It's one thing to pick a stock, it's an entirely different thing to score how that stock's doing, to score against the market's average ... I think you'll get so much better not just talking the talk and not just walking the walk but scoring the walk ... when you score, you learn. There's no substitute for the learnings that come from lived experience.
-- Motley Fool co-founder David Gardner, in this episode of Rule Breaker Investing.
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This video was recorded on Feb. 9, 2022.
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 recommendations that I can come up with for stocks that fit that theme? Aiming, of course, always to beat the market, the S&P 500, because otherwise, why are we bothering? Then one year later, we reviewed the picks 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, and I would say yourself too. Then the three-year review, which is going to be the most telling, and why is that? Well, first, because three years have passed since I picked the five stocks, we really can be smarter about what has happened and why, and what we can learn with the greater passage of time.
That's the smarter part. But if I've done my job well then, we'll also be happier, we hope richer too. Now, that three-year review is also important because most of the time, we end the game right there. We're going to keep holding these stocks in real life, mind you, you should too, if you own them, but if I kept reviewing all 30 of my samplers in years 4, 5 and 6, etc, well, we wouldn't have time to do much else on this podcast. Thirty separate times I picked five stocks, what I've also called my Five Stock Samplers, and we're going to review three of those samplers this week. Five Stocks Rolled Up at Random, Five Stocks that Spark Joy, and Five Stocks Shrouded in Mystery. Review them, we will with my three analysts. Guest star Sanmeet Deo, Asit Sharma, and Rick Munarriz, only on this week's Rule Breaker Investing.
Welcome back to Rule Breaker Investing. It's rare that I start a show already talking about next week's show, but I'm going to do that briefly this week. A couple of years ago, Chris Hill joined me for Rule Breaker Investing, and we did, I think one of my more memorable podcasts. Together, Chris and I did the day the market crashed. It was a simulation like Orson Welles, War of the Worlds, radio broadcast for those who know that history. But we were just having fun, it was of course made up. The market wasn't crashing that week. But we did a live seeming podcast, just to process what that would feel like, and sound like for you, our dear listeners. We've heard back many times over the years, this is one that people have gone back to and that the market happened to go down 30 percentage points or so within a few months. Well, we didn't intend that, we weren't expecting that, but it was helpful in that regard. Well, Chris is going to come back and join me next week and we're going to do something special. Again, I hope we're not exactly repeating what we did, well, I'll just let you experience that next week, but really excited to have Chris and some guests joining us for a special edition of Rule Breaker Investing next week. That's then, this is now, we're going to be looking over three, Five-Stock Samplers this week.
I always enjoy these episodes, I hope you do too. It's our opportunity to see what happened to stocks that were picked 1, 2, and 3 years ago this week or so. We've got three different samplers, one dated one year, another, two, and one we'll be sending off to Foolhalla after its three-year run. They are in order, Five Stocks Rolled Up at Random, Five Stocks that Spark Joy, and Five Stocks Shrouded in Mystery. I'm about to get started with the first of those, the one that's one year old, Five Stocks Rolled Up at Random. I don't really want to review that one, but we will be in a minute. But first, let me just speak about Five Stock Samplers and Reviewapalooza episodes for new listeners. From the earliest days of the Fool, we've always said it's so important not just to talk the talk, but to walk the walk. I mean, that for me and for my brother Tom, when we first started The Motley Fool as a newsletter we thought we could write about stocks and write about our thoughts.
But wouldn't it make more sense for us to pick stocks too, to walk the walk as it were, instead of merely talking the talk. From our earliest days of the Fool, the fun of being in the game, skin in the game, accountability, the benefits to our learning, which I'll speak about in a sec, have always been so powerful. Talking the talk and walking the walk underlies so much of The Motley Fool's work, but of course, it's right in the heart of these Five Stock Samplers. The second thing I want to say about walking the walk is if you're walking the walk, that's great, but you know what, you should also be scoring the walk. This is one of my cardinal teams on Rule Breaker Investing. It's one thing to pick a stock, it's an entirely different thing to score how that stock's doing, to score against the market's average, and of course, more broadly, to score your portfolio, not just that stock against the market average year-in and year-out. I think you'll get so much better not just talking the talk and not just walking the walk, but scoring the walk, because point number three, when you score, you learn. There's no substitute for the learnings that come from lived experience.
That goes for your winners and your loser, and we'll be talking about both of those this particular week on Rule Breaker Investing. But there's really no way to know that you're not doing it right, unless you start seeing some negative feedback in the form of red numbers or poor performance. Nobody likes it, I sure don't, but as the person who I still think has picked more bad stocks than anyone else in Motley Fool history, I can tell you that it's been really important to me to learn from the mistakes that I've made and of course also, I would say even more importantly, to learn from what's working. That's a forgotten art. Sometimes, a lot of people talk about the importance of learning lessons from what failed, I get it, but I love to learn lessons from what is working because that's surely what we want to do more of and figure out over the course of time.
Walking the walk, but scoring and scoring because you learn. I guess the last thing I want to say before we get started with this Reviewapalooza, this is a tip to any financial professional, that's what our analysts and advisors are at The Motley Fool. I've never really thought of myself this way, but I guess I'm a financial professional and that's what we are. You're going to build trust with your clientele when you're talking the talk, walking the walk, scoring the walk, and learning from the score. I think any financial professional listening to me right now is highly encouraged. If you're not already doing all of those, and I bet a lot of you are, if you're a Fool, you probably are, but in my experience, a lot of people in the financial world are not necessarily going through all of those steps. But if you do, you're going to separate yourself from all the others because you're going to be building trust, and don't we need a little bit more of that in this world? Well, as we all want to do on this podcast, it's time to go back in time.
It wasn't so long ago, January 21st, 2021 the market was in a very different place than it is right now. In fact, the market has had some real undulations up and down since January 21st, 2021. On that week's podcast, I pick Five Stocks Rolled Up at Random. I'm about to invite my friend Sanmeet Deo on to review this sampler but let me say about the market that even though it's really been suffering in recent weeks and months, the S&P 500 is up 16.9 percent. We'll just call that an even 17, since January 21st of 2021. So that's the mechanical hair that all of our greyhound stocks are chasing here 17 percent take it all-in-all. That's a really wonderful overall year for the stock market now. It hasn't felt that for a lot of our stocks and let's see how Five Stocks Rolled Up at Random are doing. Sanmeet Deo, how are you doing, sir?
Sanmeet Deo: I'm doing great. Thanks for having me again.
