The Stocks Are Losing, but That Doesn't Make Them Losers

In this podcast, we look back at some stock picks.

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This video was recorded on June 15, 2022.

David Gardner: For 30 podcasts done over more than six years, I pick five-stock samplers right here for you for free. Every year thereafter, the first year after the picks were made, and then the second year and then the third, three years after the picks were made, we reviewed them, check their numbers. I had some of the Motley Fool's best analysts on to review their stories, review. We got to calling these Reviewapaloozas. Yes, Reviewapaloozas used to be among my favorite of Rule Breaker Investing podcast, hasn't been very fun to review the performance of any stocks really this year, any stocks at all. I don't enjoy spending time during the week with you going over poor performance, sifting through losers, sharing losing numbers. But that is what 2022 has been all about. As I've said a few times before on this podcast, if you enjoy slow-motion train wrecks, if you're the type who Gooseneck interstate accident cleanups as you drive by, slowing up traffic for the rest of us, if Schadenfreude is your middle name, even in Germany, is that anyone's middle name? Probably not. Well, then this week's podcast is for you. One thing we always enjoy doing is talking stocks and having some of the Motley Fool's best analysts on to discuss them. Fifteen stocks are in play this week, and while the vast majority of them are market losers, most of these remain compelling businesses to me anyway. So I'm thinking you might be rewarded going forward for joining in this week only on Rule Breaker Investing.

Welcome back to Rule Breaker Investing. It's a big month for stocks, not necessarily for the stock market itself, but at least for this podcast. Any time we spend time going through 15 or so different stocks, you know we're stock-centric. Next week we will remain stock-centric. It's the Market Cap Game Show. I'll be having back our two most recent champions going head-to-head. Calling out the market caps with you, our dear listeners you getting to play along at home are four times a year tradition, the Market Cap Game Show. Stocks are in the air, and it's not that fun to talk about the stock market right now. But I think it might be fun years from now, to listen back to this week's podcast or next week's podcast, and remember the prices that some of us were getting to buy stock set when the whole market was on sale. Well, on this Reviewapalooza episode, we have once again, three five-stock samplers, and let me name them right now, going backward from here. One year ago, it was five stocks pursued by a bear. Little did I know how that name might come back [laughs] to bite me. Those stocks have done very poorly, but the good news, I guess, is that these games are played for three years. This five-stock samplers, the vast majority, are three-year games. As hard as it's going to be to look at the numbers from one-year ago, my final five-stock sampler, we're not even quite a third of the way through that ballgame.

Two years ago, I picked five stocks for America. I had America in mind at the time in particular because our nation was hurting so badly, right in the face of COVID, I thought about what were our core values. I tagged the stock to each. We'll see how those are doing. Then we do have one five-stock sampler, five stocks that passed the snap test, picked three years ago this month that we will be sending forever to Foolhalla. Technically, that sampler ended on June 5th of this year. So we'll be reviewing the numbers from June 5th for that final five-stock sampler. It's quite remarkable to me to see that just in between June 5th and where I am speaking to you today, the S&P 500 has dropped almost another 10%. We're talking about an extremely weak market. Spoiler alert ahead of Asit Sharma, our first analyst, joining me to talk about five stocks pursued by a bear. By the way, we will then have Nick Sciple joining me for five stocks for America, and Alicia Alfiere later in the episode five stocks that passed the snap test.

Asit, Nick, and Alicia joining in this week, that's going to be fun, but let me give the spoiler upfront. All three of these samplers are losing or have lost to the market. No surprise there. It's been so disappointing to watch green numbers. Sometimes wildly positive, bolded green numbers turn to red. Initially disappointing flattish pink numbers, and then more to red numbers, bolded red numbers in some cases. Spoiler alert for a second consecutive Reviewapalooza episode we had another some weeks ago. It's not going to be pretty. But I do want to say two things on the other side of the ledger. The first is, this is about the worst time in the market cycle that I think we could be talking about stocks and reviewing past five-stock samplers and sending one indeed to Foolhalla. Our Reviewapalooza tradition, when we send the oldest still active five-stock sampler up to the halls of meat and celebration, even sometimes just drinking a way our [laughs] sorrows in Foolhalla. But this is about the worst time in the market cycle. I just think it's worth mentioning that and putting it out there. I think a lot of us our mindsets are all over the place with the market, but I hope you're close to me anyway, in that you, your mindset is expectant of better things to come. You know, that the market always comes back overtime, never bet against America, Warren Buffett has said. Anybody who looks at any long-term graph of stock market performance knows it goes lower left to upper right. You just need to give the market time.

We have a family stock contest that I write a little missive about each month of the year. I'm just going to share a little bit of what I shared, especially with some of the younger members of our family. This week when I had the pleasure or mis-pleasure of updating the numbers in the family stock contents, most of us have picked stocks that have gotten more than cut in half in less than six months, just since the start of this year. I wrote, and I will just share with you, this hasn't felt fun at all, but especially for those family members younger than the age of 30, the market year of 2022 is really educational and ultimately a good experience to see the volatility of the market, to know it doesn't only ever go up, and to experience directly or secondhand the psychology of what it takes to be a lifelong investor. I continued, you know, full well, these times will come. In my experience, about once a decade, and that's what we're living through right now. This is definitely the worst market year since 2008-'9 and before that, 2001–'2.

The Motley Fool has been in business for just about 30 years, and this is the third such time, we're watching stocks get beaten, bloody and yet just as happened in the face of 2002 and 2009, so to will the market come back in the years to come, particularly the winning companies doing valuable and important work in this world, it happens every time. It never feels good until you can look back and see where it came from.

Well, speaking of where things came from, we've done 35 stock samplers in Rule Breaker Investing history, and as painful as these numbers are to review, as disappointing as it is for me to see five stocks that passed the snap test, which was once such a winning sampler retreat to Foolhalla permanently with a little bit of red on its shoulder as of this afternoon, nevertheless, the 30 five-stock samplers who picked the 150 stocks picked on Rule Breaker Investing over years and years, average and individual stock gain of about 67 percent. That's against the markets, the S&P 500's 33 percent. Across 150 stocks, even at the worst time, I think just about in the market cycle, still happy to know that 150 stocks have generated more than 5,000 points of Alpha. I think it's going up from here, we shall see. A little bit of encouragement, not just for you, but I'm often on this podcast talking to me as well. But enough talking to me. I say we get this started with Reviewapalooza five-stock sampler, number 1, it's five stocks pursued by a bear. I pick these stocks one-year ago this month, and at the time mentioned, this will be my final five-stock sampler. Well, how have they done in the year since? I'd like to welcome back to the show, my friend Asit Sharma. Asit, great to have you back to Rule Breaker Investing.

