"Rule Breaker Investing" -- Talking About Stocks, Staying Hydrated, and Other Life Things

The market is up so far in 2023! Of course, that's not very meaningful. But still, we can embrace optimism for the year. More importantly, we can remember that what really matters are the decades ahead.

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This video was recorded on Jan. 25, 2023.

David Gardner: What do you get after a month of stock stories and stock reviews of stock scorecards and a stock market that is actually going up; 14 percent for me so far anyway, this month. I hope you too, maybe you're doing better. Well, after a stocky stock start to the year and to this year's podcast, I think we should talk about stocks, breaking rules and investing. Just a little bit more driven, of course by your questions. Your best questions and thoughts, my best answers back. It's time for your mailbag. First of the year only on this week's Rule Breaker Investing.

Welcome back to Rule Breaker Investing. Looking back over the month that has been for this podcast, we started with January 4th, the first Wednesday of 2023, Old, New, Borrowed and Blue Volume 6. One of my enjoyable, at least for me, I hope for you too recurring series. Thinking about four points, some from the past, some from the present. I do remember Blue getting to talk about the Blues and the Buffs from Pickwick  Papers and Charles Dickens but I remember the Borrowed as well, Borrowed, we talked about completing capitalism and the economics of mutuality and the work done by Jay Jakub and his partner Bruno Roche and the wonderful framework that very much complements conscious capitalism.

A variety of different treats in Old, New, Borrowed and Blue, we then went forward, told some Stock Stories for the seventh time in this podcast's history, joined by several guests. Each of whom had a didactic lesson drawn from their own investing experience to share with you. That was a lot of fun and I'm going to be having one of them back in a little while to reflect a little bit longer. Thanks to one of your wonderful notes on the story that he told and then finally, last week well, it was time for some more stocks. This time it was a Review-a-Palooza looking back at two past five stock samplers picked on this podcast, a winner and a loser and at the end of this week's podcast, I will officially update the final numbers for the winner. You need to wait till last Friday to get the three-year end stats for that particular five stock sampler.

I'll have those numbers for you along with its Fool Halla Ascension. We begin this mailbag as so many others have begun with some hot takes from Twitter @erickdevore @DavidGFool. Finally getting around to this Jim from Shirzad Chamine and the Rule Breaker Investing podcast that's solidified by connection to the Fool, very appreciative of the community you've built and opened up to the rest of us. Happy New Year Chief. I see you. Rights, Eric and Eric, thank you very much for that. I'm highlighting this one just because for many of us, we're hoping that 2023 will be a better year, maybe across many dynamics than was 2022. Now 2022 had its charms and its highlights. I certainly can look back fondly on moments throughout 2022 and yet I'm always hoping to level it up. I bet, you too, dear listener, are looking to do the same thing.

For many of us at the start of the year, taking a positive approach to life probably will lead to a more positive year. If you've not already come across the work of Shirzad Chamine is wonderful book, New York Times Bestseller, Positive Intelligence that's what Eric is referencing and I would highly recommend it. You should read the book, but if you just want a one-hour or so cliff notes like podcast of me interviewing Shirzad, just Google, Rule Breaker Investing, Shirzad S-H-I-R-Z-A-D, Chamine C-H-A-M-I-N-E I'm spelling those app because it's occasionally helpful for some of my listeners, for me actually to give the names and spellings of things as you'll hear very shortly on a mailbag item this week but I highly recommend Shirzad and his work it'll help me a lot. I bet it will help you and your friends and family.

Positive Intelligence, so glad it's been a positive thing for you. Erick DeVore. Also love getting this from you. Jason Moore, @JimminyJilickrz, great start to 2023. David, Jason referencing Old, New, Borrowed and Blue, talked about Tesla on that podcast to open up the year and Jason, you list yourself as a Tesla shareholder. Great thoughts in this episode, I'm excited to hear that we're aiming to get Kevin Kelly back again. Yeah, the co-founder of Wired, the longtime writer and thinker, author of the wonderful book The Inevitable, which I highly recommend. It's probably 6, 7, 8 years old right now. It's talking about the future, but it's looking deeply far into the future. Well not too far, but far enough that things are starting to come true and some other things we're waiting on and I always admire anybody who has the guts to write down his thoughts in a permanent way about what do you think it will happen in the future? Kevin Kelly is one of them.

He made a wonderful appearance on this podcast a few years ago. I do note Kevin has his next book coming out this year. Yes, Jason, I predict we will have Kevin Kelly for you a little bit later this year. Excited to see that. In fact, you gave him the hashtag, world's most interesting man in your tweet, which I think is wonderful. Something blue makes me think of one of my Rule Breaker Investing favorites, Jason Wrights is a longtime listener, my interview with Matthew DiLallo. Anyway, thank you for that nice note to start the year. How about two more from Twitter? Another one from @jason_trice, one of my most wonderful correspondence. Jason, thank you for this. You just simply wrote, I enjoyed the Completing Capitalism framework. Feels like a form of business Karma. Take care of all stakeholders, and the bottom line will take care of itself.

Now, I think that it's true much more often than not any way more often than most people would think. Obviously, it's going to take a little bit more than just trying to take care of all of your stakeholders. Sometimes even that can fail, but really, the odds are so far on your side. If you are creating a win-win with your business, for your investors, for your employees, certainly for your customers, of course, and the world at large. Jason, I'm so glad you enjoyed that framework. I mentioned it. It was something borrowed in the Old, New, Borrowed, Blue episode to start this year. Glad that you enjoyed that. I agree with your observations. Last one I'll mention. Yeah, we took a trip. My family after Christmas to Barcelona. I had a wonderful time at the Sagrada Familia Cathedral and many other treats, lots of good eats in Barcelona and I was tweeting out a few things from there @CarlosArbesu, responding to my Barcelona picture that I posted up on Twitter, said, learn about Goudi's life, Goudi, of course, the incredibly talented 20th century creative, the artist.