David Gardner: Excellent. Thank you. You and I were just talking off the air about the Texas basketball team and a big win over Kansas this week and the burnt Orange. I know that football accounts for more in your home State of Texas, but it's nice to know that there's some basketball excitement these days around Austin.
Sanmeet Deo: Yeah, for sure and the coach is really trying to get that fan engagement with basketball. He knows that it's a tough road when you have such an entrenched football fan base. But he's doing his best to get them excited for basketball as well, especially with the new arena coming next year.
David Gardner: Well, that is exciting and sports are exciting and something you and I enjoy but maybe we should just return back to the stock market which is what centers us. Let's talk about Five Stocks Rolled Up at Random. Now, no requirement on your part, Sanmeet, to go back and relisten to that podcast from a year ago. But can you maybe briefly summarize why they were Five Stocks Rolled Up at Random?
Sanmeet Deo: Yeah, this was fun. I did relisten to it, and it was a cool way to do a Five-Stock Sampler. Usually, you have your samplers with themes and this theme was really just random. You randomly pick 10 stocks and then you pick five from those, so it's an interesting way to play the Five-Stock Sampler game and we'll see how the results turned out for the year [laughs] and going forward as well. But one thing I love about these samplers is that they are samples, so many of the samples have done well just from picking themes and picking stocks from that big universe, so they're all almost random to some extent.
David Gardner: Well, choosing the theme definitely is not and that's always been a fun thing for me to do overtime. Then thinking of what stocks best exhibit that theme always gets you as you're saying, Sanmeet, into a smaller group. I've only ever done five stocks at a time and certainly, a portfolio is not about five stocks. But with that said, the five stocks that I rolled up at random in alphabetical order are Apple, Atlassian, SolarEdge Technologies, Starbucks, and Teladoc. Again, they are competing against in S&P 500 up 17 percent. Let's start as we do traditionally with the worst performer, and wow, it's been a hard year for Teladoc,, it was at $246.74 about a year ago. Today, it's below 70. This stock, Sanmeet is down 72 percentage points in its first year as part of this sampler. Previously, big winner for Motley Fool Rule Breakers combining two companies, well, let's talk about that a little bit. What is the number one reason in your mind that Teladoc has lost three quarters or so of its value in the past year?
Sanmeet Deo: If I could choose just a short phrase, I would say pandemic pull forward. The pandemic was rough for all of us in general, for many reasons, but for many businesses that actually pull forward a lot of revenues and their business trends. While that was good in 2020 for their businesses, meeting those expectations and continuing that growth and continuing those trends in the later years in 2021 has proved very challenging for some RNAs, one specifically Teladoc, which if the listeners aren't aware of yet, it's a virtual healthcare services company on a B2B basis, covering various clinical conditions and offering telehealth for chronic condition management, extra medical services, behavioral health. It serves health employers, health plans, hospitals, and insurance companies through brands such as Teladoc, Livongo, BetterHelp and etc. They're a global leader in this virtual care space, they have over 12,000 clients, 51.5 million US paid members, and 10.5 million medical visits in 2020. Now, with those numbers, you would think, why is this stock down like it is.
David Gardner: This is the age of telemedicine. I mean, that was my thinking anyway and it felt like that's what was happening during this pandemic.
Sanmeet Deo: Yeah, one of the themes I've noticed with some of these pandemic winners is it brought forward trends that were already in process. But because of the shutdowns in the extreme nature of the way we lived during the pandemic, those trends were accelerated. We couldn't go see the doctor, we couldn't take care of our health the way we would have. We looked at companies like Teladoc to provide those services that we couldn't do in person, so seeing our doctor when we need to virtually, getting mental healthcare when we needed it virtually. Those are things that really drove the business and while that drove the business, now, they've come off that high, so to speak, and revenues are slowing down, although they were at a rapid clip over the past four quarters of over 100 percent.
Slowing down, disappointment with membership revenue growth. One analyst had estimated only 1-5 percent year-over-year membership growth from 2021-2024 going forward. The market really thinks that this pull forward is not sustainable post COVID. Because of these, the stock had gotten overvalued and expectations had run high, so now, they're playing catch-up with expectations in terms of revenue, membership, growth, and all those things. Also, another theme that's been particularly for them is competition. The big elephant in the room of Amazon with their Amazon Care, which they announced today is being rolled out broadly. Walmart, GoodRx, lots of companies are getting into the space so that competition has also been an overhang on the stock.
David Gardner: Well said, and yeah, as we speak and we are recording the afternoon of Tuesday, February 8th, Teladoc is down another seven percent today, and I'm assuming that is in sympathy. Well, actually, empathy maybe for shareholders of that Amazon announcement. Well, that's Teladoc. Again, this is a company that had a $40 billion market gap within the last year, down to an $11 or $12 billion market gap. This is not the only so-called pandemic stock that is taken it seriously on the chin, Peloton, but that's for another Five-Stock Sampler or another day. There are other examples, but I know you feel the same way I do, but I feel it incumbent upon us to say, Sanmeet, to all of our listeners that we're in it for the long term with these companies. So it's very frustrating to watch some of our Rule Breakers stocks get cut in half or more since it happened many times before. I like to stay in there when the tailwinds behind companies and their solutions are in place and I do believe telemedicine is a wind that's going to keep blowing in our back and keeping our boats moving forward even though, wow, we faced a huge headwind here in 2021. Well, let's move from the worst performer now, Sanmeet, to the best performer, and while it's nice to see the best performers up, I'm sorry to say it's not nearly as up as Teladoc is down. The number 1 performer for this Five Stock Samplers so far Atlassian up 36 percent. That's about 19 percentage points over the market. What's been happening for this Australian software company?
Sanmeet Deo: Yes, I am asking for those who aren't familiar. It's a $79 billion market cap company currently that makes workflow management, collaboration, agile, and organizational software products such as Jira and Trello. Trello is something we use here at The Motley Fool for project collaboration. It's used by 82 percent of Fortune 500 companies, has 10 million monthly active users and over 180,000 customers in over 190 countries. Solid software company. This is just a case of a strong revenue growing company. They've averaged over 35 percent durable and consistent revenue growth over the past year and as well as even looking back past that, they've had rapid subscription revenue growth of over 50 percent in the past few quarters. They have a differentiated, go-to-market with a low-price, high-value products strategy.