Asit Sharma: Great to be here. Thanks very much, David.

David Gardner: How has the last year been for you? Forget about these stocks for a sec Asit, I think one question that I want to ask each of my friends joining with me today is I don't enjoy watching stocks as much when they are dropping. That's something I've talked a lot about. So I try to do some other things in life that I would've otherwise spent gawking at the market. Can you describe either a new habit or intention or experience you've had as a consequence of being in a bear market?

Asit Sharma: I think David, being in a bear market, has given me the courage to do something I've been trying to for a long time, which is to pick up another language. Why? Because it's harder to look at the market than it is to go to my grammar exercises. [laughs] I'm trying to pick up the Turkish language, which is famously difficult because it's called an agglutinative language. One word gets tacked onto another. But it's a fun language, and I've thrown all caution to the wind. I'm at the age where they say it's really difficult to pick up languages. But I prefer to do this than worry about stock prices.

David Gardner: I love that you're doing that. I have never even try. I don't know a single, how do you say hello in Turkish?

Asit Sharma: Really simple, [FOREIGN] .

David Gardner: [FOREIGN] , wow. Well that's very kind of you. Thank you. Now I know my first term in Turkish. When you talk about agglutinative, I always think of German nouns. Is that another example? You'll see these incredibly long nouns in German that are single words of compound concepts. Is that also agglutinative?

Asit Sharma: I think. Now I have two sons that are pretty proficient in German, so I hope they're not going to [laughs] listen to this later and say dad you should have said no it's actually x or yes. Certainly David that's the same principle.

David Gardner: To the Sharma family I probably got that wrong and if it was gotten wrong, it was on me. Well, I'm delighted to know that you have that extra pursuit enabled perhaps by some extra time. Well, let's take a look now at five stocks pursued by a bear. What I like to do usually is talk, first of all about how the stock market has done Asit. The stock market is down 11.8 percent, the S&P 500 since June 16th, 2021, so we're not quite into a full year right now, the market is down 12 percent. Now it's felt like it's done a lot more than that to me and I think to a lot of Rule Breakers style investors, and I think the performance of this five-stock samplers so far is eloquent testimony. Let me first mention the companies in alphabetical order. Axon Enterprise, Peloton Interactive, The Trade Desk, Unity Software, and Zillow Group. Those were five stocks I had in mind. I think they'd already declined somewhat. I think that was part of the theme of this particular five stock samplers. They were already down some they were pursued by a bear. But man, if the bare didn't show up, it's a little bit ironic to me Asit that I think we have officially entered bear market territory this week as the S&P 500 declined below a 20 percent loss since the start of the year. It is ironic that the very week, you and I do this Reviewapalooza for this five-stock sampler, the one-year anniversary, we're now Asit in a bear market.

Asit Sharma: Well, I wish the bear would go back into hibernation. My prediction is that many of these, if not all, these companies are going to be just fine over a longer time period.

David Gardner: Well, the one that's done the worst, which is the way I like to start it the ticker symbol is PTON, and this is Peloton Interactive. The stock was at $105 a share this month, last year, right now it's just down below $10 a share Asit down 90.9 percent up about the worst stock pick somebody can make to lose 91 percent of your value one year later across the market down 12. We start with a minus 79 in the Alpha hole, what has happened to Peloton?

Asit Sharma: The story with Peloton should be familiar with anyone who follows the connected fitness market. This is a company I think that almost got too much to soon or had too much of a good experience too soon. Sometimes you can get spoiled. Peloton was at the beginning of a longer journey to figure out its business model, where they manufacture, where they in essence, a subscription-based company that was going to enjoy really great margins from a software-type subscription business that was connected to those bikes and treadmills. What happened was as the effects of the pandemic faded away, people start to go back into the real-world. The demand for the bikes dropped off. They got such a big pull-forward during COVID that I think it masked for management the need to figure out at the end of the day how they were going to structure their profit and loss statement, how they're going to make their margin. Was it through profit in the manufacturer bikes? Was it through the subscriptions? How does that whole puzzle come together? Now they have a new CEO, and this is veteran CEO his name Barry McCarthy. I like the way that he is working on slashing the inventory where he can, trying to fix cash flow, doing all the things you would in a turnaround. I think now they get a chance to rethink life and figure it out. I wouldn't say that this is the company that's going to lead the basket into glory, but it's got a decent chance to make a comeback. [laughs]

David Gardner: Market cap has gone from $30 billion to just north of $3 billion so a much smaller company in at least the market capitalization terms, I would say it's brand hasn't declined nearly that much. Its public awareness clearly, the company is losing money and this has been a horrifically bad transition from in-COVID to somewhat anyway out of COVID at this point and Peloton has been badly hurt, I would say probably badly managed. The only real bad here is me for putting this into our five stocks pursued by a bear. Let's go from the worst stock to the best performer. I regret to say the best performer here is itself down 22 percent, which means even The Trade Desk ticker symbol TTD is down itself to the market by 10 percentage points. I never like to talk about being down 22 percent as a good thing, but relative to the other four stocks in the sampler, something's going really right for The Trade Desk. Do you agree?

Asit Sharma: I agree with this. I think what's going right for Trade Desk is that it knows exactly what its identity is. There's never been any confusion about the business model versus Peloton. This is a company that works in the programmatic advertising market. They make it easy for advertisers to place digital ads and they've just become better and better at what they do. The example I wanted to touch on here is the coming change in the way companies track us around the internet. Google Chrome is going to drop its cookies by late next year, and The Trade Desk is leading the charge to find a different way to track us one that's a little fair in terms of privacy, but still helps advertisers to reach us, gives us the ability to comfortably opt into some advertising. I think this is going to be great for their business model. It's a company that is still growing in the strong double-digits. Jeff Green is a really seasoned CEO, wonderful leader, and I think we see a ton of innovation going on in this company as well. They've announced some really cool integrations that offer real-time data to big companies like Adobe, so it's a company that understands what it needs to do in the marketplace. They are passionate about it. I can understand why they are only down 22 percent odd versus some other tech companies which are down a lot more.

