In this podcast, Motley Fool senior analyst Matt Argersinger discusses:
- The rise and sudden fall of Wang Laboratories.
- Why his search for "the next Warren Buffett" ended badly.
- Amazon and Home Depot sharing discipline as a common business trait.
- How he overcame the challenge of adding to his winners.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Aug. 23, 2022.
Chris Hill: How would an investor react if the company they bought shares of went bankrupt? Let's find out. Motley Fool money starts now.
I'm Chris Hill and just like yesterday's episode with Jason Moser, today, we've got the investing origin story with Motley Fool Senior Analyst Matt Argersinger. Yes, the first stock he ever bought shares of was a company that went bankrupt just three years later. We'll get to that in a minute. But I started the conversation by asking him, who was the first person to really start him on his investing journey.
Matt Argersinger: My dad was a little bit of an investor. He was in the army. But I remember we get the Wall Street Journal at home and I can't remember when, but I remember at some point I was probably seven or eight years old. You flip through the Wall Street Journal back in the day when they had pages and pages of stock tickers. You just like what is going on here, why the number is moving around every day plus, minus fractional, it was all fractional back then. I think I just got kind of intrigued by the idea that you could invest in these numbers. But they are companies, these symbols, right? The next day you could have more money. I think that was fascinating to me. As early as I remember, I had a paper route as a lot of kids did back in late '80s, when I was eight or nine years old. I could save a little bit of money. If it wasn't video games or something like that, I was trying to think, can I save enough money to buy one of these stocks that my dad was talking about. I can't remember when the light went off, but that was my earliest memory of being interested in investing.
Chris Hill: I remember thinking it was like a code, looking at stock charts, not even charts but just as you said, the pages and pages of the shortened names of the companies and thinking like, oh, it's a secret code for names of actual businesses, right?
Matt Argersinger: Right. Then you know there was magical when you could go to the mall or something and you'd say, oh, here's the Gap. Just to name a company that was popular in the '80s or '90s, or a Walmart or something like that. You realize, wait, that's one of the symbol, so you could actually buy a piece of this company that I know that I can see and touch. That was also just the wow moment. Yeah.
Chris Hill: What was the first stock you bought?
Matt Argersinger: It's a funny story. You finally saved enough money. I had a paper route, I was mowing lawns for people. I think I saved like 500 bucks [laughs] which when you're like nine or 10.
Chris Hill: That's lot of money with your kid.
Matt Argersinger: Yeah. I was like, I'm rich, man. I said, OK, I want to buy a stock. I remember I talked to my parents and they gave me terrible advice. [laughs] But it's good advice, I'll tell it, it's like a back story to this. We were living in Massachusetts and one of the big companies at the time, was a company called Wang Laboratories. It was founded by a really great entrepreneur named An Wang. I think he immigrated from China way long time ago in the '20s or '30s. He just built technology companies, software companies in the '60s and '70s. Eventually he built this company Wang Laboratories, that was one of the leading word processing machine companies, calculators and word processing. It became a big company, I think at some point in the early mid '80s, it was employing 10 of thousands of people. Anyway, so I asked my parents, hey, what should I invest in? They said, well, Wang Labs is a great company. It's right near us. I think it was based in Lowell, Massachusetts. Of course I was like, this sounds really great. I invested $500 in Wang Laboratories.
I think it was like 1989. Well, in 1990 An Wang, the CEO, died, and the company was passed to his son. Two years later, the company went bankrupt. No idea how or why. But my first stock investment ever went up in smoke. The lesson I took from it though, which is not the lesson you expect, at the time I remember I was into video games and computer games as a lot of kids were. There was a computer company called Sierra On-Line, which made games like King's Quest and Space Quest. These games I love to play. I remember asking my parents at the time, can I invest in Sierra On-Line? They said no, you should invest in something established like Wang Laboratories. It didn't take much to convince me to do that. But I remember looking back, way on later on when I was adult, I could've invested in Sierra On-Line in 1989, and I think the company went on to five or 6x before it was acquired. I could have had a great first investment by investing in Wang Laboratories.
Chris Hill: What's great about this Matt is, there are so many people who have a similar experience to you. That alone just drives them away from the stock market [laughs] for the rest of their life. Not only have you continued to invest, you've made it your profession. Let me move on to, because obviously you've been doing this for a long time, what's the worst stock you've ever bought? Because you could go with Wang Laboratories, the company you bought went bankrupt. But I'm guessing you have another choice.