They are growing across users, new use cases and products. One of the things with software companies and these SaaS companies that you may not think is very highly free-cash-flow positive. Their free cash flow margins have improved to about 35 percent in fiscal 2019. That's about 400 million free cash flow and it is said that they could reach a billion in free cash flow in fiscal '23. They are also benefiting from one of the best cloud transitions in the software industry. Many of these software companies have transitioned from on-premise desktop or software that you have to pick up and use to cloud software, that's high-margin, high subscription-based software. Another great thing that I like to look at sometimes is they have a very strong workplace culture as indicated on Glassdoor and Comparably, which is another side I like to use. It's overall just executing very well, and I think that's really the reason it's been doing so well as a stock.
David Gardner: It has been a long-term winner for many Fools and a great Rule Breaker pick. I'm glad to know it's up 37-ish percent over this last year but it's not going to be enough to have this sampler after one year rolled up at random, beating the market. Let's just talk about a few of these other companies, Sanmeet. Now, let's go to two S companies, very different businesses, SolarEdge Technologies, a solar power company powering the solar revolution, and then Starbucks. I'm curious, Sanmeet. I know a lot of our Motley Fool employees don't come from Wall Street but you do have a past having come from Wall Street. Of the two companies, SolarEdge and Starbucks, which was more of the company that you've studied over the course of your career?
Sanmeet Deo: Actually, the one I say more is Starbucks. I worked at a large-cap growth firm, and as part of working there, Starbucks was one of the staple growth names in our portfolio and one that is also easy to understand. You can just go to a Starbucks, pick up the coffee, see the trends, see the businesses, and get a good grasp of the company. Starbucks, I got to say is what a rough road over the past couple of years for a company that's especially restaurant companies like Starbucks, where having to deal with shutdowns, reopenings, very uneven growth, and reopening across geographies with the US operating differently than markets like China where Starbucks is in or other places internationally where reopening might be slower or the virus has been popping in and out all over the world at different places and spiking in different places. For Starbucks, that's been a huge challenge. They are getting hit on the demand side when you have to close stores but then they're also getting hit on the cost side when you have labor shortages and wage inflation and coffee prices have actually gone up as well. It's been a rough road to navigate for Starbucks.
David Gardner: I will point out that Starbucks is down 10 percent over this last year. Both SolarEdge and Starbucks are underwater. Unfortunately, SolarEdge is down 17 percent, Starbucks is down 10 percent. I introduced these two S companies together because they are both, I'm not going to say sucking, but [laughs] they are both losing to the market. You're right. I mean, what a hard business it's been to run for Starbucks the last couple of years. What about SolarEdge?
Sanmeet Deo: SolarEdge makes the DC optimized inverter systems for solar photovoltaic installations worldwide. I can see why this is a great Rule Breaker because it is playing off the long-term tailwind of solar energy, electric energy, and they've been hit with supply chain, chip shortage issues, an overhang for the stock. Some people think it's transient and it has upside once that's been alleviated. Those revenues have been choppy, it started to come back in the past couple of quarters, back to about 40 percent plus. They're positioned well though because the residential solar market is forecasted to grow quite well in the next few years. That's a place where they play very well. SolarEdge is also a duopoly of sorts with another company called Enphase. They have a strong foothold in this market and they have been even throughout this. They've had strong solar revenue across segments and geographies. The commercial segment has started to turn and indicates the businesses are spending after the downturn to COVID. They're in that recovery phase and I think recently too, The White House confirmed an extension of solar tariffs put in place by Trump during Trump's administration. Some of these governmental and energy credit situations also play a part in SolarEdge's business.
David Gardner: Well, thank you for that. Yeah, this stock touched a high of around 370 in November, right around Thanksgiving. Now, here we are in early 2022, we find ourselves well down from 370 down to about 245. Again, a company that we've held for a long time. This is a company with a $12 billion market cap today. As you mentioned, they are an Israeli company, Enphase is a US company, and yes, they are a duopoly as you mentioned. An interesting company we're going to keep holding and hope it performs better over the next two years. Let's close real quick, Sanmeet, with, well, maybe the best known of all five of these companies, even including Starbucks and that would be Apple. I'm happy to say that Apple is a winner. Over the last year, the stock is up 33 percent, again, the market up about 17. Apple is dragging Five Stocks Rolled Up at Random upward. It's not going to get high enough but give us a word about Apple.
Sanmeet Deo: I think Apple has just robust demand for their products, iPhones, Macs, wearables, strengthen their services businesses with their TV service. That just continues to drive revenue and earnings even despite supply chain issues, which they too are not immune to but they've done a very good job of navigating those. They have reported that they are seeing some relief coming in the first half of 2022. There's always that excitement of talk of an Apple Car, or if not even an Apple Car, they're more engaged within the electric vehicle segment. However, they decided to take part in that. There's also always the Apple will buy you theme [laughs] in coming up with other companies. Because of the cash that they generate and have on their balance sheet, just executing phenomenally like they really do, they have very few quarters that disappoint.
David Gardner: Does any company have more cash on its balance sheet than Apple?
Sanmeet Deo: I don't know. The only one I could guess is maybe Google, but I don't think even Google has as much as Apple or Berkshire Hathaway.
David Gardner: Why even pick knits here? These are companies that have on their balance sheets cash that exceeds the GDP of some sovereign nations around the world today. This is a really important, relevant company, Apple Plus. A lot of people watching Ted Lasso last couple of years waiting for Season 3. It's a reminder. I just got another pair of AirPods Pro in the mail today, having slightly lost one of my AirPods Pro the other day. It's a reminder of how relevant this company is, the devices that we're using, the entertainment we're consuming, Apple is such a big part of music as well. It's an amazing company. I'm glad it's part of Five Stocks Rolled Up at Random, but now, it's time to account for where we are. The stock market up 17 percent over the first year for this podcast. I regret to say that this group is presently down six percent. I am looking at you, Teladoc, because you're bringing everybody else down. But if I never picked Teladoc, we'd be up. But so far, anyway, this is one of my losing Five Stock Samplers. I guess the good news, Sanmeet, is one year does not a season make, is that fair?
Sanmeet Deo: Absolutely. These are three-year samplers. We still have two years to go. A lot can happen in those two years for these companies.
David Gardner: Well, thank you very much, and each one of these is such a relevant, interesting company to follow on its own. I mean, Teladoc, despite its underperformance, is a fascinating company and doing really important things in this world. It would be fun to see how Five Stocks Rolled Up at Random play out. I love dice and I love randomizing and I don't want them to have a bad reputation, [laughs] so I need this sampler to do better than it's done in years 2 and 3. In the meantime, Sanmeet Deo, thank you so much for joining us again on Rule Breaker Investing. Fool on, my friend.
Sanmeet Deo: All right. Thank you, David. Thanks for having me.