David Gardner: Well, since we're talking market caps, and of course next week is our market cap, game show, Trade desk right now capped at about twenty-three-and-half billion, which ends up being 6-7 times the size of Peloton Interactive, which I think is a lot better known than the Trade Desk. Also I'm assuming if you were forced to buy one of these stocks, not that we're going to force you to do so, but I'm guessing you'd probably by the Trade Desk right now.

Asit Sharma: Actually, I might choose another one in the basket. The accountant in me doesn't like the cash flows that are associated with Unity Software, they're still losing money. I think they could do a better job in generating cash flow, but I love the way this company invests in the future. They offer a creative platform for gamers to develop games. They offer another one that can be used by architects. It can be used by filmmakers. This is a company that is working on the tools for creativity in the next decade. There's a long path to greatness for Unity it's not going to be an easy path for them. But I love the ambition of this company, and at this point in a bear market it's sometimes good to kick the tires on companies that you like. Maybe they're not as profitable, so they've been pushed down even further. If you believe in the concept and management, I mean, this is an interesting company. I think investors should keep their eye on it. It's one of the worst performers, David, but it could be one of the most resilient as conditions improve.

David Gardner: Stock is down from $200 in December to just right around $33 as we speak today. Again, just cataclysmic drops $200 down to $33. The market cap, well about half of The Trade Desk's at 11.5 billion. But so of the five asset you favor Unity the most. I like Unity a lot too of course, that's why it's in the sampler. I don't like the performance of any of these Unity down 65 percent for the sampler so far again, against the market's 12, that's minus a 53. But thank you for the positive words there. Would you like to add anything about another single letter, ticker symbol company Unity Software owns the letter U. That's it's ticker symbol Zillow Group is Z. It's also ZG by another share class. But any thoughts about actually let's close it out with A-Z. Axon Enterprise, as I mentioned earlier in this sampler down 43 percent, Zillow Group down 72 percent. I'll give the final accounting in a minute, but I will say, give us just a little bit of thinking on Axon Enterprise and Zillow Group.

Asit Sharma: Both are trying to play important roles in the economy. Axon offers body cameras. They have a software-as-a-service platform that is aimed at companies that buy its products. They have a product called the Axon Fleet 3, which is AI-enabled license plate recognition. It's a company you can see for a long time just playing a greater role in our economy. It does a lot of good out in the world, its main purpose as stated, is to try to help reduce crime through its product. This is an important company for people who believe in the potential of technology to make the world a safer place. Zillow, I think, is a little challenge just now because the real estate industry is at a crossroads. There's a lot of pent-up demand for housing and yet we have mortgage rates that are flying through the roof. This is one, the thesis isn't broken for Zillow, but it's maybe one of the more exposed to near-term macro stuff in the economy. Again, as we go out over a longer time period, you were mentioning the power of brand earlier as we talked. Zillow's got such a great brand in the real estate space, I think in residential, housing, they're going to be an important player. I wouldn't count that out either, but I would lean Axon, I'd lean the beginning of the alphabet between these two choices versus the end.

David Gardner: You like Unity Software the most all five of these I liked one year ago, I like them a little bit less right now because I just don't like things that lose this badly and yet, I think often the strength of balance sheets helps us think through what's going to come back and of course, the strength of opportunity, is the company doing something important that's good for this world that always counts for so much for me? How could I not also reference brand? Because I think brand accounts for a lot. Well, take it all-in-all Asit. This is on me, not on you. I thank you though. I'm not going to shoot the messenger. You're the messenger of some good thoughts about these companies. But take it all-in-all, the stock market down 12 percent over the last year, these stocks averaged a loss of 59 percent. That is 47 percentage points under the market averages. If there's any good news and this is about all I can come up with right now. We're only through just about the first year of three. This will be fascinating to watch. How these companies do, how the economy rebounds, which ones of these rebound? Can we get anything, any green back on this red scorecard for the 30th and final five-stock sampler. Asit, do you have your fingers crossed for us?

Asit Sharma: I don't even have my fingers crossed, David, I look forward to the performance of these companies and I'm already impressed by the performance of this basket in advance.

David Gardner: [LAUGHTER] Well, thank you so much Asit for visiting and let's revisit this together a year from now, shall we? It'll be interesting to see where we are. Asit Sharma, thank you so much for joining me this week on Rule Breaker Investing.

Asit Sharma: Thanks so much for having me, David.

David Gardner: All right, well thus much for now, for five stocks pursued by a bear, it's time to go. Let's strap ourselves into the way back machine and we need to go back through time, Rick Engdahl.

We have alighted upon June of 2020, things were not pretty in the world at large. The economy was shutting down. There were a lot of Americans hurting for lots of different reasons and so I was inspired that week to think about what would be five stocks for America. These are companies that are, of course all American companies. But each of them I tag to one of the core values as I've thought about America. Things like Liberty in enterprise and justice. We're not going to revisit each of those, but that was the uniting theme behind this five-stock sampler, five stocks for America and to review this five-stock sampler with me, my pal Nick Sciple. Nick, great to have you on Rule Breaker Investing.

Nick Sciple: Great to be here with you, David. First-time, what I guess visitor or whatever you want to call this long-time listener [LAUGHTER] happy to be here with you.

David Gardner: Absolutely. Anybody who's a Motley Fool member has I think got to know Nick and Asit and Alicia, all three of my guests really well, because Motley Fool Live, the equivalent of the TV show on our website that's there for our members. Every weekday, Nick, you are regularly featured and I've always drove so much of your morning show and other commentary on Motley Fool Live. Thanks a lot for that and this time we get to do a little bit of a dive into stocks. I know sometimes you've been talking especially macro recently. The joke being you're not a macro thinker necessarily or we're not a macro show, but Nick, you can't not talk about macro a little bit these days.

Nick Sciple: No. That's the top of the headlines. You can't turn on CNBC without hearing about interest rates and inflation and all of these, I guess second year macroeconomics, business, I'm more of a microeconomics thinker, but the headlines these days are those macroeconomic topics for better or worse. I am looking forward to the days when we get past some of that and we talk about what real businesses are doing in the real world, but that's just me.