A lot of his work showcased and what I think of as one of the wonders of the modern world showcase to of course, in the Sagrada Familia, the great cathedral in Barcelona. That Goudi, such an original thinker and doer and Carlos, you clearly as a Barcelona native yourself tweeted, learn about Goudi's life. The Sagrada Familia Cathedral can be a marvelous example of compounding. Now like many cathedrals, the Sagrada Familia has taken a longtime to build. You'll often hear it said of those who lived in medieval times that many of them spent their entire lives labor working on a cathedral that they themselves would never see completed. Not a bad way of thinking but what we're all trying to do in life, which is leave the care plays better than we found it, but not necessarily tying up every loose end and maybe setting up the next-generation for success in what we do. I am inspired Carlos to look a little bit more at the Sagrada Familia Cathedral story.

I admittedly spent a great two hours in the cathedral itself, but I remain a little bit more in the dark about the long-term bill that's taking quite a longtime to complete this cathedral and it's not done yet. I think I'm hearing part of what you're saying, but a marvelous example of compounding, and I'm quite sure Goudi was thinking past his own life in his work. Anyway, thank you for another great month of tweets I'm @DavidGFool on Twitter @RBIPodcast is this podcast's address. Of course our email address, which is very relevant for mailbag episodes is [email protected]. That's where most of the notes came in for this month's mailbag. I see seven items ahead of us. Let's get started. Rule Breaker Investing Mailbag Item number 1. This is from Jonathan Edwards. Thank you, Jonathan, for this note. Hey, Dave.

By the way, sometimes people are like, are you David or Dave? What do I call you? If you're somebody like me or maybe my pal, Rick, my producer, they'll say, is it Richard or Rick? A lot of us have names that can be easily nicknamed and very thoughtful people want to know to call us by the name we prefer. If that ever matters to you and me face to face dear listener, I don't care. I like either. People call me David. People call me Dave. Some people used to use my initials, especially if there were a lot of Daves around. I'd just be DG to them, but I think Fool has been used many a time for me as well. All of these names work for me. Hey Dave, it's Jonathan Edwards. Great episode. I'm rediscovering podcasts and was a member of the Motley Fool at one time.

Well, Jonathan, I hope we can get you back. Curious, could not make out some of the items on your list, and we're about to go through that very briefly. Jonathan is referring not to one of my January podcasts, but to my listing of some of my favorite things and favorite holiday gifts that I was giving out at the end of last year. Specifically three of them, Jonathan, it was unclear to you what I was saying or how it was spelled so very quickly. The first one is Better Booch. You said, is it better cooch, hooch from your friend, Trey? The answer is, it's Better Booch. Now Booch is B-O-O-C-H, and that's short for Kombucha and I'm a big fan of Better Booch, which you can order over Amazon and other places, and Trey Lockerbie and his family are behind that. Trey, the talented co-host, one of the co-host of the Investor's Podcasts that I've appeared on a few times, including near the end of last year.

If anybody wants to get too much of me, if me once a week isn't enough, you definitely are encouraged to go back and hear me interviewed by somebody else on the Investor's Podcast. But in addition to being a pretty darn good podcast host, Trey is also an entrepreneur and once sent me some of his Better Booch, and I liked enough. I was like, I'm chatting this up to friends. I'm going to give it over the holidays for any of my Kombucha, a leaning friends. If you haven't ever tried Kombucha, look it up and I would suggest trying it whether you want to try Better Booch or any of the many different brands these days. It's fermented tea and different flavors. It's very healthy for our gut. I am a fan. So that is how to spell that one, Jonathan. The second one you asked about was Building a Second Brain, the book, and you said who's the author.

Let me spell that for you. T-I-A-G-O, Tiago is his first name and Forte, I'm assuming he pronounces it that way, F-O-R-T-E. Speaking of people that I'm hoping to have on the podcast is definitely on my shortlist here near the start of this year. Building a Second brain, the reason I was giving that to any friend who listened to me over the holiday season is because I think it's a remarkably helpful and important book for our time. Each of us, whether you want to be or not, is an information worker indulging in personal knowledge management. Yeah. All that stuff on your file folders, on your hard drive or on your desktop, or the note-keeping app that you have, or your to-do lists, all of these are digital assets and we can make better use of them. We can integrate them, have them mirror each other, and really treat them as a second brain.

We all know our first brain. I'm using it to speak to you right now. You're using it to listen to me right now. But if you have an excellent, stronger memory full of everything that you've read, thought about, if you've collected those things and you integrate them and you build that second brain, well, it will be an asset that keeps on giving to you for the rest of your life. A wonderful book, happy to give it yet another plug at the start of this week's podcast. Finally, the fifth one you asked about, we'll skip the others on the list. Anyone can go back and listen to that podcast. But the fifth was Nixplay photo frames. You were like, is it Nick's like my buddy N-I-C-K, apostrophe, S. Is it Nick's? The answer is no. It's N-I-X-P-L-A-Y. You can Google them. You'll find them on Amazon, probably other places too. Photo frames that are much better than the ones I grew up with. The photo frames I grew up with never changed.