David Gardner: All right. Well, from January 2021, we go back one year. This is pre-pandemic, my friends. Well, for most of us in the world. Way back music machine, Rick Engdahl.
The date was January 22nd, 2020 and it was Five Stocks that Spark Joy. What I remember now, two years later, is that it was a [inaudible 00:26:26] to Marie Kondo, Mark Hahn. She had a lot of fans back then. She still has a lot of fans today. The woman who teaches us how to organize our homes, how to simplify our lives. I started reading her book, in fact, and though I've not finished it, her first insight is so profound. She's like, "We all expect our kids to pick up after themselves. We say stuff to them like, 'Clean up your room, honey,' but we never are taught exactly how to clean things up. In most cases," Marie Kondo has said, "that's because parents themselves don't exactly know how to do it right. They were never taught themselves and this has been passed down through the generation." So Mark Hahn is here to help us simplify our closets. Those are both the tangible and intangible closets in our homes and in our minds. Asit Sharma, as I get to welcome you in now, the big phrase that I remember from her is, "You picked that old sweater up in your closet and you look at it and you ask yourself, 'Does this spark joy for me?'" If it doesn't, what are you supposed to do?
Asit Sharma: You're supposed to discard it, David, if it doesn't spark joy. [laughs]
David Gardner: Exactly, and that's going to simplify our lives a lot if we take that mentality. Five Stocks that Spark Joy, Asit, and I'm going to give the stock names now, Amazon, Apple, Etsy, Tesla, and Walt Disney. All five of those I was picking at the time because I think Marie Kondo's insights into how to live better can actually help us invest better and we're going to find out whether these stocks and their performance are going to back me up on that point. But first, Asit, great to have you back to Rule Breaker Investing.
Asit Sharma: David, thanks for having me back. Really excited to talk about these stocks in context of Marie Kondo. It seems like every time I've encountered any kind of Japanese thinking, there's always a big revelation whether it's continuous improvement or the compound method of production which is essentially using flags to show one process is done and another can start. The Japanese have a way of approaching the world that lifts you out of your own sphere and punks you down in another one, and this certainly is that for me.
David Gardner: Wow, that is really well put and thank you. You're reminding me I need to delve further into Japanese culture, so thank you for that reminder, Asit. Let's start with the worst performer. Good news, there is only one stock that's down in this group of five and it's losing to the market by 37 percentage points. A couple of numbers here. The stock market over the last two years is up 36 percent. Therefore, Walt Disney, ticker symbol DIS, it's down 37 percentage points to the market. That means it's down one percent overall versus the market's plus 36. With Sanmeet earlier, I think I said Apple might be the best-known company in the world. It definitely has more cash, but maybe Disney is even better known worldwide than Apple, but then again, why draw these kinds of distinctions? This is a big brand and a big business operating across many different industries. It's underperforming. Asit, in your mind, for what reason over the last two years is Disney 37 percentage points behind the S&P 500?
Asit Sharma: David, I think the factor that drove their underperformance isn't something that's difficult to figure out for many of us. Those theme parks got hit during COVID. You picked this basket in January of 2020. I remember on March 15th of that year, trying to go to a play out in the real world and learning that the play was canceled, we had a turned back and that was the beginning of this COVID experience for me. But extrapolate this to Disney, which has such a big component with its theme parks. Investors have necessarily been cautious about this company. I took a look at both the companies I'm going to speak about through this Marie Kondo lens. I wanted to know what is speaking to management, what is sparking joy in management's eyes, and what might they be trying to discard? Let me take a stab at this. I actually want to quote from the last conference call that Disney had. This is from CEO Bob Chapek. Now, of course, we're recording just before the next quarter of earnings is going to be released, David, so for anyone who's tuning in, this is probably not the most recent quarter by the time you're listening.
He said, "Telling the world's most original and enduring stories, maximizing the synergy of our unique ecosystem to deepen customers' connection to our characters and our stories, and using the power of our far-reaching platforms and new technologies to give consumers the best entertainment experience possible." This is the way Disney describes what sparks joy from them. I believe that, there's a lot of corporate-speak in that, but I think when you look at how quickly they've been able to get into the streaming market with Disney+, ESPN+, and Hulu and create this gargantuan tribe of listeners. I think at the last count, Disney+ had 180 million subscribers. You can see that they are funneling that joy, the stories that they've been telling for decades into this new medium that the next generation of consumers is going to watch and keep watching. That obviously shows you the potential of the company where its heart lies. I'm going to go out on a limp here [laughs] and try to isolate what isn't sparking joy as much. I think that actually is the theme parks, not because those aren't wonderful expressions of Walt Disney's original love for narrative and his love for having experiences. I think that it's more difficult part of the business as time goes on.
Of course, it's got a much smaller margins. They are struggling to recover from COVID. As the last few weeks have evolved, I note that Bob Chapek is under fire because Disney fans are furious that lines have become very long, ticket prices are soaring. This is a hard problem and it would be a hard problem for any management team. Right now, they're not feeling the joy on those theme parks, but I will say, even though if you look at these numbers, the Disney part of the business, the Disney theme parks part of the business while being only 25 percent of revenue and even less than operating profit, about six percent, long-term, it is something that's going to spark joy again. I think fast-forward a few years past COVID and we've got a few years left in this basket, I think that component comes back and the whole picture and beauty of this business model becomes apparent to investors.
David Gardner: Well, and we do have one year left in this basket, so we're two in out of three. We do have another year for the world to, I don't know, find its new normal and have more action around Disney theme parks, but you're speaking as well to streaming. Asit, and looking over this basket, this Five-Stock Sampler, Five Stocks that Spark Joy, three of these companies are among the most prominent entertainment companies when we think about streaming. Amazon, of course, with Prime Video, Apple with Apple Plus, and Disney, of course, with Disney+. Part of what sparks joy for a lot of us are those stories, and ultimately, when you look at these five companies, we're about to talk about the big winner next, but all five of these really have great brands. Certainly, Etsy is not nearly as well-known as the other four, but let's now shift from Disney, the biggest underperformer to the biggest outperformer and that will be Tesla.
While a lot of people, for a long time, have viewed Tesla as unsustainably premium-priced and maybe it even still is today, often that's been true, Asit, of the Rule Breakers over the course of time. They're perceived overvalued people don't buy the stocks, but I think part of the reason that happens is because they have great brands and brands aren't really counted anywhere on the financial statements for the most part unless we're talking about goodwill, but that's an obscure thing we're not going to talk about right now. Brands are often overlooked, I think, both by Wall Street analysts, but also the computer algorithms that drive a lot of the trading. I think that's part of the magic for a company like Tesla. Tesla was at $114 a share two years ago. It's now over 900. This stock is an eight-bagger for this Five-Stock Sampler. I myself have bought at least one new Tesla since picking this Five-Stock Sampler two years ago. So it sparks some joy for me. Asit, this stock is up 674 percentage points over the market averages. Would you have believed that two years ago?