David Gardner: Well, let's do that together for about 10 or 15 minutes or so, looking at these five companies now first, let me mention how the stock market has done at the bogey, of course. Then I'm always looking to beat and I'm sorry to say spoiler alert ahead of time none of the five companies in this sampler is beating the market averages, which looked tough to beat over two years. Is this true? The market's up 16.3 percent from where it was two years ago. Again, so many stocks so far down, including some of these, but it is nice to know Nick that the market, the S&P 500, those in the index fund anyway, have enjoyed a 16 percent return in these two years.

Nick Sciple: The market has continued to march up, although some of these companies haven't performed quite as well. Although I won't say the market hasn't been marching quite as well the past six months of the year, 2022 as they had been the past couple of years before that. But in any event, these companies are not keeping up with where they've been in the past couple of years.

David Gardner: That's right in five stocks for America, I used to open up the sampler spreadsheet with joy and see green. Now what we see is red. But let's talk about the companies, each of which is a really interesting company that I still certainly believe in going forward. Let's start with, as tradition would happen, with the worst performer again, the market up 16 percent, which makes the drop for Boston Beer company. Ticker symbol SAM, from 524 two years ago to just below 300 right now, a drop of 44 percentage points. That is well down to the markets gain of 16. We're going to call that minus 61 in the loss column for alpha, for SAM, so far. Nick, are you a beer drinker?

Nick Sciple: I like to have a beer every now and again. I'm much more of a beer drinker than a liquor drinker. I like a craft beer. Miller Lite, is my main line beer of choice?

David Gardner: Yeah. What about Hard Seltzer?

Nick Sciple: Haven't gotten into the Hard Seltzer game as much. We might talk about this a little bit later. I'm a little bit more into these ready-to-drink cocktails that have emerged in the past couple of years. High Noon is one that I'm a fan of it, but yeah, I've had a future release in my day.

David Gardner: Very nice. Well, let's transition then into looking at this company. Nick just taken a big picture of you here. Stocks almost just about been cut in half over these last two years. What's happening to the Boston Beer Company?

Nick Sciple: Sure. The Boston Beer Company, when folks hear about this company, probably think of Sam Adams, there their [inaudible 00:27:51] beer, lots of commercials. They were the first mover in this craft beer. But today, much less of a beer company, more of a malted beverage company and the big drivers are brands like Truly Hard Seltzer, Angry Orchard, Hard Cider, Twisted Tea products. Those products have really been driving the business in recent years are actually a majority of the business today. A slowdown in that part of the business is really what's driving this underperformance of SAM in the past year. In particular, Hard Seltzer, where they're one of the leaders in the market with their Truly product. We're really seeing incredible growth in Hard Seltzer over the past couple of years. In 2020 Hard Seltzer grew a 158 percent year-over-year and deliveries. Big slowdown in 2021, however, with only 13 percent growth in the category. That left the Boston Beer Company in a situation where they had rushed to increase supply to keep up with the demand they saw coming down the pike. We even saw CEO Jim Koch say that the company had to toss, "Millions of cases of Truly back in October."

David Gardner: Oh my gosh.

Nick Sciple: Part of that is, we've seen this huge growth in Hard Seltzer. Perhaps you see a fad slowing down. These things can't grow to the moon. We're not going to be exclusively drinking Hard Seltzer to the detriment of other categories. But another potential competitive threat that I think we're seeing rise up, are these ready-to-drink Cocktail. We just saw this week actually Coke make a deal with Jack Daniel's. You're going to able to buy Jack and Coke in the store and that's indicative of this big growth we've seen in ready-to-drink products. I gave you those numbers in growth of Hard Seltzer in 2021, only 13 percent growth in 2021 after a 100 percent plus growth in 2020. But if you look at those ready-to-drink cocktails in 2021 grew over 118 percent year-over-year. To a certain extent, the loss in these Hard Seltzer markets, the winners have been these ready-to-drink cocktails and that's a potential threat. We actually saw Jim Koch write a letter to a large brewers organization in 2021, where he said, speaking about concerns about these ready-to-drink cocktails. Historically, liquor based drinks have been taxed at a higher rate than multi-base drinks like beer and Ciders, and things like that. He wrote in his letter, "If they succeed in changing state regulations for these other purveyors of ready-to-drink cocktails, the beer industry, brewers and wholesalers alike would face virtually permanent declines in volume, revenue, and profits while liquor volume and profits would sour." I think a couple of things going on, increased competition from these ready-to-drink cocktails and then also, again, you can't grow at a 100 percent growth rate to infinity with these Hard Seltzer. Those are the things that are driving down Boston Beer stock.

David Gardner: It is ironic to think that the company made a smart forward-thinking bet with Hard Seltzer with the rest of the industry and yet in the face of huge growth, we see the stock price with significant decline. Stock down by the way 700 last summer. Now when you're quoting SAM these days, seeing it just below 300, well again, it feels like so many other stocks, especially Rule Breaker Style stocks on the market today. Well, let's go Nick, from the worst performer in this sampler to the best performer and all four of the other companies, Nick, all of them are down. Again, the market up 17 percent, all of them are down somewhere between eight and 15 percent. They're all about 25 percentage points to 30 percentage points behind the market averages. The one that's technically ahead of the rest is Take-Two Interactive, down 8.4 percent from a year ago. Now Nick, you and I know in some long time discerning listeners may remember, I never did pick Take-Two Interactive as part of this five-stock sampler, picked Zynga, and Zynga the mobile software games company ended up getting bought out by Take-Two Interactive not too long ago, and shareholders were paid out some cash, but also Take-Two Interactive stocks. I'd simply converted over what your dollar for dollar investment would've been in Zynga two years ago, to what it looks like in Take-Two Interactive today. A little bit of technicality there. Yeah, sometimes these stocks get bought out in bad times, sometimes and in good. Take-Two Interactive. Nick, any thoughts around this best performer in this sampler?

Nick Sciple: Sure. I think Zynga was an interesting company. The acquisition by Take-Two in 2021, they put up their best annual revenue and bookings ever, and put up their best first quarter ever as well here in 2022. However, when Take-Two announced their deal to acquire Zynga stock for $3.50 in cash and about 0.0406 shares of Take-Two, doctor [inaudible 00:32:37] per Zynga, stock was down over 30 percent, and there's some drivers of that. Number 1, as the pandemic was coming to an end, a little bit of a slowdown in mobile games into the category where Zynga is a leader. However, another factor that was driving Zynga's stock down is if you think about how mobile games or monetize mobile games have been monetized historically through advertising. If you think about the way folks interact with a mobile games, spending a few minutes on the platform, you aren't spending $60 upfront and the way you do for traditional game sales. In that business, dependence on advertising means Zynga was impacted by Apple's iOS changes in 2021 and the ability to be able to target ads in the same way that you could prior to those ad changes, and that was a contributor to the sell-off in Zynga stock. However, I think Zynga combined with Take-Two is in an interesting spot. Zynga being one of the largest providers of mobile games in the world. They have a lot of first party data on the types of users they are engaging on their platforms. They also acquired a company called Chartboost in, I believe it was August of 2021.

