasser, to see how well the market's done, it's a little intimidating when you're picking stocks needing to outperform that in a three-year period. So let's start with the worst performer and it's not even close. In fact, spoiler alert four of the five are beating the market. But that's not true of 2U, ticker symbol T-W-O-U. 2U, Yasser was at 52, three years ago. It's now around 26. It's down. It's just about been cut in half. When the market is up 73%, that puts you 120 percentage points or so behind the market averages. What has been happening with 2U?
Yasser El-Shimy: I know what a [inaudible 00:48:47] has been almost losing half its value over the three years. So 2U for those who don't know is an online degree marketing company that has been trying to [inaudible 00:48:59] higher education effectively by making it easier for students to sign up for online degrees, like masters degrees, and PhDs and so on. They design curricula and programs alongside universities. They market them to potential students, and then they take a percentage of the tuition revenue that the students pay over time. Their clients include very reputable universities, including my alma mater, Georgetown University, and your alma mater David, UNC Chapel Hill. I think there was definitely a lot of good ideas behind their recommendation of 2U when you made it for Rule Breakers and then when you selected it for this five-stock sampler. Now, when COVID-19 hit and campuses across the world shut down, online education are the companies that make it possible we're seeing as big winners, potentially of a presumed generational shift away from in-person attendance toward virtual education. But the story did not pan out exactly as predicted. As we actually saw from the recent quarterly earnings of another online education company, Chegg, the sky has not been so blue in that market this year. Students are back on campuses and revenue growth is dramatically slowing down against comps from a pandemic year, 2U has not been immune to these headwinds.
David Gardner: Thank you for that. That is a good broad stroke view, the long view of what's been happening. I mean, I still appreciate what this company is doing. It's definitely trying to transition ultimately toward a hybrid model. We've done a lot of hybrid work. Hybrid education maybe doesn't work quite as well though sometimes as hybrid work, can, everything is contextual. There's no real broad-brush answer I ultimately can give to whether this makes sense or not. Well, I'll figure out in the years ahead. But one thing is for sure this stock has been a dog over the last three years. Anytime you are cutting in half with the market up 73 percent, let's not mince our words that is huge under performance at a real disappointment. So let's go from the disappointment of 2U, Yasser, to the best performer here a lot of us follow The Trade Desk and when the market closed last Friday, the stock crusted $100 a share. It was at 100.33. So that's the closing price for Trade Desk for this sampler. The good news is three years ago this week it was $11 and 65 cents. It's up 761 percent, not to overstate the short-term too much, but even just a few days after last Friday, as we're recording today, the stock is at a 111, up another 10 percent or so, in just the first few days this week, Yasser, it has been a spectacular performer. It's also been a very volatile three years. What is your take on ticker symbol T-T-D, The Trade Desk?
Yasser El-Shimy: What an impressive performance this has been and just to circle back to something you try and repeat all the time on your podcast, which is the idea that you can lose up to 100 percent of your capital on this talk, which is rare. But it can happen. However, the gains are uncapped. There is no limit on how much that stock can go up. In this case, we have stock in The Trade Desk that has 8Xed over three years. That's just an incredible performance. This company has almost single-handedly reinvented the programmatic advertising space. Providing an online marketplace where sellers and buyers of digital ads can match their needs and prices. They take a very profitable cut on each of the transactions that happen on that marketplace. Now this talk was punished for a while by changes to privacy settings from Apple where they did not allow apps to track user behavior on the iPhone. Alphabet also announced that it would discontinue cookies on their Chrome web browsers, which allowed advertisers to track the habits of browsers as they did so in real-time. Now, nonetheless, founder and CEO, Jeff Green, who's the visionary founder at this Company, maintained all along, that they have built a new system to improve app targeting without the need for cookies or app tracking on iPhones, of course, the market ridiculed that, that will just simply almost ludicrous idea to entertain that you could do without cookies or iPhone app tracking, especially with companies like Snapchat reporting dramatic declines in ad revenue due to these Privacy Setting changes. The Trade Desk did seem for a while like it was in trouble, but in fact, the joke was on the street. The Trade desk reported very impressive results this quarter, with revenue increasing by 39 percent year-over-year. In fact, it could be seen as 47 percent increase if we exclude the impact of presidential election ad spend from last year. The companies also reported very robust profitability numbers that beat expectations. Jeff Green effectively hailed this new digital ads paradigm, called UID2 to end the reliance on what he called walled gardens of Apple and Google. He suggested that UID2 is in fact more accurate than cookies. Maybe he's onto something here because I see this quarter as potentially breakthrough moment for The Trade Desk and its clients. I mean, The Trade Desk is growing faster than the digital ad market overall, despite its big size and it's taking market share from competitors. This is why winners win, David.