You just put a photograph that somebody had actually developed in a lab and you'd put that and leave it there forever. But these days, I think a lot of us can appreciate all the pictures we're taking. You can now have them digitally uploaded into frames that you keep around your house and they can change pictures from one minute or day to the next, which to me is such a better version of photo frames than I can think of in the past. But what I think is cool about Nixplay is that you can actually network them so you can have the same photos popping up on your photo frame in your home and on your elderly parent's photo frame and his or her home or your kids off at college. You can share photos into it. I am a fan. Anyway, Jonathan, you concluded, is there a way to get transcripts of podcasts? Because I read, Jonathan writes, better than I hear. I can do this for myself, he says. Happy New Year. Cheers, Jonathan Edwards. Well, Jonathan, there is indeed. In fact, podcasts.fool.com is the site on the Internet.

Now, I have to admit as a longtime member of my own services, The Motley Fool, I'm not actually sure if this is for members only or free to all, but I hope you're a member anyway. If you are, go to podcasts.fool.com. You'll see on that page Rule Breaker Investing. If you click on Rule Breaker Investing and then look carefully for a blue link near the top of the page that says Podcast Transcripts, click that and you will find a long-running chronological list of articles, many of which have the transcripts of all of my past podcasts. You will find the transcript for that podcast or most others that I've done right there. Thank you. Thanks for reaching out. Ready in. Rule Breaker Mailbag Item number 2, this one from Paul Den. Hi, David. I'm not a good writer, but I'm trying to make it a future atomic habit of that. If I crank enough stuff out publicly, Paul writes, maybe I'll get better. Based on your best gifts podcasts.

Here's another reference to that one. I was the proud recipient of a HidrateSpark PRO Lite Smart Water Bottle, the 24-ounce chug bottle for Christmas. I've been hitting my hydration target daily and you know I'm reading that with a smile on my face, Paul, because I love hearing that. Now as you refeature the HidrateSpark as something new in this month, yeah, something old, something new, I figure it's not too late to give feedback. Paul provides feedback for the HidrateSpark PRO community and the people of the bottle. There might even be customer service or CEOs listening. Who knows, Paul? Pros, you give five quick bullets here. Pros number 1, my daily water intake has increased. Number 2, fewer plastic bottles have been purchased and recycled. Number 3, bottle design is very nice.

I like it as a water bottle. Number 4, the digital confetti that's on the app because, of course, this product is not just a hardware piece, it's not just a water bottle, it's tied to an app on your phone, which constantly monitors and updates how much water you've taken through that battle through the day and gamifies it and makes it a community with your family and friends, which I love about it. Anyway, the digital confetti, Bullet number 4 reads, is rewarding when the daily goal is reached. Yes, Paul, I think you've figured this out. You're going for a daily goal, but then like some other things like Wordle, for example, you're also trying to put together a streak. I think it's all to your health. The more water and the fewer plastic bottles in our oceans, I'd say the better. Your final PRO Bullet number 5, the glowing-base. Yeah, that's a little bit of the fun of this product.

The glowing-base after each sip in colors of your choice, by the way, dear listener, was fun. Emphasis on past tense, so I guess I should do it this way. Was fun and it made me happy. Those are the Pros. There are two cons that Paul wants to share back. The first one being the most important to him and perhaps to all. Con number 1, technology glitch. My bottle quit working 23 days after receiving it. Nothing happened to damage it, but it no longer syncs with the app, though the sensor is fully charged and glows. I contacted [email protected] and got an auto-response with some specific questions. I responded to that immediately. I received an email from a human no less three days later with a link to a diagnostic tool, ran it, tried the fixes in quotes, not fixed yet. Jury is still out on customer support, but for now, I'm putting all of my fluid intake into the app manually.

That concludes his first con. It is a reminder that you don't have to drink all your water through your HidrateSpark PRO bottle. You can just note you had a six-ounce glass of water. I don't know at the restaurant last night. Yes, you could do that too, but that really is not how this product is supposed to work. Your other con, Paul, you wrote his activity level parameter pet peeve. I'm annoyed that it's totally subjective. Five highly qualitative categories with no backup guidance for each. Well, we're not going to get to down in the weeds on this one. Want to move to our next mailbag item. But I will say that I like the way that they set the parameters. I understand that you're saying I'm very active or I'm somewhat active. I realize these are somewhat subjective. One thing I appreciate about the product is that you don't have the same water goal every day. That would get a little boring if every single day it was 72.0 Celsius.

What your hydrate water bottle is doing is it's noting your own activity level, let's say through your Apple Watch the number of steps that you're getting. It'll have you drinking more water when you're more active and less when less. It also looks at the humidity of your zip code. It knows the weather that does affect how much are little we should hydrate ourselves. It also makes it a more fun game because you have a different numerical target that sometimes moves during every day. Well, Paul concludes, pros outweigh the cons, but Con number 1 is a biggie. You noted giving quite a few hydrate Sparks' gifts this year is my experience atypical. Thanks, David. Closing, I love my weekly Rule Breaker Investing fixed Paul Den well, Paul, thank you for that kind note. I have both given it as gifts and inspired others to give it as gifts. You're the first one that I've heard back from who has had a broken bottle.