That was a leading mobile ad platform to be able to essentially take all this first-party data we have marry it together with an advertising platform and improve our advertising business performance. There had their highest ever advertising revenue in Q1 of 2022. I would suggest that some of that business is taking hold. Combined with Take-Two. I think there's a lot of opportunity there as well. Take-two historically has been a laggard in the mobile game market relative to some of these other Tier-1 game developers. Although Take-Two had been making some significant investments in mobile games, combined together with Zynga, they'll have an even bigger platform of first-party mobile games data that they can plug into that Chartboost system and really move significantly into the advertising side of things. Another thing that is interesting, as well as Zynga was getting ready to launch their Star Wars Hunters franchise, which is going to be Zynga's first cross-platform game offering. That's again another area that Take-Two has lagged behind some other players in the market. If you think long term, where gaming is going, cross-platform, ad-supported games appear to be where business models are increasingly moving in the future. You can tell a story about how the combination between Zynga and Take-Two is value creative. The management thinks that too. If you looked at the Take-Two earnings call back in May, the CEO of Take-Two, Strauss Zelnick, said he thought the stock was deep value at a $158 a share when they were buying back stock in Q2 of last year. Well, today we're in a 120 this year. Again, this is with Zynga combined, this event, again, this additive acquisitions. I think the stock is very attractive here. I own it and I think it's an interesting one for listeners to look at too.

David Gardner: Well thank you Nick. Taking the longer view, which sometimes we forget to do in the face of one or two or three-year sampler reviews, Take-two Interactive has been a good performer. It's been an outstanding performer really for Motley Fool Rule Breakers over the years. But just looking at the last five years, a market beater, not spectacular, up 75 percent and the market's up 50 percent. It has beaten the market, so a lot of up and down for Take-Two Interactive. Well, I mean, if the worst performer, Boston Beer is down about 44 percent, and the best performer Take-Two Interactive down about eight percent. That means this sampler is presently losing to the market. Again, good news. It's got another year for a comeback. These stocks had been doing well until about 6-9 months ago. But Nick, let's take quick looks at the other three. Down 8.7 percent. Just behind Take-Two Interactive, down less than 10 percent which I almost think it's important to say these days, is Starbucks.

Nick Sciple: Yeah, Starbucks continues to be America's coffee shop in the same way you think about McDonald's as America's hamburger stand. Starbucks continue to put up some pretty reasonable numbers. Most recent quarter comp sales growth up 12 percent even at significant scale, continuing to grow its sales [OVERLAPPING]

David Gardner: Reopening.

Nick Sciple: Reopening exactly. We talked earlier about how Boston Beer isn't necessarily a beer company with all this focus on Truly Hard Seltzer. I think if you look at Starbucks, I'd argue it's not necessarily a coffee company either. About 80 percent of their sales are now from cold beverages. I think you could say at the milkshake company and more so been a coffee company, but why is Starbucks stock struggling? Well, part of it is some lockdowns in China, a significant portion of the business coming out of China and most recent quarter comp sales in China down 23 percent. Also, some headwinds from labor costs. There's been unionization efforts across the company, which is of course, hitting the business. There's a quote from now returning CEO, Founder Howard Schultz back at the [OVERLAPPING] business once again saying that we've done our best to build up our benefits over the past several years, but still not good enough for the Gen Z employees. There's been some headwinds on labor costs, those things. I think Starbucks, again still America's coffee shop, but some of these macro headwinds, whether it's labor unrest or issues actually doing business in China that's slowing down the company.

David Gardner: Well, the two others are Etsy and Axon Enterprise. Let's talk a minute or two about both of them. Of course, Axon did show up in the earlier sampler, the five stocks pursued by a bear. But let's shift to Etsy briefly, what's happening in Etsyville, Nick Sciple?

Nick Sciple: Sure. Etsy continues to be the dominant platform for these online handmade gifts, things of that sort. However again, like Starbucks coming out of the pandemic, some headwinds as folks move away from e-commerce sales. In addition, Etsy has seen some pushback from its sellers in the face of an increase in it's transactions fee by 30 percent. They increase it from five percent to 6.5 percent. Good for Etsy in the sense that they are able to capture more capital moving forward, but a little bit of a pushback from consumers. But the big thing pulling the stock down, I think, is just this lack of enthusiasm among investors related to e-commerce stories that we saw past couple of years ago and some of the tailwinds that have been behind them are coming to an end.

David Gardner: Well, Etsy, two-years ago this month, about $80 a share, it's at $72 now that's down 10 percent again, the market up 17. The last one is Axon Enterprise. I did cover it briefly. I think listeners will be familiar with this one. This one, I picked in a number of samplers and a lot of Motley Fool members I think probably owned or at least are aware of Axon Enterprise. Taking those slightly longer view, the two-year view, the stock is down 16 percent, again, the market up 17 percent. It's also like its brethren and sister in here, down about 30 percentage points to the market these past two years. But Nick again, the good news there is another year left for five stocks for America. What would you like to see going forward from Axon?