David Gardner: Thank you for that analysis. This has been a remarkable stock in one of the things I really love about The Trade Desk is my brother Tom has recommended it, I have recommended it. We've done it across multiple services, multiple times. This is a stock. If you're a Motley Fool member, listener, follower, fan, you can't have missed The Trade Desk. We've really underlined this one like Shopify and a few others. I just love how many of our members and listeners likely have participated in this prosperity. As you said, it is in fact an eight-bagger. It's up 761 percent versus the market's rounding 73 percent. A huge winner that's going to power this particular sampler to glory as it gets ready to ascend to Foolhalla. Rick Engdahl, a quick audio reminder of where we're headed. [MUSIC] Before we go to the other three, briefly, I do want to mention, is it an interesting the two real power performers for the last two samplers we've talked about this week are companies that unite buyers and sellers. Whether it was Etsy an e-commerce framework earlier or as you just mentioned, that's exactly what The Trade Desk is. A middleman platform enabling people to get their work done. They're not the buyer, they're not the seller, they're the platform. Look at these multibaggers for these companies. By the way, I won't speak for you, Yasser, but I love these companies going forward. We're looking backwards, of course, because that's what we do for a Reviewapalooza episode, see how they've done. But every one of these stocks, including the losers, remains an active recommendation going forward. I hope, keep multiplying our returns anyway that buyers and sellers, when you said that earlier, Yasser, you reminded me that's true. The Trade Desk, true any other great companies as well, let's take a quick look at the three other stocks in the sampler before we say goodbye. Really happy to say we have another multibagger here because Trex ticker symbol T-R-E-X is up 339 percent over the last three years. The composite outdoor decking company, speaking of seemingly boring stocks that are four-baggers, what a wonderful women winter that's been Teladoc, which has been such a fascinating story, has lost a lot of value over the last six months and yet still remains more than a double for this sampler. Take-Two Interactive just points ahead at 76 percent returns, just a few percentage points ahead of the S&P. But of those three, Yasser, which one do you want to pick out and say something about?
Yasser El-Shimy: Sure. Let's talk about Take-Two, which was the last time you just mentioned. Now, Take-Two Interactive has almost matched the performance of the S&P 500 over the past three years. But I believe as you said, we're looking forward. We're not looking backwards. I believe this is a business that should continue to benefit from secular tailwinds, not only in-gaming, but also in the metaverse. Now metaverses that buzzware that everybody is talking about it now.
David Gardner: We had to use it on the show, Yasser.
Yasser El-Shimy: Of course.
David Gardner: We're required to say at least once a month and you've just done it on this podcast. Thank you.
Yasser El-Shimy: Exactly. I would've been fired if I talked about the Composite Decking Company, that is Trex. But by the way, that has been a great performance in a lot of investors talking about Trex. But that's why you're early David and you are right. This has been just a great performer. Now Take-Two, should continue to benefit from these secular tailwinds, as I said, they have probably some of the world's most popular metaverse like franchises in Grand Theft Auto and Red Dead Redemption. By the way, I was a big Red Dead Redemption fan when it first came out and played it for a couple of years.
David Gardner: Me to thank you, sir love that, and Red Dead Redemption 2, which is a very worthy sequel.
Yasser El-Shimy: I have had kids since David [LAUGHTER] I haven't been able to play Red Dead Redemption 2. Take-Two Interactive has been hit hard, just like the rest of video games studios by pandemic induced production delays. All of the big studios, if you will, have, had issues getting their titles out in time to meet first of all, the demand, but also just the logistics of being able to finish producing these titles. This has negatively impacted the stock, but this is a temporary setback in my view, and this company should continue to prosper long term with such strong brand franchises here.