Asit Sharma: David, it's been a long evolution for me to understand the power of great brands. I am a believer now, I've been talking about this principle probably for the last year on Industry Focus with Emily Flippen, you can't underestimate what a brand can mean in the consumer's mind. We can be skeptical about Tesla's ability to produce its cars, its entry into new markets, its competition. If we don't understand what the consumer wants, we could be way off base, and that's been the case here. I want to point out one more thing about Tesla, which I think is more recently supporting its success in addition to its great brand. That is the ability of Elon Musk and his management team to go full Marie Kondo and figure out what is speaking to their heart and discarding the other things. Counter intuitive, if you look at Tesla's strategy over the last two years, while they are working on a bunch of new models, they haven't been hyper-focused on that. In fact, that's secondary. What is sparking joy for Tesla, for Elon Musk is scaling outputs.
He mentioned this in the company's last earnings call back in January. I thought it was fascinating. He said a lot of people don't understand this point. If we had spent our focus during COVID with supply chain shortages inability to get the chips in that we wanted on trying to introduce new models, that would've been really complex business proposition. Instead, we just focused on scaling our output. Because you and I have, David, both know that demand is there. People want that brand. By doing that, they were able to increase their volumes by 90 percent year-over-year. They were able to produce a tremendous amount of operating cash flow, a tremendous amount of profit. I believe in the last quarter, if I'm not mistaken, they had about $2.8 billion of operating cash flow that they generated, and as Musk pointed out, most automakers went backwards last year and during COVID they weren't able to meet demand. The ability of management team to channel that inner Marie Kondo and focus on what's sparking joy, focus on what's important is a sign of a winning company, so these two elements together, they explained this fantastic stock price moving to me now of course, we can't predict the future. There's still some time left in this basket, but I wouldn't bet against this company over the long term.
David Gardner: Well, and speaking of the long term, that's how long we have held this stock. First picked in Motley Fool Rule Breakers, November 2011, so we're now in our eleventh year of just buying and holding Tesla. We have been, well, I'm just going to say it, rewarded beyond my wildest dreams, the performance of this company, and often it's forgotten that from 2014-2019, ticker symbol TSLA, check it, went sideways. As the market continues to rise inexorably a strong bull market. In the teens 2014, '15, '16, '17, '18, Tesla went sideways and it just was within the last three years that the stock truly has exploded. While it's been volatile, I mean, the stock is already down from recent highs, like a lot of others, it's had about 20 percent as valued shopped in just the last month or so. Nevertheless, we're so far above where we started, and I think it's a company that does spark joy.
I think from day 1, people have said if Apple made a car, it would be Tesla. Tesla early days had that understanding of design, but also the fun. Elon Musk is a crazy man, mostly in a good way I think, and I think a lot of us have benefited mightily because of all of his exemptions and his company's efforts. It is still one of my favorite consumer products of all time, it is by far the best car I've ever driven, and it's amazing to think that Tesla remains asset at the forefront of the electric revolution. Seems like everybody else is announcing, they've got their electric car coming to, but nobody is anywhere close to Tesla in terms of building out that network of chargers or all of the miles logged which helps contribute to the AI for, I don't know, at some point, autonomous driving might actually work and Tesla might actually bringing it, but they really have a huge advantage.
Asit Sharma: It's amazing what you can achieve when you set audacious goals and work backwards.
David Gardner: Beautifully said and succinctly said, let's stay succinct about these other three. But if there's any one of the remaining three stocks that you'd like to speak to, Asit, I learn so much from you. I will point out to the others. Apple and Etsy have both more than doubled, and Amazon itself is up 70 percent. Again, with the stock market up 36 percent points, this has been an absolute homerun of a Five-Stock Sampler. I will just give the numbers right now. Overall, the market's up 36 percent points. These stocks average gain of plus 216 percent points, so we're a 180 per stock above the market. Of course, Tesla pulling them all up together, but three of these stocks have more than doubled. Between Amazon, Apple, and Etsy, which one do you want to pick up, look at it and ask, doesn't spark joy for you, Asit Sharma?
Asit Sharma: You're asking me to pick my favorite child, David, [laughs] and I happen to have three children. But let's do this. Let's go with Etsy to keep within this theme. I remember rubbing my hands together when you first picked this basket. Thinking, oh men, this basket is going to outperform, and outperform it has. But to choose one, I loved that Etsy's management team talks about a fun and inspiring and engaging experience on their platform. Almost every conference call, that's so important, you know the intangibles are what make accompany performance, it's the people you hire, it's the goals you set, it's the attention to the small thing. I really love how Etsy is so focused on making its platform fun for the people who want. It's crafty artisans type goods, which I am an avid buyer. I seem to remember you saying that you hadn't or maybe when I was reviewing your transcript from the podcast that you hadn't bought from Etsy at that point in time and I'm curious. Have you become an Etsy members since then?
David Gardner: I'm sorry to say I still have not, and there are a lot of reasons I might, in particular, as a geeky board gamer, one of the things that I like this is a real sidelight of Etsy, but there are a lot of people who take the components of the game. Let's just pick Monopoly as the generic name everybody knows, and bling them out, like have much more interesting looking dice that you roll or replace that little metallic poodle with something else. There are a lot of opportunities that craftsman have to take well-known games and develop much more interesting or beautiful components, and you just put those in your box instead, kick-out the old, so put in wood for plastic, for example. That's happening, thanks to Etsy. I probably should have, Asit, but thank you for remembering that about me. I still haven't bought from Etsy as a consumer.
Asit Sharma: Well, I'm guessing within the next year or two, you will because they have disability to help you find the things that are going to spark joy, whatever your interest are. They do it very well. They pour a lot of money into the technology to make it easy to find those things. I think, these are the intangibles behind numbers like we've seen recently where they're growing their total platform volume by double-digits. It's now over, I think, three billion bucks of total platform volume in the last quarter, they're becoming quite a big company from this little upstart that challenged Amazon and its own world of handmade goods. I think that Etsy is the one for me that is most Marie Kondo-like in this regard.