I'm so sorry to hear that you're bottle is no longer through Bluetooth sinking with your phone. I would hope that they would send you a replacement if you've gone through all their steps. I think this is a good company. I appreciate the product. Even more, I appreciate you're reaching out and sharing your experience and letting me do it here. I bet they're listening and I bet they're working hard to make it better. Rule Breaker Mailbag Item number 3. Dear David, this is the third year I have written to you, in your February 2021 Mailbag titled Tinker, Tailor, Soldier, Sailor. I remember this. You read my "stock story" Steve Hofstetter writes, I was the firefighter. That year I was quite happy to report an amazing portfolio percentage increase after my Rule Breaker picks killed it in the quotes, stay-at-home environment. The basic theme of my letter was that it paid off not to penny and stay the course during the initial stock market COVID plummets.

At that time, I couldn't be more on board with the full premise of buying and holding companies essentially forever as the same companies that did great in 2020 had also done well leading up to 2020. You read my next letter in the January 2022 Mailbag that would be one year ago titled, you look marvelous. This report wasn't so great. My portfolio was handily beaten by the S&P as stay-at-home stocks came back down to earth and the rotation from growth to value was well underway. I ended last year's letter, Steve rights by stating that I will stay the course with my Rule Breaker picks. That, "It will be interesting to see where the market in my portfolio are at the end of 2022." While the market was to say the least interesting and staying the course didn't work out well at all in terms of results, my portfolio was down 40 percent in 2022.

At the beginning of 2022, I had a defined plan, knowing the downturns usually don't last too long, that good companies always bounce back and that buying the dips had been working. I did just that I had some new capital at the beginning of the year, deployed it using the dollar-cost averaging strategy over the next 12 months with concerns about the economy, the Federal Reserve raising rates, and then the war in Ukraine. I thought I would be conservative, and increased holdings and well-capitalized large-cap techs companies like Microsoft, Alphabet, Apple, and Amazon. But I also bought some shares of the growth stocks that had performed well in 2020, and it did beaten down in 2021 like HubSpot, MercadoLibre, Shopify, and DocuSign. They got beaten down some more. Steve continues a lot more, and so did the large-cap tech stocks. What a disaster.

Every month I bought more shares and what felt like an environment that couldn't get worse. Because contrarians buy when there's blood in the water as they say. I was buying companies at prices that hadn't been seen in over two years, and then they'd go lower every month in 2022, I continued to hope I was buying the dip, but in retrospect, was attempting to catch a falling knife. I felt that at any time this year some good news like the economy improving, the Ukraine war wrapping up, or the Fed changing course could change the direction of the market. But that in 2022 never happened. My lessons learned this year aren't definitive and I'm not 100 percent sure of the changes in strategy. I'm contemplating making. I'm interested in your two cents on my considerations. I believe I should've given more consideration to the macroeconomic factors that were going on this year.

When the market is above its average price-to-earnings ratio, inflation is running hot and the Fed is insisting they will continue to raise interest rates. I should have held more cash longer. I invested throughout the year as opposed to investing all my capital at the beginning of the year. But my ultimate goal was to be all in the market by the end of 2022. I've always felt that holding cash as a part of my investment portfolio is a waste of capital. But maybe that's wrong. In a recent interview with your brother, Morgan Housel push back on the Generally Accepted notion that owning cash is bad in times of high inflation. He stated that although cash will lose value, assets will lose even more in the short-term. This makes sense to me as I've witnessed it happen time and time again. When the dust settles, cash buys assets at a bargain. Knowing when the dust settles always occurs in hindsight.

We currently have a lot of moving macroeconomic pieces, but I'm considering making a cash position a percentage of my portfolio, and time the market to some degree with my stock purchases and sales. Yes, I said it, time the market Steve writes, I wouldn't consider buying and selling entire positions, but I would sell a few shares when traditional market and economic indicators dictate I should increase my cash position and buy shares in the opposite environment in this respect, don't fight the Fed and valuations matter will be more a part of my investing strategy than they've been in the past. In retrospect, I'm not sure why I was buying when the Federal Reserve was raising interest rates and stating they were going to do it some more. It seems like I should've been selling a few shares.

After following you for years, David, it seems your strategy is to buy companies you like at the time you decide you like them, and hold all the shares forever, regardless of market factors or until you don't like the company anymore. Is that it? I'm curious to know if you did anything with your portfolio in 2022 as economic factors transpired and if you were to see them unfold in the future like they did last year, would you do anything differently? What would you do if you had a 2022 do over? I would venture to guess there are a lot of Fools in the same boat for 2022 that would be interested to know if you care to share, please excuse me. If you already have and I missed it. Thanks for all you do, David, be well and Fool on, Steve. Well, first of all, Steve, there are so many things that I appreciate about your note.

One of them is how it started. This is the third year I have written to you. I love all of my new listeners, I always will and if you're very new this week, welcome. I'm so glad that you found us in the eighth year of this weekly podcast. But I have to admit I love the people who've been with me the most or the longest, even more, I love the accountability that takes place over time. I love the trust-building that needs time to happen. Steve, I think I've failed you in the year that we've just lived through. I hope nevertheless I still built trust with you, and I hope this act of featuring you on the mailbag does so in addition. The first thing I want to say that I really appreciate is that this is the third year that you've written to me. I also appreciate your services as a firefighter, I love sharing your story. Yeah, it's their February 2021 Mailbag. Anybody can look at the transcript.

You now know how to find it, or you can just go back and listen to Steve's story as it was told in that February 2021 Mailbag. That was a mailbag by the way, where I had so many wonderful stories from Motley, different places that I decided to turn the whole mailbag into featuring the stories of very different people, which is why we call it Tinker, Tailor, Soldier, Sailor, I can even say in this case firefighter because Steve, that's part of your background and your story. The next thing I wanted to speak to is just dollar-cost averaging as a strategy. I continue to believe that it is the way to go in this world. That's why pretty much not just for the eight years of this podcast or the last three volatile years, but for the 30 years of The Motley Fool, I, and so many of us at the Fool, my brother, of course, included Morgan Housel would include himself as well, have been big fans of regular, persistent investing. I would say through all times good and bad.