David Gardner: Thank you for that, this is a company I love as a fellow video gamer who has older kids so I can game, again, I totally respect where you are Yasser younger kids. You probably should be being a good dad to them and not playing cowboy [LAUGHTER] on your home theater system as I do. But let me mention about Take-Two Interactive. This is I'm glad you mentioned long-term, and here we are with a three-year sampler. It was at a 106.5, three years ago, it's 187 today, 76 percent gain a little bit ahead of our strong market. But this is a stock we've had in Motley Fool Rule Breaker since September 2007. That really is the long game that we're playing. Our cost of $16.93 has been pretty great against the beginning up to a 187 over a much more meaningful period, in this case, 14 years on the way to a 10 bagger. I really like you, I like this business going forward. Metaverse, there I said the second time catching but more seriously, really an interesting company. One of the four of the five in this sampler that did beat the market some spectacularly well. Yasser, I don't know if it's just that you're good luck or a good guy. But in either case or both, let's talk about how this one did, as we said it off to Foolhalla. [MUSIC] These five stocks taken all-in-all, compared against a market average of 72.9 percent over these three years, closed out last Friday with a total average gain per stock of 253.2 percent. That makes it a huge triple-digit winner in the plus column, and this case, more than a three-bagger as a basket of five stocks beating the market by a 180 percentage points. This was a fun review a palooza to do not just because we had winning numbers, but because the companies themselves are so interesting as are my very interesting analysts, Yasser, I am scratching my head to think, you just learned English in college wow. Eloquent and so well educated and so Foolish, Yasser El-Shimy, thank you so much for joining me on this week's Rule Breaker Investing.
Yasser El-Shimy: Thank you always a pressure
David Gardner: Again, thank you to each of my guests, Alicia Alfiere, Asit Sharma, and Yasser El-Shimy this week, thank you to 15 great companies because you know, behind every great stock back, by the way, the bad ones too, are the real-world companies that are creating the products and services that you and I are buying. Presumably in enough volume and frequency with enough happiness generated that we're happy to help those companies prosper with our consumer dollars or partnering with them. But as investors, we can be part owners of these enterprises. There will never be a great stock pick unless there's a great company that stock sits behind and you and I get to be part owners thanks to the miracle of the modern day stock market and a delight to see three big wins for Reviewapalooza this week. Let me mention only one of those is ascending to Foolhalla very shortly. The other two we just checked-in midstream and will be checking in the years ahead to see how they close out as well. I want to mention before we close that next week is the Rule Breaker Investing Mailbag. It's thanksgiving week for us here in the United States of America.
If you'd like me to speak to something, I'm working during a part of thanksgiving week so as, my producer, Rick, we're going to do a podcast next week. We need your great questions, stories, poems, thoughts to power our mailbag as we have every month for years now, so firstname.lastname@example.org is of course, the email address. Did you enjoy real estate investing with Matt Argasinger earlier this month? Did spark a question for you. How about the stock stories that we're told last week by my friend Sanmeet, Jim, Emily, and Aaron, did any of those stocks from Stitch Fix to NVIDIA spark anything for you? Finally, any reflections on the learnings you've got from this week's Reviewapalooza episode. We'll talk about it on Rule Breaker Investing next week. It will probably be a little bit shorter because a lot of us are away and celebrating, but no, Rick and I will be right there with you trying to educate, amuse, and enrich next week. Let me just say in conclusion, for this week, my producer Rick has specially chosen this Foolhalla music to send one very special sampler, five stocks that got trouble. By the way, never forget the trouble part and think about where those stocks came from to send this sampler along with the 15 previously off to the heavens. Not a lot of people still believe in the Norse gods anymore. I'm pretty sure that's true. I respect your viewpoint, whatever it is, dear listener, but I'm pretty sure that's true. But one thing we can all believe in, even if Valhalla is no longer as sought after or talked about as it once was. I think Foolhallla's day is here. To foreshadow, then, there will be 14 more samplers in future. We send off to Foolhalla over the next several years. But if you enjoy this exciting theme music, you're going to get to hear it over and over again as these Reviewapalooza stroll by as the months and the years wile away. Rick Engdahl, thank you for Foolhalla. By the way, if anybody thinks that there could be better music, you can let us know email@example.com for next week's mailbag. Five stocks that got trouble, ascend.