Matt Argersinger: No, I've many other choices. But one that really comes to mind is a company that's still traded today. It's not bankrupt and it wasn't even my worst performing investment. But it's company called Biglari Holdings and the ticker is BH. I think what really brought me into that company was as a young investor, especially since I remember 10 years ago or so. We're all searching for the next Warren Buffett, and we're always so quick to name the next Warren Buffett. Well, here I found a young entrepreneur named Sardar Biglari, he had run a hedge fund as a young person, he had a really good track record, and he ends up acquiring this restaurant company called Steak 'n Shake, which you can still find in the Midwest and other states. He turns around the restaurant and his whole plan was Steak 'n Shake is going to be this business that kicks off a lot of cash flow. I'm going to invest in all these other businesses, and he does.
He invests in an energy company, he invests in insurance business. In my eyes, I like this is my Warren Buffett. This is the guy that's going to lead me to the promised land, he's going to build the next Berkshire Hathaway. I literally went to every annual meeting for about five or six straight years up in New York. I was so enthralled by it. The reason it's my worst investment is because I let the mystique of him and the company force me to keep putting money into this business, even though I could see that the way it was being managed was not right. The Steak 'n Shake business itself was falling off and it's really fallen off now if you know the company. I let myself just be load in and not really objective about it as much as I should have been as an analyst. I think it's my worst investment just because of the time, the mental energy, and the amount of capital I put in routinely into this company for years before I wised up and sold my position several years ago.
Chris Hill: I appreciate you making that distinction because I think the default thinking for a lot of people is the worst stock you buy, is the stock that you lose the most money on, or it has the greatest percentage drop. But as you said, there's a time element there.
Matt Argersinger: Right?
Chris Hill: A mindshare element that can cost you as well. Let's go in a more positive direction. What's the stock that means the most to you, not necessarily because it's been the biggest winner, but because of some affinity you have for the business.
Matt Argersinger: Yeah. This is an easy one. Right about when I was about to finish college, one of my first investments I made where it was my own brokerage account making the investment was Boston Beer. You know it, maker of Samuel Adams. This was in 2001, I believe. The stock was trading from $14 a share. The reason I love it is because in college, I loved the Samuel Adams blogger. At that time they really just had the Samuel Adams lager, and now of course these days they've got dozens of labels. They've got the Twisted Tea, Angry Orchard cider, and the Seltzer. They've got a lot of beverages, and they're a much bigger company. But I just knew the company, I had an affinity for the brand. I love the story of Jim Koch, the founder and CEO. I've owned shares ever since.
One of the cool things is I remember when I first bought shares for myself, my brother was graduating high school and I ordered away one of those ones share certificates that you can get. I don't know if you can do that anymore, but I got them one share of Boston Beer, at $14 a share, plus 10 or 20 bucks whatever the shipping handling was for this certificate. The beautiful thing is, over the years, I could tell him like, hey, you know that certificate you've got hanging on your wall, it keeps going up in value. At one point Boston Beer was trading over $1,000 a share. The bad part about this story is that several years ago, my brother didn't tell me this, but he actually sold it, I know in 2016 or 17. He sold it when he was, I guess, moving apartments and he just was like how are these things worth like four or 500 bucks now, I should sell it, and what a bum. [laughs] But anyway, so it's just got an interesting story and I've held this stock for so long that yeah, it's pretty much pardoning me now.
Chris Hill: Also, when you're in college, beer tends to be a commodity that people save money on. Like if you're buying Sam Adams beer in college like that's a premium beer.
Matt Argersinger: Well. It was the aspirational beer. It's was like we would buy the Yuenglings and the Budweisers thinking about someday, someday we're going to pay 999 for that six pack of Sam Adams. Now I'm in it, it's like a tree.
Chris Hill: Is there one that got away? Do you have your version of a stock that you sold too soon or just for whatever reason never pulled the trigger on?
Matt Argersinger: Yeah, the one it's an easy one, because I bet you everyone listening on this has owned it at least part of their life, but I never owned Apple. Can you believe that? I've never owned shares of Apple, and I think because I always assumed for years that Apple's they're at their peak, it's really a hardware business, and hardware over time, especially in the consumer electronics space, it's not exactly a great business. I totally underestimated their amazing transition to software services, and just the whole they have on the App Store, which has become the ecosystem of mobile apps and technology. For some stupid reason, I admired the company. I was always impressed by the company, I used their products like no one else, but I never bought shares. It's pretty sad.
Chris Hill: Apple is one of those companies that, from the standpoint of investing, it essentially broke to long-standing things that all investors tended to agree on. One is what you already spoke to, which is the whole, well, consumer electronics, the price comes down over time. For such a long time, that was the narrative around Apple. It's like, well, they're not going to be able to keep charging this amount of money for those phones, are they? The other one was all of the debate around them paying a dividend. Are they going to pay a dividend? Well, if they do that, it will turn them into a stodgy old dividend paying company, and it will just kill their growth. It's like they did that, and then we've never had that conversation since. As investors, we've never had that.