Nick Sciple: Well, hopefully more of the same of what the company has delivered in the past. If you look at the past five years, they've grown revenue at 26 percent compound annual growth rate. If you drill into that a little bit more hardware sales, so things like body cams and the taser devices up 3X in that period of time Cloud, which is the evidence.com where you store all that data you collect from body cameras up 47 percent on a compound annual growth rate over the past five-years. If you look in the first-quarter of 2022, overall revenue up 32 percent, the Cloud revenue up 47 percent. Growing faster or in line with that historical five-year growth rate. I think the big thing that's brought down Axon stock is the valuation. It peaks back toward the end of 2021 at somewhere around 15 times sales evaluation number. Now we're down in the six times or seven times sales range thereabouts. The performance of the business is very strong. There's not a lot I would be upset about as far as continuing earnings growth. However, the valuation has compressed. One thing I will point out, however, there has been some headlines in recent weeks following that the tragic school shooting the past couple of weeks, Axon came out saying that we're going to deploy drones, that we'll have taser enabled devices on them. That statement was made without consulting the AI ethics board that our axon had put in place earlier this year and it's led to a number of ethicist on that board resigning. On one hand are very happy to see Axon trying to continue to push technology forward and keep society safe. That's the core part of their mission. Their mission is obsolete, the bullet by the end of the decade. Certainly this will be part of that. But in an industry that again, you're deploying force on human beings as something that is very concerning to the average citizen you would like to see the way the company goes about deploying that technology. Be a little bit more step-by-step rather than making willy nilly statements. I think maybe what we've seen these past couple of weeks can be corrected going forward or they can learn from this incident this month due to do better moving forward.

David Gardner: Well, we certainly have to comment on that because it does seem important and recent. But also taking the longer view, I do really appreciate what this company does. I much prefer a non-lethal world when we talked about weaponry, and that's really what Axon's about. Stock up from 25 to 85 these last five years, despite the drop as Nick alluded to from 200 last year to just down below 100 right now. But still a market whopper and a company, I think we like a lot going forward. Market cap by the way, below seven billion, so 6.5 billion or so today for Axon Enterprise. Well Nick, thank you very much for an info-rich look at this five-stock sampler, five stocks for America. I really wish my numbers were as good as your analysis, but the facts are these, stock market up about 17 percentage points over the last two years. These stocks in aggregate down 17 percentage points these last two years. What used to be a winning sampler is now 34 percentage points in the whole. As I think I've hasten to add a number of times there's still more time left for five stocks for America. We'll check in a year from now summer and send this one-off to Foolhalla, I hope, with some better numbers. But Nick Sciple, thank you so much for excellent analysis and you're good foolishness, sir.

Nick Sciple: Great to be here with you, David. If you had told me five years ago I was going to be on this podcast with you, I would have been very excited. [LAUGHTER] So you've made my dream come true.

David Gardner: [LAUGHTER] That's so kind. Thank you, Nick. Before I let you go, I want to make sure I ask you the same question I asked Asit that I also asked myself, which is, if you're like me, when the market declines, you don't spend quite as much time looking at the numbers. It's just not as fun. Maybe you take some of that time we were spending, I would even say somewhat voyeuristically and you supplement it. You converted into something more positive. Asit learning a new language. Nick, what have you been doing the last year or so that's different from before?

Nick Sciple: Well, sure. I'm coming up on my one-year wedding anniversary. I got married last July 17, 2021.

David Gardner: That's a great answer.

Nick Sciple: So I've been busy traveling in the world, going on honeymoons and doing all those things. There have been a happy year married so far and looking forward to many more.

David Gardner: Well, that's probably the best answer I can imagine that question. Congratulations again, Nick Sciple and congratulations ahead of time in your first year anniversary, I think it's July. Come back and join me sometime. Thanks, Nick.

Nick Sciple: Anytime.

David Gardner: Well, two out of three ain't bad. But you know what is bad? Three out of three. All three of these are market losers. I guess it gets a little bit better though. I'm delighted to be joined by Alicia Alfiere to talk through five stocks that passed the snap test Alicia, from June 2019.

Alicia Alfiere: Yeah, so glad to be here with you.

David Gardner: Thank you. Let's put on our seatbelts because we're about to get in the way back machine together, the way-back music, and let's go back to June 5th of 2019.

On that fair day, I hope it was a fair day, it was June, I picked five stocks that passed the snap tests. Now, we didn't talk about this offline and I never expect my analysts who have listened to the original podcast, Alicia, but do you know what I mean when I say the snap test?

Alicia Alfiere: I do and I did listen. I have my own explanation. I am a Marvel fan and a bit of a nerd, so my explanation is this is, if Thanos snapped test fingers and these companies disappeared, you and the rest of us would notice and you would feel it and care.

David Gardner: Beautifully recounted. I first wrote about the snap test in the Rule Breakers Rule Makers book of 1998. I couldn't have known at the time probably about Infinity Wars or really what would have become of Marvel, which at the time was really just a comic book company, wouldn't make the shift to the big silver screen until the early 2000s. Anyway, Alicia, thank you for rebranding in some sense the snap test with a Thanos test, and yeah, these five companies, and I'm going to read them out now alphabetically. Oh my golly, Axon Enterprise, I picked it three Junes in a row. Axon Enterprise, Fair Isaac, Live Nation, Nintendo, and Twitter. What I was contending three years ago this month, as you have ably recounted, is that I think that if any of these companies disappeared, a lot of us would notice and the world would care. The reason that the Thanos test or snap test, I think leads to better investing for those who follow it is that it has you focused on companies of real consequence, you're going to be avoiding a lot of penny stocks or fly by-nighter, or hope in a dream stocks because you're really focused on companies doing big important things like these five that we'll talk about now. Let's first share how the market has done Alicia, and the market over the last three years is up 45 percent from where it was the S&P 500 three years ago. Is it that interesting? It doesn't feel that way at all, right now, emotionally, psychologically, Alicia I see you, nodding your head from your new venue in Colorado, which we'll be talking about it a little bit. But isn't it interesting to think that the market has actually really outperformed the norm over the last three years? Because, of course, you and I know the market typically rises 9-10 percent over three years, that would be 30-ish percent. Alicia, stock market up 45.1 percent from three years ago.

Alicia Alfiere: Yes and I think the important thing to remember here is that this is a really good example of zooming out an increasing year timeline.

David Gardner: I agree. That's something that is sometimes hard to do, especially in the face of such poor performance for the market. But if there's one thing I hope this podcast helps our listeners do from one week to the next, it's zoom out a little bit. Thank you for that reminder. Speaking of zooming out, before we dive into these stocks together, Alicia I have been asking each of my guests this week if they are converting some of their past time they might have spent gawking at their stocks going up into something more positive. Could you describe a change in your life circumstances or habits over the last year or so?

Alicia Alfiere: Sure. As we mentioned, I recently moved to Colorado, so what I've been doing instead of checking my portfolio every day is I've been taking walks and exploring the area and the sky in Colorado is amazing.

David Gardner: It's sky state.