David Gardner: I love it, and you know what I also love? I love that we're talking about this in early February with the stock around a 140. Again, this has been a wonderful performer. It is up 181 percent from two years ago. But have you looked at the stock recently, Asit and everybody listening to us right now? This stock was over 300 thanksgiving week, it's at 140 right now two months later, this feels like a sale. A sale is happening not just on the Etsy platform, but maybe on the stock market. A lot of long time listeners are smiling because they know Etsy was the example we used for the Market Cap Game Show for years. Matt Argersinger always kept over estimating it, and I was always saying no, it's a smaller market cap than that, which means, Matt, you should be a buyer. Indeed, a lot of us have been very well rewarded, but it is amazing to me, Asit. We've seen this, of course, with many Rule Breakers stocks in just the last couple of months, the stock has been cut in half in just two months.
Asit Sharma: It makes you wonder how long one should wait on the sidelines. I'm an Etsy shareholder, and I hope to pick up some more shares in the near future. I'm not saying that because you brought up that the fact that the stock was cut in half. But when I look through my list of holdings, it popped out. Now, I invested in many growth names, so yes, I've taken a beating among many areas my portfolio, but this is one stock, again, that will feel good to add to my holdings. I think when I fast forward a year or two from now, I'll feel even better.
David Gardner: Thank you for that, and that fast-forwarding is important. The only reason that make sense to fast-forward is if you're still holding the stock, otherwise, you fast-forward into nothingness, so it's a reminder, Asit, and everybody listening that it's about holding, that's really most of the work of investing. That by discipline, I've tried to exert upfront and that sell discipline that I ignore relative to most of the rest of world in between those two points are hold, hold, hold, and Etsy has well-rewarded us for these two years, and yet you've been whacked as an Etsy shareholder just over the last couple of months. You have to be able to enjoy all of that and see the whole journey, I think to be a successful investor, well, we don't exactly know what the next year will hold. But one thing, I think almost for sure this Five-Stock Sampler is going to retire to Foolhalla next year as the market beater, again, 180 percentage point lead over the market after just two years of volatile trading. We'll keep our fingers crossed, and with Marie Kondo, we'll hope to pick these five stocks up a year from now, Asit, and hope they still spark joy. Thank you, my friend.
Asit Sharma: So much fun, David. Thanks a brunch.
David Gardner: All right. Well, from 2020, let's go back in time once more. It's January of 2019, the date was January 23rd. The podcast that week was entitled Five Stocks Shrouded in Mystery and for this group, I'd like to welcome back long time Rule Breaker friend of mine Rick Munarriz. Rick, welcome back to Rule Breaker Investing.
Rick Munarriz: Thank you. It's a pleasure to be here, David.
David Gardner: How's investing been treating you over the last year or so, Rick? It hasn't been great for a lot of my kind of Rule Breaker Stocks, you?
Rick Munarriz: Yes. I've been hit hard. I got lucky that I moved into some REITs just like thinking, hey, maybe a little income. Now that I'm in my 50s and my wife is pondering early retirement in a year. I took a conservative approach with a part of my money. I'm still very into the aggressive growth stocks that we know and love, David. But that helped out. I took a tiny little bit on crypto which was greater initially and then not so great lately, but again, a very small part. Last year wasn't too bad, my portfolio was actually up in the low teens and the mid-teens rather, which I know is a lot better than a lot of people with growth investors but I definitely lost to the market like just about everybody I know.
David Gardner: Coming right off for five stocks that sparked joy and what we just talked about Etsy, it's truly remarkable to me to think that Etsy is less than half what it was just two months ago and yet still up 100 percentage points plus over the last two years. That's how investing in Rule Breaker is felt in recent months. Well, let's take a look at this group now. We're going to be sending this Five Stock Sampler off to Foolhalla at the end of this week show, because Five Stock Shrouded in Mystery started on January 23rd, 2019 and three years later that was a few weeks ago. Our numbers are locked. Friday, January 21st was the full three-year period and those are the prices we'll be using and this Five Stock Sampler, while the S&P, Rick Munarriz, was up, on average, 55 percent over the last five years. That's with an asterisk. We're going to explain a little bit more about that in the second.
Technically, the S&P 500 is up 66 percentage points over these past three years. But one of these companies got bought out very early and so we're only averaging it for the time that it was still alive stock and that's what brings down the overall average of the market to 55 percentage points over the last three years. But now I feel like I'm really getting into the weeds. Let's zoom back one level, Rick, and let's look at the worst performer among these Five Stocks Shrouded in Mystery. We'll explain the mystery a little later. But Rick, Carter's, the ticker symbol is CRI. Baby clothes, multi-generations up 13 percent the last three years. Bad news though, the S&P, it's not really bad news, was up 66 percent, and so Carter's is 53 percentage points behind the market. Rick, looking over the last three years, what, in your mind is the number one reason why Carter's has underperformed?
Rick Munarriz: I just want to start by saying that up 13 percent and this is the worst pick is obviously going to be a very good next 10-15 minutes for us here talking about these stocks. But for Carter's, again, this is the company behind OshKosh B'gosh and of course, Carter's. I think what really hurt them is that even before the pandemic, they weren't doing that well. The revenue net sales basically in 2018, less than two percent, 2019 less than two percent, and then the pandemic came, so revenue declined 14 percent in 2020. This is a company that already had issues where it wasn't necessarily catching up to, let's say a Target or Walmart that's selling a lot of kid clothes. A lot of generic stuff to put on your kid as they grow up and especially if you're a parent and you're cost conscious, you don't want to invest a lot of money into an outfit that only is going to fit them when they're really young for maybe a couple of months, a year or two at most.
I think that's hurt Carter's. Just the general scope of the pandemic, I think it's fairly obvious that if your kids and your family and you're all hunkering down and sheltering in place, you don't necessarily want to get out and say, "Oh, I need to get these outfits because my kid has a play date." Or "He is going to go to school every day, I got make sure she looks different. I got to make sure that she has something special to wear once she's invited to a sleep over." All these things didn't really happen during the pandemic. So I think a lot of parents just said, if there's one thing I can hold back on is just clothing and we saw this with a lot of companies, but I think especially with children, since they outgrow them so quickly, you're not making an investment in something that they can wear 5, 10 years from now for a lot of the young kids. I think Carter's was just in the wrong place at the wrong time, but it was already at the wrong place at the wrong time before the pandemic.
David Gardner: Well said, and I'm sorry to say this stock, which is up 13 percent. It's actually made money over the last few years. It's just really underperformed. It's joined by one other in this Five Stock Sampler that also similarly has dramatically underperformed. IPG Photonics completely different business, cold lasers, fiber lasers. But IPG Photonics is up 17 percent over the last three years, but that again, still about 50 percentage points or so rounding behind the market averages. Horse of a different color here, Rick, but what's been up with IPG Photonics over the past three years?