I would say often we can't know that they were going to be good or that they were going to be bad until well after they've occurred, at which point we can start being definitive, saying that was a really bad year, 2022, but it's very hard to know at the start of a new year for any year in my experience, how things are going to go. That's why I much prefer just keep swimming, persistent action-taking, not guessing, sometimes head faking yourself out of the market. I want you to know that what you did in 2022, I think was really smart. You said you had maybe a lump sum or an opportunity to invest it all at the start of the year. But you didn't put it all into the market at the start of 2022, you described a plan which I love of doing it over the next 12 months so that you were fully invested by the end of the year.

That means that some of the disappointing numbers we saw in 2022, you didn't have to suffer them all. In fact, if you were still buying in June and then September and then December if you were spreading your money out, I bet you're going to look back some years from now and say you're really glad that you were buying all the way through 2022. There's no way a month into the new year that you can reflect happily on your actions. It does feel as if everything is down, although it's been up double-digits last few weeks for some of us Rule Breakers, I bet for you to Steve, you wrote this note prior to 2023, but I want you to know that I think you're going to look back and be glad that you did what you did through 2022. But the near-term feedback, which is all we can really get when we've made new buys, is what happens next month or that particular year.

The near-term feedback has of course, largely been negative and 2021 was a bad year as well. I want you to know in conclusion that I can completely empathize. I think so many of us hearing you can completely empathize having lived, having walked those shoes ourselves these last few years. To speak briefly to your question about changing strategies, changing horses in the middle of the race is one way of thinking about it, although that's often a very negative connotation, I'm here to celebrate learning as you go. While I myself will continue to take the approach that I've taken, which is different probably in some ways from my brother Tom, although there's a lot of overlap there, different from Morgan Housel, maybe unique. Maybe what I've been throwing down the last 30 years or so could only have come for me in some senses we're all, our own creatives we're all inventing as we go.

But I'm going to continue following the path because I know how it's done over the last 10, 20, and 30 years. I feel very confident that buying great companies, even when they sell off dramatically over short periods of time. I know how the story ends. I watched Amazon once go from 95-7. My cost basis was three. I watched it go up 30 times in value. But then as everything came tumbling down in 2001, how many Motley Fool members were talking about how disappointed that they were, that they hadn't sold at 95, or that they hadn't gotten to cash, or that they should have sold Amazon at 50 or 40 or 30 as it drops back down to seven. But these days, if you were to split, adjust that cost basis, you'd see the benefits. Even if you'd bought all the way through that difficult time, you would see the tremendous benefits of holding a great company.

Now not everything is Amazon. In fact, only Amazon is Amazon, but I'm certainly a fan of most of the companies you just mentioned. Even if the near-term feedback has been negative, you should please note Steve Hofstetter and all my fellow Fools that this too shall pass. The markets go up over time and great companies win. I'm not looking to go to cash, we're looking to macroeconomic factors which changed from one year to the next. I think it's much more helpful, at least for me, the lazy bum that I am to just invest in greatness, keep doing so my whole lifelong, and let's see how the numbers look. I feel good after 30 years, but I already said I was going to close, but I'll add one more. This is an addendum or an appendix to my response. But what I would say is if you do choose to alter your strategy, which I am a fan of doing, we should be learning as we go.

I would still highly suggest that maybe you segment. Maybe you keep a bunch of your money in the strategy that you've already been practicing sounds as if largely inspired by me. Then I would say if you want to have a cash cushion or more of a market timing strategy with whatever portion of your money you want to do that with, whether it's a majority or a minority, I would highly suggest that you keep score. When you write me back a year from now, although you're certainly welcome to write me again in between now and a year from now. But when you write me back a year from now or the year after that, if you're going to pursue some new strategies, be scoring them. If you want to have multiple strategies going on, separate them and understand how they're doing for you. I think a lot of times in life we feel like we have to make whole hog changes.

Everything's either on or off. It's binary thinking but I'm a big fan of a multiplicity of frameworks or thoughts of seeing the grades and the gradients. Here is one example where I'm throwing that down for you, Steve, to think about if you're going to change strategy score it, and don't just score it over a quarter or a year. Don't decide that you're really right or really wrong after even one year, do it for about five years and be watching a few different things. Then with the several decades after that, you'll be better equipped to make the best decisions that you can. Steve, I want to close by saying to you, sir, thanks for all you do, taking the time to listen and write in share your story in an authentic way that I think we can all relate to. I sure can. To you sir, I say back be well and Fool on. Mailbag Item number 4, this one from Chris from Toronto. Hey, David and Rick. I hope you're both well and off to a great start in the new year. Thank you.

Chris, I can only speak for me right now. Perhaps Rick will speak for himself at the end of the show, but it has been a great start in the new year. Thank you. After listening to your January 11 podcast of Stock Stories, my ears perked up when Auri Hughes told his excellent, and that's spelled with a capital X, no E. Excellent XPEL, that's the company name, X-P-E-L story, and I just, Chris writes, had to relate my own XPEL experience to you. It was 2019 and I was early on in my investing journey, I'd just reread the wonderful Motley Fool investment guide as gifted from my parents a couple of years earlier inspired. I started digging, looking for what I was going to add to my portfolio next. It occurred to me that the book had laid out a number of different guidelines for positive signs in a company's financials, which I could plug into a stock screener to narrow my search.