Matt Argersinger: Apple broke some serious rules. They fooled me for sure, lowercase fooled, and I never bought shares, missed out on huge gains.
Chris Hill: Is there a company you own shares of that you particularly admire?
Matt Argersinger: Yeah, I was thinking about this. I think I have two that I need to mention. They're similar but different in a lot of ways, but Amazon and the Home Depot. Amazon, not just because what the scope and scale of this company that Jeff Bezos has built, but just their ability to always, to use that old analogy, escape where the puck is going, in terms of e-commerce, of course, but just third-party fulfillment. Amazon Web Services, cloud computing, mobile advertising, just so many streaming, they're always into the best places in such a great job. I just so admire how they've been able to get into all these different businesses. I think the Home Depot, if you just think of their history as a "big box retailer", the margins they put up, the growth that they've been able to achieve without actually growing that many stores. These days Home Depot they open maybe a dozen stores per year. But you just see the growth that they're able to continually put out and the affinity that people have for that experience that they get from Home Depot and the products and services. The way they got into the big contracting business several years ago, that's been worked out. Two businesses, Amazon and Home Depot, that I think of always just seems like they're ahead of the competition, ahead of the curve, and I love owning both businesses, and I plan to hold them for a very long time.
Chris Hill: You have to assume that both of those businesses also have a lot of institutional discipline built-in. Just hearing you talk about The Home Depot really not opening a lot of new locations year after year. You have to believe there are some people inside the executive ranks saying, no, we can do more than this, even if we just go from 12 to 24 in a year, that sort of thing.
Matt Argersinger: Right.
Chris Hill: The same with Amazon. The discipline not just to go after new initiatives, but to say no to a lot of others.
Matt Argersinger: Absolutely. It's so impressive.
Chris Hill: What is the stock that is your biggest holding?
Matt Argersinger: Yes. It's a base holding by orders of magnitude and it wasn't really by design. Well, maybe kind of. MercadoLibre, which I've talked about on this show for years. The reason it is my biggest holding, not only because it's been such an amazing winner over the last, I've held it for gosh now, 13 or 14 years, and I've added to it. But the reason I've added to it is that not only has the business been successful, but I was a part of this service called Supernova, which you know about, and we recommended MercadoLibre for our portfolio in Supernova, I want to say, seven or eight times, and I made it a point when I was the advisor of that service to really follow our own investment advice. I bought pretty much every investment we made, including MercadoLibre, seven or eight times.
That was incredibly fortunate, but I certainly love the business. I mean, as the e-commerce leader in Latin America, big presence in Brazil, Mexico, Argentina, and other countries. What I loved especially is early on they are actually owned by eBay. I don't know if many investors know that, and I was worried that they were going to a little bit follow the eBay model, which is not a terrible model, and not really go after the logistics and fulfillment part of the business that really completes that consumer shopping cycle. But fortunately they really did go after Amazon starting about seven or eight years ago, modeling Amazon but also modeling PayPal with payments and transactions. It just becomes such a big e-commerce powerhouse throughout Latin America, and I just see many years ahead of big growth for them.
Chris Hill: You're the reason I own shares of MercadoLibre. I wish I had listened to you the first several times you'd mentioned it on the show before finally clinging in. But I do want to ask you about something you mentioned, which is the number of times you added to it. What was that like? To the extent that you can, walk me through that mental process, because I find this to be a challenge, and I'm sure other investors do as well. The idea of adding to our winners sounds great in theory, but for me, the struggle is, well, wait, I already bought it at this lower cost base. I do have that hurdle I need to get over. I've gotten into it some times in my life, but not all the time. How did you do it?
Matt Argersinger: It took me a long time too, and I think it was really honestly just working closely with David Gardner for years and seeing him. We rerecommend these stocks that he'd recommended years ago that were up five, six, 10x and he's recommending them again. It was tough for me early on as well, but then I just thought, why am I so focused on what David Gardner would say, which is what most investors do, which is they water their weeds and trim their flowers. I should be watering my flowers and trimming my weeds. I had to pound that in my head, but eventually I did, and thankfully, it's led me to buy MercadoLibre all the way up, buy Amazon and other companies on the way up. Winners tend to keep winning. I think that's something also David Gardner says. It is hard to get your head around as an investor. As an investor, we're hardwired to be looking for bargains, and discounts from what we paid. But if you have a premium business, pay up and keep paying up as you go, it'll make a huge difference. The biggest difference to my portfolio, my returns, my net worth over time has come from adding multiple times to winners. It hasn't come from seeking bargains or doubling down on stocks as we like to do.
Chris Hill: Matt, thanks so much for being here.
Matt Argersinger: Thank you, Chris.
Chris Hill: That's all for today, but coming up tomorrow, we will get back to the headlines with Motley Fool Senior Analyst, Bill Mann. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.