Rick Munarriz: Yeah. With IPG Photonics, and again, it's not a household name, obviously. This company makes fiber lasers, amplifiers, laser systems, a lot of industrial stuff that's used for medical applications, telecommunications, materials processing. It's a lot of stuff, a lot of this heavy industrial equipment that's used to make things and make other things go. What really hurt IPG Photonics was actually a lot of the weakness, not just a supply chain breakdown all over. But in China when there was a slowdown in their manufacturing because they are very big with these material cutting applications. They have basically half of the welding market as far as equipment to help with welding. All these things, once production slowed down during the COVID-19 crisis and especially with tensions between the US and China. Even though IPG Photonics, they have factories everywhere, they have presences all over the world. when China slowed down, a big part of their business actually took a hit. That is why the stock was able to rise over the next three years, but definitely lose the market just a rough climate globally, particularly in the world's most populous nations.
David Gardner: Thank you for that. What a fascinating time it has been and to see what has won and what has lost. A lot of this was simply unpredictable but I think part of what we do as Rule Breaker investors is we're looking at great founders. We're looking at companies that have innovative solutions that the world needs and we're never quite sure which one is going to win when and which ones are going to lose, otherwise, we'd never bought those in the first place. But this is a company that unfortunately lost its founder in just the last few months. Valentin Gapontsev, the Russian American immigrant, just a great story. One of my favorite Russians Gapontsev with a net worth of 2.3 billion largely tied up in his IPG Photonics stock company. He founded decades ago, unfortunately died in October of last year.
But this is a stock like a lot of these we've talked about this week. We've owned it for a long time, recommended it actively all the way through and we're going to keep doing that with IPG Photonics. These two stocks, Rick, put this Five Stock Sampler and a whole both about 50 percentage points behind the market. Let's now go to the winner in this Five Stock Sampler, the number one performer, MercadoLibre, ticker symbol MELI, also shrouded in mystery with these other four. Good news MercadoLibre is up from $328 a share three years ago. It closed a few weeks ago, January 21st at 1,053-ish up. As I mentioned, 220 percent waxing the market averages up 150 plus over the market. Rick, you speak Spanish, you pronounced MercadoLibre much better than I do. You know this company better than I do, but it's been one of our favorite longtime Rule Breakers. In your mind, what's the number one reason over the last three years that MercadoLibre tripled?
Rick Munarriz: I think especially with MercadoLibre the way would it have been able to do is, it has been able to do it every single e-commerce company has wanted to do and Amazon has exceeded. But for the most part, this is a company that said, right, we are the leading Latin America marketplace for goods, for e-commerce. Where can we go next? They have Mercado Pago, which is basically like a PayPal equivalent or Square or Venmo, but more PayPal is because it's very good for commerce. Mercado Pago has actually overtaken the MercadoLibre platform. There are 78.7 million unique active users across MercadoLibre's entire ecosystem. But this is a company in its latest quarter, 7.3 billion in gross merchandise volume for the MercadoLibre. The actual like e-commerce is a store front, but 21 billion, almost three times the volume in Mercado Pago. It's almost like that one point that you and I followed eBay for a long time when PayPal overtook eBay became the bigger verb in that company and eventually had to be spun off on its own. You have Mercado Pago has become so powerful and there are other things. Every time MercadoLibre slaps the name Mercado which is Spanish for market. I will give you that [laughs] introductory Spanish lesson there. MercadoLibre is obviously free market. They go Mercado Envios, which is their fulfillment and shipping stuff. Mercado Credito, they have a credit department. Now Mercado Fondo which is now an asset management company. They are doing so many things now that they are basically the name, the brand, and FinTech when it comes to Latin America and just the ability to be able to grow beyond. They would've been fighting with just the marketplace with the fact that they were able to expand into all these logical areas to basically spread their wings really set them apart from most of the companies that have failed.
David Gardner: As good as the stock has been and we're just looking at the three-year run, this is another one that's well down from recent highs. Rick, MercadoLibre actually touched stock over 2,000 as its 52 week high presently trading at 1,053. So at a market cap of $50 billion, just about even, I continue to love the future of that whole area of the world. MercadoLibre's leadership in so many contexts, helping lift up and serve Latin America. So are you as excited about this stock here in 2022 as we were in 2012?
Rick Munarriz: I definitely am, and again, this is something that a company that it's not just as a stock is cheaper now than it was several months ago, because that's not the right reason to buy the stock. This is a company that will continue to dominate. You're talking about the CEO, micro-scale bidding, who basically was like 1999 Stanford student. So basically, watching this whole.com revolution before the bubble pop and basically said, all right, I can do this in my country, I can do this in South America, I can do Latin America, and boom, MercadoLibre is born and they would quickly scaled up. Within a few years, eBay was buying 20 percent of the company. They had a lot of big investors onboard, so clearly, a well-educated person that saw something early, like so many people we know back in the late 1990s, hopping on this trend enable to make it work. So just a definitely dynamic company, but I think the future is still very bright for MercadoLibre. All the fears that we've always said, there's like geopolitical risks, there's inflationary risks because of the inflation through Latin America that's been ramping for basically decades. All that MercadoLibre has been able to climb that wall of worry, and it's just an amazing company.
David Gardner: True to add, and looking on its own, this company has made this Five-Stock Sampler a winner, I'll be giving the final accounting in just a few minutes. But since Rick, this is the last time we're talking about Five Stocks Shrouded in Mystery. We should speak to the other two, the also-rans. One of them beat the market, the other lost, let's go with the lost one first, Planet Fitness up 45 percent the last three years, but that's 21 percentage points behind the market. What's your take these days on Planet Fitness?
Rick Munarriz: So I was a big fan of Planet Fitness and this is the kind of stock again, if you look at the stock chart, it's almost like doing like a fitness rep because the stock hit $23.77 in March 2020 when so many of our stocks bottomed out. Now, it's almost quadrupled at this point since then. But this is obviously a company that, again, we're talking about CEOs, about these top of the line CEOs at these companies that IPG, MercadoLibre, but then with Planet Fitness specifically, it had one of my best origin CEO stories, CEO origin stories, and I know I shared it on the podcast three years ago, but I'll do this pretty quickly. Chris Rondeau, he was a college student in Dover, New Hampshire, population 30,000 and he was a real fitness buff. Have you seen him? He's very buff, he works out, obviously, and there was like basically one really good gym in towns. So he signed up and said I'll work at the front-desk, if you can let me work the equipment and stuff like that.