Years goes on. It took us many of these numbers as I could. What exactly they were? I can't recall at this point, and when I screened for them, only two companies came back and won was XPEL. For those keeping score at home, the ticker symbol for XPEL is indeed X-P-E-L. Reading a summary of what the company did didn't particularly excite me, which was and still is very important to me so as to keep me engaged with the story of the stock. So I put the company on a watch list and didn't think anything of it for a while. It wasn't until late 2020 that I had noticed what I had been missing out on.

For those who are listening a couple of weeks ago to Stock Stories Volume 7, you'll remember, or Hughes talking about the outstanding performance, I can't quite recall or his exact title of his story. He'll be on very shortly to remind me, but it was something like Get to Know My Best Stock Pick Ever or something very close to that. We're talking about a stellar performer through a couple of pretty bad years for the stock market. That's part of the compelling story here going on with XPEL. Anyway, Chris goes on. It took until 2023, checking my calendar. I think he's talking about this month, but I finally dove into this company and found myself much more interested in their business than originally thought.

Couple of that with what I see as a potentially very large market opportunity in energy-saving window films and there was enough for me to make it a small position in my portfolio, and wouldn't know it, two days after I make that purchase, Auri relieves my experience on the podcast. If I have a lesson to be learned, I suppose it might be to keep your options and view as open as possible. I could have easily brushed this idea off, never found it again. But by keeping it on my radar, I would add, I hope, on your Motley Fool watchlist, Chris, you're right. I was able to keep tabs from a distance and find a new interest in it years down the road. Boy, do I want to double underline that one. Auri, welcome.

Auri Hughes: Thank you for having me, David.

David Gardner: I'm delighted to have you back. Obviously, Chris loved your story, and here we are talking about it again. Let's talk about some more. He closed out his note with: While it will take some time to see if this idea pans out. I'm glad that I have a new team to root for and I'm excited to know Auri is watching as well. He writes Fool on and go Jays. He's, of course, referring to the Toronto Blue Jays. As a Canadian man himself, he is a Blue Jays fan, knows we like baseball on this podcast, or your timing couldn't have been better for Chris from Toronto. I love his own story.

You know what, jumps out to me first is that he took the time to do some research in the first place, he took a pass understandably, but he didn't forget. He actually using a watchlist, it came back to him. Talk about building a second rate, a separate topic for another time, but setting yourself up so that your system brings back insights and ideas from your past can be so helpful for you as a present-day investor. Now, Auri, you know the story all the way through. You've invested and held it. I know even you yourself with this small-cap winning stock could have bought even earlier than that. I guess we're all always feeling that way. You're looking backward at a stock you could have bought earlier. Auri, could you remind us briefly, what is the company's business?

Auri Hughes: The company makes paint protection film, which is an interesting technology. Paint protection film was originally used by the military on helicopters to protect the blades of the helicopters from rocks and things that could nick the helicopters. Like a lot of innovative technologies, they were originally created for military uses, such as the same thing was paint protection film, and eventually, paint protection film made its way to new car sales, to protect the car from debris, and the elements, and those chips and things you see on the front bumpers as you drive the car and use it over time.

David Gardner: I definitely have had stuff jump up and nick may sometimes the windshield. Obviously, for a lot of us, often we're thinking about, I don't know, a SaaS stock or a new Internet app or something, or for me, video games, but paint film or paint protection doesn't necessarily lead to the top of the list of exciting businesses we want to be invested. Yet, Auri, your research to what were you seeing and what made you bullish enough to actually buy the stock a while ago?

Auri Hughes: Sure. To, I think, Chris' point. I think there's a lot of things that were evident that could make someone take a pass, especially if you did some research. I think the most biggest glaring one for me was that 3M was in this business.

David Gardner: We're going to compete with Microsoft.

Auri Hughes: 3M is obviously a juggernaut. They're innovative. They're known for the sticky notes. That's what everyone always uses. They were in this business. But I think where the advantage was was XPEL could focus on it. They established a brand that was known for this. For 3M, and I imagine this is a smaller division, and I think there were even like lawsuits where, I guess, if you're a larger company, what would you do? Of course, you're going to take legal action because you probably have more resources than the smaller company. But for me, what I liked was upon working here, I was just learning about the power of incentives and inside ownership, and really understand how that can drive performance, and that was certainly the case of XPEL with Ryan Pape. There are some extraordinary stories coming out with Ryan about.

David Gardner: He's the founder.

Auri Hughes: Yes, not the founder.

David Gardner: He's the CEO.

Auri Hughes: This is a CEO who started when the company was on the verge of bankruptcy. There is a story where they had these lenders and the lenders could have sent them into bankruptcy essentially. Ryan Pape went to the lenders that hey, I have x limit on my credit card, you can use my personal credit card while we figure this out. He made that sacrifice and I think not a lot of leaders would do that. Then the other thing I noticed when I put the position on was that they had started to develop a track record.

There was a few years of solid earnings, especially in the small-cap world which I think is important, where they were bootstrapping and from a lot of the great companies I've seen there tends to be a lot of bootstrapping and I should be self-sufficient using cash flow to grow. So there was a little bit of a track record high inside ownership. I think they were managing the company very well. I was reading some strong write-ups and I felt like it was a good time to put a position on.