Alicia Alfiere: It's really help speed to put things in perspective, I think

David Gardner: I also love the sky. Talking about really geeky stuff like video games, which we talked about earlier, or Marvel these days, whenever you have like elemental choices that you make with your role-playing character, I always select air, not fire or water or earth, I am an air person. I love big skies, clouds, birds, planes. The sky in Colorado is just so much bigger than I think it is here in the Washington DC area.

Alicia Alfiere: It certainly feels that way and it's beautiful. I can't tell you how many times I've just marveled at the sky.

David Gardner: Well, I'm marveling that you're even on the podcast this week, Alicia, because you mentioned to me in a humble, I would almost say sheepish manner that before this podcast throughout the day this morning, you were being moved in or movers were [laughs] in your house. As I recall, it is one of the five most stressful things in life for a lot of people. Thank you again for making some time with us on Rule Breaker Investing this week.

Alicia Alfiere: Of course, I am coming to you among boxes. [laughs] It's better than being in an empty house, I would say that.

David Gardner: You and I can agree on that. Good. Well, let's agree on some other things. One thing we can agree on is that the worst performer of these five companies, and this is ironic, perhaps in the face of so many headlines, although maybe not ironic is Twitter. Twitter, of course, I'm not going to say in infatuation of Elon Musk because I hope that's still mostly Tesla, but certainly, Elon making lots of headlines saying he's going to buy Twitter out. Twitter been a volatile stock. Three years ago, the stock was at 36 dollars a share and it closed out June 3rd, which is when this sampler ended, this three-year game ended on June 3rd earlier this month at about 40. Twitter was up 10 1/2 percent, but the bad news Alicia markets up 45 percent, so severely underperforming.

Alicia Alfiere: Yes, and what I would say here first is that Twitter definitely passes the snap test because if it were gone, a lot of us would miss it because of news, interacting with people, and certainly Elon Musk would no doubt miss them if it were lost in a snap. Though there are question marks around the acquisition and that certainly isn't helping the stock. When we look at what happened, so first, there's been drama with Elon Musk potentially buying the company. But apparently, there has been some drama with the number of bots on Twitter, the company's willingness to provide raw data to him. It's essentially like a long-running TV series; we're left asking the question of will they or won't they. But unlike TV viewers, investors don't like the uncertainty. There's also been a fair amount of cost to fuel Twitter's growth. Last summer, Twitter was looking like a really interesting opportunity. They had a renewed focus to grow the platforms relevance, they had positive momentum with advertising revenues growing even faster than their user base, suggesting that they were doing a good job monetizing their product. To be fair, from 2019-2021, revenues increased 47 percent, monetizable daily active users, which are people, organizations, and other accounts logging to Twitter.

David Gardner: Only investment analyst say monetizable daily, what did you say again? Asset?

Alicia Alfiere: Monetizable daily active users, it's a mouthful. [laughs]

David Gardner: Active users

Alicia Alfiere: But those users increased almost 43 percent. But that growth, as I said, came at a cost. Twitter's R&D expenses, or research and development expenses, increased 83 percent in that same time period. A lot of those product launches that looks really promising, like the ability to tip other users and Twitter subscription service that let you undo a tweet, they haven't quite paid off yet. Add to this the fact that Jack Dorsey left to focus solely on Block also known as Square, which was a bit of a mixed bag. It meant losing a co-founder, but it also meant that Twitter would gain a new CEO, longtime Twitter employee, Parag Agarwal, and that would mean that they would have a leader that was focused solely on Twitter. But it often takes time for a new leader to really get their footing to pivot and implement their own strategies on a business. It's really trying to turn a massive ship in the ocean. That means that changes in direction or strategy just can't happen immediately. But then that turning ship got hit with a force of nature that is Elon Musk. We'll have to wait and see what happens if the acquisition happens, what new leaders will take the helm, and what their strategies will be for the future.

David Gardner: Yeah, it's funny looking at Twitter stock, it was right around 37 before the Elon announcement and all of the [inaudible 00:53:22]. Right now as we speak, it's back down to right around 37, so there's been a temporary blip and we're left on the horns of a dilemma not quite knowing where the stock is going to go from here. Since this five-stock sampler closed out a couple of weeks ago, the numbers are fixed where we are, but the story continues and Twitter touched over 70. It was flirting with 80 points last year, so to see it again down below 40, more than cut in half from its 2021 highs, I've continued to find the company interesting and favorite. I do think it still passes the snap test to your point. Thank you for that, Alicia. Well, from the worst performer, we go to the best performer and Live Nation out of this group of five stocks, remarkable, I think because, for two of the three years of the sampler, many concert venues were closed for business altogether. Live Nation, which, of course, sells tickets on some of the venues, partners with a lot of the acts, a lot of rock music fans like their Live Nation. Actually, a lot of people don't like Live Nation that much in my experience because they feel like the ticket that they buy from the platform it usually has some tack-on additional service fee seems high, but at least from a business standpoint, Live Nation, well finished strong. The stock up 54 percent over these three years. Again, the market up 45. Alicia, two of these five companies, Live Nation and Axon Enterprise, which we probably don't need to talk too much about, we'll speak about it for a minute in a sec, but Live Nation, the number 1 performer, how did this company ticker symbol LYV somehow go up more than 50 percent through a pandemic?

Alicia Alfiere: You know what? When we were talking earlier, I told you I was really glad that they were the winner in this sampler just because their journey over the last three years has been incredible and difficult. The biggest challenge that Live Nation faced over this period was COVID, of course, and the impact it had on our ability to see friends and family let alone go to a crowded concert venue. It was almost like someone snapped their fingers and most concert disappeared, and I think we all noticed. In 2020, Live Nation saw revenues fall 84 percent and full-year revenues were under two billion, which is pretty close to just one quarter's worth of revenues in a normal year. Live Nation restarted their concert business about halfway through 2021, and there was a lot of pent-up demand. As a result, the fourth quarter in 2021 saw the largest number of tickets sold in a single quarter, the highest gross ticket value, excluding refunds, and their resale business also hit record highs. Here's a great statistic. In the last five months of the year, Live Nation had more than 15 Million fans attend their outdoor events in the US and the UK, which was higher than the same period in 2019. As the world continues to reopen, people are still looking to spend on experiences as opposed to things like we did at the height of the pandemic. So far this year, Live Nation is looking pretty promising. They delivered their best first-quarter efforts despite some markets taking longer to reopen in the pretty positive about the road ahead. Over 70 million tickets now sold for shows in 2022, which is up 36 percent from 2019 and early reads on consumer spending, obviously a concern since a lot of people are concerned about inflation. Early reads on consumer spending shows that fans are spending a fair bit when they go to shows too. With average revenue per fan up 30 percent compared to 2019. Since we started talking about COVID, COVID is having less of an impact on their concert schedules and by March in the US, they canceled only one percent of their planned concerts. Potentially good news for the rest of the year.