Gym is not going anywhere, it's about to go under. These two brothers come in, they buy it and they have this complete idea about changing everything around. They want to replace, get rid of the day care center. Get rid of the heavyweights. Because there's just a lot of grunting, a lot of heavy equipment hitting the ground. They got rid of fitness classes, which was very controversial at the time. They did all these things and place thrive. They dropped the price downs like $10.999, and all it was was basically just a bunch of workout gear, a bunch of a robot gear, treadmills, bikes, and light weights. It took off obviously, and Chris Rondeau, who is working the front-desk, eventually becomes a club manager eventually becomes a regional manager and then VP, and then 20 years after he is checking IDs at the door of the very first Planet Fitness becomes a CEO so you can relax and the most humble of origins and be CEO, and obviously the stock has done really well over time. The company continues to grow. I know if rambled too much on Planet Fitness, but it's definitely very interesting stock especially now that we can go to gyms again, which was something that we couldn't do two years ago, which is why the stock was as low as it was back in March of 2020.
David Gardner: Got to love the Haracio Alger stories which continue to run. I would say there are more rags to riches, amazing stories of people from modest means coming to become very successful business people. I think that happens more today than it did in the 19th century. Which checking Wikipedia right now was when novelist Horatio Alger wrote a lot of his so-called Horatio Alger stories. Rags to riches stories, impoverished boys becoming Superman. There were some wish fulfillment for his readers back in the 19th century. But I see this every day, these days, and I love that about America. I'm delighted to note after your storytelling, Rick, but that's been true for Planet Fitness as well. But it wasn't enough to propel the stock to a market, bid.
It's running 45 percentage points, so about 20 behind the market. Let's talk about the last one because in some ways, this is the most interesting of the five in the sampler, but for really unusual reason. So Rick, these stocks are picked on January 23rd of 2019, and within just days, in fact, less than two weeks after the podcast aired, Ellie Mae, ticker symbol ELLI is all of a sudden popping 9.5 percent that day, and why? Because the story is, it's going to be bought out. Indeed, Ellie Mae was, you can tell the story better than I will, but I will just point out, stock basically went from 70- 99 when we closed it out. So it was up 41 percent. The market at the time was up 10 percent, and Ellie Mae was off the market, so we froze its numbers here In this Five-Stock Sampler. We've talked about this each year since. But just amazing to think that within two weeks of picking a stock, this sometimes happens in real life, doesn't rick, in portfolios. Sometimes your companies get bought out and that's what happened to Ellie Mae.
Rick Munarriz: I think especially with the way you would like to approach these disruptive growth companies. They're going to be acquisition targets. They may not always be available for sale, but it does not surprise you when one your stocks gets acquired because they are something that someone thinks is important to them and it's disrupting their business or can make their business better. With Ellie Mae, they were really basically reinventing the game with how mortgage lending was done with enterprise software solutions to make things process more efficiently. So it did that surprise me when they were bought out. It was private equity firm Thomas Bravo paid about $3.7 billion of deal with worth $99 a share. Deals announced that February, it closed in April.
So within three months, you have locked in this 41 percent gain on the slant sampler scorecard in just three months, that's great money if you can take it. The only downside to this, and there is a bitter, sweet and I should get more bitter than sweet ending to this, is that a year-and-a-half later, Thomas Bravo went onto sell Ellie Mae to Intercontinental Exchange, ticker symbol ICE company we know for $11 billion, so almost tripled their money by basically flipping this amazing company that would better on our scorecard, on the sampler scorecard it would have actually said, just let it be and then let Intercontinental Exchange pipe directly from the tap, they would have paid more. So great job on the private equity firm, Thomas Bravo for doing that. But [inaudible 01:03:30] any for us and what could have been a much larger gain?
David Gardner: Yeah, bravo to them, it is exciting when you find out that your stock is getting bought out and it shoots up, it's generally stocks are bought up premiums by their acquiring companies. So the little fish that get grabbed like Ellie Mae, they are exciting to quote that day and see, I had completely missed the latter part of that story though, Rick, to think that the stock tripled just in a couple of years from there. Yeah. We really did miss out on some great gains. A friend to the mortgage lending industry, Ellie Mae, helping out mortgage brokers run their business through their platform. So one of those companies that had its own platform, Etsy has its own platform, Ellie Mae had stood one up itself. Obviously it's a very relevant companies today, even though it's much more opaque to most of us. But anyway, for this Five-Stock Sampler, it was the last of the five stocks shrouded in history, and Rick, do you want to say why these are Five Stocks Shrouded in Mystery?
Rick Munarriz: If I remember correctly, it was something about possibly like these were like bear market stocks like the feet of bear earlier we just repeated them again because we just felt inspired to do so.
David Gardner: That was the mystery and I'm glad that you remember. This is a long time ago, so you certainly weren't required to remember this. I had to double-check it myself. But the third Five-Stock Sampler I ever picked was Five Stocks to Feed the bear in February of 2016, and they had a great run over those three years. I decided, since I had to pick a new Five-Stock Sampler, right, as that old one ended, I decided, why not just repeat them again and make an important point about investing, which is, we loved in three-years ago. They did great, we love them today, let's buy them again, recommend them again, and they have done great. So very happy to say that the mystery part of five stocks shrouded the mystery. Because otherwise, what would unite Carter's with IPG, Photonics, Ellie Mae, Planet Fitness, and MercadoLibre. There are no themes that really makes sense for those, it's because we took a previous group that were picked in a bear market circumstances, stocks that we liked through a hard market in 2016. We just persisted them and kept holding them all of these, companies, like the ones we've talked about this week, all of these generally remained active recommendations. We like them here in 2022, just like Rick, we liked them in 2019 and in 2016. So the final accounting then for Five Stocks Shrouded in Mystery, the average is 67.1 percent gain as a group versus the market's 55 percent, 55.0 matched against the S&P 500. So this basket beats the market by 12 percentage points over three years. Again, they've already done really well. The three-years before they were up more than a 100 percent is a basket. They just added another 67 percent on top of that as Five Stocks Shrouded in Mystery disappeared in January of 2020. To send off with the music, Rick Engdahl, our Foolhalla tribute to Five Stocks Shrouded in Mystery. Another market bidder.
I want to thank you, get all of my guest stars this week. Sanmeet Deo, Asit Sharma, and my friend Rick Munarriz. All right, well that's it for Rule Breaker Investing this week. Three, Five-Stock Samplers covered a reminder next week, it's going to be a special podcast, Chris Hill joining me for the year the market skyrocketed. Can't wait for that. Have a great week Fool-on.