David Gardner: Well, that's great. The company's market cap today, just about exactly two billion dollars. So we're not talking about a fly by-night Micro-Cap anymore. We are still talking about a smaller cap company. Still does face big competition. I'm quite sure there is a lot to be said for a culture of bootstrapping and also a company that's focused on something. Sometimes when I've had smaller cap stocks and I'm thinking, should I buy this or not? But, oh my gosh, wait, they're competing against, I mean it up earlier Microsoft. The reason that doesn't don't me some of the time is because when you're a pure play really focused on your product within an industry and you're playing against a player that has 1,000 different products and they're trying to manage them all.

That isn't necessarily a reason to be intimidated by a much bigger player if you're a more focused player. By the way another thing about this, and then I'm going to kick it back to you for some final thoughts Auri. It isn't always a winner takes all situation and business really is not a zero-sum game. It's very different from the NFL playoff games that were played last weekend or will be next weekend where only one can win, the other will definitely lose. It's very plausible that 3M and XPEL will win. You're a software start-up in Microsoft can both win even if you're in the same field. This is something that for a lot of people is an aha moment because we're raised often thinking trade-offs and zero-sum. Auri, any final thoughts here about you're XPEL story or Chris' hope for his Jays in the year ahead?

Auri Hughes: Concluding thoughts for me, this is the biggest takeaway for me, is love the process more than the outcome. Really enjoy the process. Because for me, obviously, this is a big winner. I didn't buy enough to get on the cap table or significantly changed my life.

David Gardner: You're still working at The Motley Fool you're not time. 

Auri Hughes: But I love the process and this has been a great learning experience for me. I'm proud that I was red and used other people to help identify this stock and learn from these processes. A lot of people look at this and they say, oh I missed out on this 10-bagger. That's OK. Like learn from it, take that it to your next process so you can identify the next 10-bagger, 100-bagger because they are rare. But if you find them, they can substantially change your life in meaningful ways.

David Gardner: What a wonderful mindset you have Auri Hughes and part of what I tried to do with this podcast is have exemplars on people who are exhibiting a lot of the things that I think were are not just investing, but also in business, in life. Auri, you just threw one down right there, that mindset that you have. There's always another wave coming and you can learn from the previous one whether you served it well or not.

You can definitely learn from the previous one and should. Auri thank you for your inquisitive nature and your research orientation. When you and I off the air talked about this just before you came on, you mentioned that you'd actually prepped up to half an hour or so material about this. I let you know I was a bad host because I didn't tell you this is a mailbag item for maybe like five minutes or so. But the point is, your research shops are impressive service. Thank you very much for sharing them with all of us listening this week.

Auri Hughes: Thank you for having me on. This is a pleasure.

David Gardner: Alright, onto Rule Breaker Mailbag Item number 5, this one from Ben Adams. Ben, thank you for this note. Hi David and fellow Rule Breakers. At 39 years of age, this year has been my 10th as a stock market investor and by some margin, the least fun with a portfolio largely made up of Rule Breaker companies, year-to-date performance has been nothing short of abysmal. I'm an optimist by nature. Ben, I enjoy investing because I believe that the future will be better than the past. But there's no denying that this enjoyment has been boosted by a historically strong market during my investing experience so far. By contrast, the seemingly relentless grind down over the last few months has being emotionally tiring and it can be tough to know what to do.

Speaking of emotionally tiring, Ben goes on in the last 10 years, has also seen the birth of my two children. My son is eight years old and he's a strong mathematician for his age. Over recent weeks, he's begun to take an interest in the Apple stocks app. He often catches me studying on my iPhone. He loves to find companies he recognizes, for example, Apple, Tesla, and then tap through the various graphs to see how pricing has changed over different timeframes. There's a charming simplicity to the way children think. Peter Lynch famously said that you should never invest in any idea that you can't illustrate with a crayon. It turns out that explaining my holdings to my son was actually just as beneficial for me as it was for him because I had to clarify my thoughts in order to explain to him in a way that he would understand. It's amazing how much easier it is when you realize, you know what you own.

He continues to look through the app. He's mostly fascinated by the year-to-date graph, terrible and the all-view graph showing a company's entire historical performance, often, incredible. Dad, why didn't you buy these earlier? He asks, just imagine what price they'll be when I'm a grown-up. With that, he disappears off to enjoy himself. This is why I invest, wishing you all a great Christmas and a Foolish 2023, Ben Adams. This note, like a few others written right near the end of last year as opposed to during this month. But what a treat that was to share, Ben, thank you for taking the time to write in and share a little bit of the family banter. I love that your son is a burgeoning mathematician reading an excellent book right now myself on math by Jordan Elingburg, you might have seen it before. How Not to Be Wrong, The Power of Mathematical Thinking. A delightful read I'm reading on my Kindle, of course.

I think that math, even though I'm an English major, is fascinating and I share your son's appreciation of looking at graphs and seeing how those stocks have done over the last year as you wrote. Terrible. But how about over a more meaningful timeframe? As you wrote, often incredible. I think at the heart of that is what I shared a little bit earlier with Steve Hofstetter and all of you, you have to be able, as F. Scott Fitzgerald once said, to hold opposing thoughts together in your head. To be successful at investing, you have to be willing to recognize if you're going to buy and hold as I do, that you're going to lose and sometimes dramatically in the near-term that could happen again this year, I doubt it. I think the market is going up this year, but it sure went down last year. You have to be willing to understand that you're going to lose, as I've many times said before, in order to win.