David Gardner: Just a really a remarkable story and I'm guilty as charged when I ask myself before the show, who's the CEO of Live Nation, I couldn't answer my own question. I'm not going to put you on the spot because I think most of us, Alicia, don't know who the CEO of Live Nation has been, but he's been there since Clear Channel's spun off Live Nation into its own company in 2005. Michael Rapino, a Canadian American business executive, has been for 17 years and counting the CEO of Live Nation, you can only imagine what he was saying to his employees through this period of time, somebody should make the Michael Rapino story so we can see at least the Hollywood version of the inspirational speech he must have been giving to the employees. Especially as things open back up, a rocky like ending and at least for this five-stock sampler which has now ended, and we're about to send to Foolhalla. This five-stock sampler was carried by the best performer that you just mentioned, Live Nation ticker symbol L-Y-V. Now, it's worth pointing out that Axon Enterprise, which also made it into this five-stock sampler. Axon beat the market. Talk about taking the long view. Axon up 52 percent over these three years, the market up 45 percent. The longer you've held Axon, the happier you are with it. I trust that's going to be true going forward. But Alicia, is there anything you would like to say that Asit and/or Nick didn't already say about Axon Enterprise.

Alicia Alfiere: Well, I would only add that the company isn't just resting on their laurels and leading growth define them. They're also working to expand the ecosystem of solutions in order to continue their growth. They have an expanded virtual reality simulator, which is a training solution. They also have Attorney Premier, which was launched just last year and aims to help prosecutors and defense attorneys manage digital evidence, so they're continuing to expand.

David Gardner: Well, it's rare that we talked about the same stock in three samplers, all in the same Reviewapalooza. But I guess without even realizing and I had Axon the brain around this month, every year, [laughs] the past several years, looking over the other two in conclusion, one of them, Fair Isaac, a company largely unknown by, I think many people, although if they knew the ticker symbol FICO and then they start thinking, what is FICO stand for? They'd realize this is the company behind FICO credit scoring, Fair Isaac up from 300 to 420 over these three years. Unfortunately, that 39 percent gain a handful of points behind the market. But let's look at a much better known company which was among the worst performers here. Nintendo. Alicia, Nintendo up 18 percent, not bad over the last three years, except again, the market up 45 percentage points. Would you like to add anything about one of the more consumer friendly global brands I can think of, Nintendo.

Alicia Alfiere: Absolutely. When I think of Nintendo, I think of content and I think if intellectual property, they've been called the Disney of the East with big franchises like Super Mario and Pokémon. Unlike a lot of video game companies, they did well at the beginning of the pandemic, with revenues increasing about 34 percent year-over-year for the fiscal year ending in March 2021. But that meant tougher year-over-year comparisons for the most recent year and revenues actually fell 3.6 percent year-over-year. But it also didn't help that they didn't release any blockbuster games plus we can't forget the Nintendo awesome mix consoles and the switch, which lets you go from at-home gaming to handheld games on the go and it's been around since 2017. But the big question is, where is their next console and when is it coming out? After all, new hardware generally meets people going out and buying new games and we certainly don't want a do-over from the Wii U console. But I would say it's not doom and gloom, Nintendo seems to be embracing the idea of being Disney-like and is building Super Nintendo World theme parks. That'll be something to keep your eye on going forward.

David Gardner: I did look that up and look into that a little bit. Super Nintendo World, which is a Universal Studios Hollywood theme park coming in 2023, the first of its kind in the United States, not in the world, but yes, Super Nintendo World about to become a thing in the year ahead. This is one of those companies that I think you can buy and hold for a long period of time and probably beat the market. It is an amazing company and with lots of beloved characters and brands, Disney like in its own way, as we've said many times before, a last, that wasn't enough to cause the stock to beat the market, even with the Nintendo Switch here over the last three years. Again, Nintendo up 18 percent of market loser. Well, since the clear light motif, it just kept recurring throughout this week's podcast, Alicia is losing, I'm sorry to say that these five stocks in aggregate from June 5th of 2019 through June 3rd of 2022, rose 34.7 percent, the market up 45.1 percent. This five-stock sampler, which was for the record, the 20th in Rule Breaker Investing history, goes up to Foolhalla with a negative number, 10.4 percentage points behind the market, but Alicia, it is somewhat refreshing to know you actually made money like your stocks went up 35 percent over these three years with this snap test, passing sampler.

Alicia Alfiere: Agreed, and that just drives home the point to have your timeline longer than three years.

David Gardner: I'm glad you're reminding us of the importance of the timelines. While Foolhalla is forever and five stocks that passed the snap tests have gone and left us. The sampler is over, but investing is not, each of us has an opportunity to continue to hold these stocks. Two interesting notes as we close your first of all, with this sampler closing on June 3rd. Wow, the S&P 500 dropping about 10 more percentage points in the last 10 days, which is truly remarkable and unfortunate. But this group of stocks has actually improved their alpha versus the market by one percentage point. Not a big deal, but the point is, staying in good companies usually we carry you pass the averages if you just stay in the game. Again, Alicia, thank you for staying in the game with me and rejoining me for another Reviewapalooza and a lovely look at five really compelling companies that whether Thanos's real or not, you can't make them disappear. That's part of the reason I like these kinds of investments.

Alicia Alfiere: Thank you, it's been a pleasure.

David Gardner: Fool on now I can say Alicia in Colorado, which by the way, you know this, our offices in Colorado, we've always called Foolorado. You've put some fool in Foolorado.

Alicia Alfiere: I'm so glad to.

David Gardner: Well, from five-stock samplers this week we're headed to the Market Cap Game Show next week. I hope you've got your market cap hat on and you're ready to play the game. You can win this game. This is a game you can win in good markets and bad. I'm really looking forward to being joined by our two most recent champions, Brian Stoffel and Yasser El-Shimy and you next week on this show, the Market Cap Game Show in the meantime, just keep swimming.