That's simple act of flicking back and forth from the all view to the one-year stock view, both of those are true. Only one of them really matters and what matters there makes in my experience all the difference. I also grant to your point an appreciation about the cartoon-like thinking, the big picture thinking, that Lynch encouraged. I think I do that rather naturally myself. I'm a big picture thinker, which also means I have weaknesses like I'm not great necessarily at research or getting into the nitty gritty. We all need to play the music that makes the most sense to us. Anyway, I try to hang out with mathematicians as much as I can. Ben, I'm glad you get to spend the time with your son and thanks for writing it. To left. One of them, simply an update and accounting of Five Stocks That Spark Joy, their final numbers.

But before we get to that one, Rule Breaker Mailbag Item number 6, this one from longtime correspondent Lisa Wharton. Lisa, thank you for taking the time here because you have provided a poem, a poem for us as we start 2023 as investors, I've always encouraged all the creatives to be creative. We've had original music played in this podcast. Thank you, Erick DeVore. We've had many different poem. Lisa, you've done this more than once, so we will add this to this podcasts artistic repertoire. Dear Fools, Lisa Wharton, writes, I'm always eager to listen to Rule Breakers Review-a-Palooz episodes was pleasantly surprised by the big beat by the three-year-old group of stocks, Five Stocks That Spark Joy. I wrote a poem to celebrate the bullish beginning of 2023. Now at the top of this episode, I mentioned not trying to brag here.

There's not that much to brag about given where my portfolio is, but I'm up 14 percent so far this month. It's been a pretty strong market. A lot of the companies that we've discussed this episode in this month that were well down, a lot of them have made pretty nice initial bounces back here at the start of January. Lisa, you are both energized by that observation, we're feeling that together, but you're looking ahead. This is your hopes for the near-term ahead. It's just three short stanzas. Here we go. The market is up and soaring high. Investors buying, watch the sky. The tech stocks lead the way to wealth, they're the ones who dominate health. Bulls are running, bears retreat, money flowing, can't be beat. Records broken, new highs reached, economy thriving. It's a new breach, but be mindful.

Don't get too bold. Markets change and stories are told of those who lost it all too fast, so invest wisely. Make it last. I think what particularly jumps out to me there Lisa is, it is possible to get a little too excited in the flush of a 14 percent partial monthly gain or even a great year like 2020, which really was a great, great year for stocks. Certainly, a lot of us started investing for the first time during COVID from home saw huge ups but then felt huge down. But I really hope we can all look past and think our way out of a two or three-year mindset to a two or three decade mindset, that's something that we've been throwing down for our fellow Fools, both exemplifying it ourselves, but also inspiring and I hope encouraging all of you to be playing the only game that counts, the long game. Reminding us at the end, Lisa, do not get too crazy high, or crazy low. But to invest as you wrote wisely and make it last.

I think that's the important point. My brother Tom Gardner and I have always been whole life investors. We don't think you're just doing it for an era or a season. I would highly not suggest you invest cyclically. I would highly suggest you make a lifetime commitment to your investments and whether they take the form of stock market investments and/or real estate investments and/or many other forms of investing your time, yourself, and of course your money. All of them, I think are going to be best if they're done with a long-term mindset. That's such a hard thing for many people today. Especially when the financial news is reported as if it's sports results that matter every single day, really doesn't. Most of the work that we do that really matters as investors is the work that Auri Hughes is referencing or did himself.

That's the research that we do to think long-term and figure out where we want to allocate our money. It's fun to follow the markets, it's just like I enjoy following sports. But I think it's going to be most productive if you don't follow the markets because you're thinking not to invest because we're down or up, or specifically, to over-invest too much because we're down or up. People have different mentalities around this. I really of course, favor the stability of regular actions, atomic habits, if you will take it a week after week, quarter after quarter, year-after-year, over the course of your life. Thank you, Lisa. Rule Breaker Mailbag Item number 7, not the most exciting mailbag item we've ever done, but I did commit to you as we closed out our Review-a-Palooza last week, that the final numbers would come in for Five Stocks That Spark Joy and indeed they have.

The final accounting. Now we can get ready the Fool Halla music Rick. The final performance for Five Stocks That Spark Joy picked on January 22nd, 2020, closing out last January 20th market close Friday, 2023, Amazon, Apple, Etsy, Tesla, and Walt Disney. The best performer by far, Tesla up 251 percent. Etsy, not too shabby up 162 percent, Disney down 28 percent over those three years. But take it all in all those five stocks as a sampler, up 92.4 percent. The S&P 500 over the same period up 20.8 percent. Therefore, Five Stocks That Spark Joy. Are you hearing me, Marie Kondo, signed, sealed, and delivered. This is now a permanent part of history.

Closeout, 92.4 percent versus 20.8 percent. Each stock on average beating the market by 71.7 percent outstanding Alpha. I think for a great theme to keep in mind, not just in 2020, but just as true in 2023 and all the three-year periods going forward. How about stocks, companies that spark joy starting with you, that you admire, that enable you to make your portfolio reflect your best vision for our future. It starts with what sparks joy for you and for me.

But I think it gets even better if you think beyond ourselves, what do we think will spark joy for many of us, for the world at large? If you use that as a key lens, as you look at the world and think about what stock do I want to buy next? Stocks That Spark Joy, whether you're talking about a rambunctious eight-year-old mathematician who's looking up stuff on your phone or your spouse or partner about the hard year that was, or the great decade that has been and I think will be sparking joy with Marie Kondo, I think is not a bad investment strategy. Well, thank you for joining us for this January 2023 edition of Mailbag. I'm looking forward to February. In the meantime, Fool on.