Peter Lynch taught us to buy what we know. Can successful investing be that simple? And if we know and love the companies we own, how should we go about selling them? How are we supposed to remember why we bought these stocks in the first place? All this and more in this Rule Breaker Investing mailbag with Motley Fool co-founder David Gardner!
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A full transcript follows the video.
This video was recorded on Feb. 26, 2025
David Gardner: Well, Fools, it's the end of another month, which means it's time to open the mailbag, sift through some Foolish wisdom, and most importantly, prove that I do, in fact, read my email. February may be the shortest month, but there's no shortage of great questions and insights from you. We've got Rule Breakers spotting their stocks in the wild, a birthday wish tied to a book request, a much anticipated Fool return. Because it's a mailbag, at least one great question about when or whether to sell. Let's dive in Foolish friends, your voices, your questions. Only on this week's Rule Breaker Investing.
Welcome back to this week's episode. I'm delighted to have you join me. It is the end of February, well, it means many things, but one thing it means on this podcast is we're just inches away from March. Market cap madness, just minutes, days, hours, if you like, for our world championship coming up next month. We have our four finalists, Andy Cross, Bill Barker, Emily Flippen, and Matt Argersinger are going to be competing to see who is the world champion. Of course, Andy Cross, the Motley Fool's Chief Investment Officer, is the present world champion. Andy will be here next week to begin to defend his world championship. I'm excited to bring you March Market Cap Madness. This podcast's unique game show all throughout the month of March. Yes, I'm excited, I hope you are too.
Always remember that this game is played by us for you. You have an opportunity to outscore our world champion. You have an opportunity to compete right along with each of these four world class challengers for the March Madness Market Cap crown. Join us next week and all month long for March Market Cap Madness. There were three Wednesdays preceding this one in February, three podcasts. We started with Old New Borrowed and Blue Volume 9, the first week of February. In particular, I was thinking of that new point that I made, the second point in Old New Borrowed and Blue, where we talked about five bleeding edge Rule Breaker tech trends. If you're somebody who enjoys following technology or thinking about where the future is headed, that new point point Number 2 in that podcast, I hope contained at least one or two eye openers or new ideas for you as we look ahead to the future and ask, "Where is the next great innovation coming from?"
The second week of February, Stock Stories Volume 10, joined by many a Fool around our Frosty Campfire, talking about and sharing stock stories. Then last week, Pet Perks Volume 2, a delight to share after more than eight podcasts of pet peeves that I've done over 10 years. Nice to share my second one, looking at the pet perks, the little things that make everything better. That was a lot of fun to do last week. That was the month it was for this podcast.
Before we get started with our six mailbag items this week, as I shared at the start of this year, my 2025 book Rule Breaker Investing is available for pre-order now. After 30 years of stock picking, this is my magnum opus. It's a lifetime of lessons distilled into one definitive guide. It's the playbook for anyone who wants to squeeze the maximum amount of outperformance juice out of the bountiful fruits that are the stock market. Each week until the book launches this summer, I'm sharing a short excerpt. We break open the book to a random page and I read a few sentences.
Let's do it. Here's this week's page breaker preview three sentences from very near the book's end. "For decades at The Motley Fool, one core value stands above the rest. Your Motley. The value you, yes, you bring to work every day. In a word or a phrase, it's what you most care about, what you aspire to, what defines you. It's how you choose to tell your story." That's this week's page breaker preview to pre-order my final word on stock picking, giving you all the goods I've used to pick seven 100+ baggers, just type Rule Breaker Investing in Amazon.com, barnes&noble.com, or wherever you shop for fine books. A hearty Fool on to everyone who's pre-ordered.
That means a lot to me. Well, I said we had six mailbag items, but I like to dip into Twitter X for some hot takes over the course of the last few weeks. Here's one from at 307 Fool Matt Hart. Matt, you wrote we've entered the second month of 2025, and I have a prediction that I would love to manifest. Looking forward to a day when my favorite Fool at David G Fool hosts an hour of Fool 24, maybe a live episode taping of this podcast. It would be an instant bestie. Well, first of all, thank you for that, Matt. Second of all, I think you know I answered your call. Last Friday morning was 10:00 AM Tuesday, February 21st, I got to join with, well, it was actually hosted by Tim Beyers, longtime Rule Breaker sidekick, and Tim and I had a wonderful time over that hour answering member questions. Fool 24, for those who don't recognize that is what Motley Fool Live, the television channel on our website. That's what we used to call it. Motley Fool Live, but now it's Fool 24.
It's the same experience. It's for members only, and it's an opportunity. You'll see the button right at the top of our website if you're logged in as a premium to join with me, our other advisors and analysts, whoever is around that hour of the day from 9-6 every single day, including weekends and holidays. The brainchild of my brother, CEO Tom Gardner, and a cast of thousands, a delight to have spent that time. Matt, I'm pretty sure you were there asking one or two questions that we got to answer last Friday. You manifested it, you made it happen. Thank you. I really enjoyed that hour on Fool 24. One more from Twitter X, Dog Dynasty at GA. That's like Georgia DAWGCK dog dynasty. You said, "Can you discuss what you do with spiffy drops?" Then he lists the ticker symbol TTD for The Trade Desk.
One of our long-standing Rule Breaker winners, The Trade Desk with CEO and founder Jeff Green's guidance has been a fantastic stock, leading to many a spiffy pop dog dynasty. But you and many other Fools experienced a big drop. That's earnings time. This tends to happen. You never quite know which stock is going to be near the analyst's land mine, not quite hitting numbers or with depressed forward projections. Anyway, Jeff Green and his trade desk stock dropped from 120 to about 80 in about a day or two, and most of it just happened in a single day here in mid-February.
That is a spiffy drop, by the way, parlance all of which I've invented and is silly and yet very serious for a spiffy drop is when the stock drops more in a single day than your cost basis. For example, if your cost basis had been 28 and The Trade Desk and all of a sudden, in a single day, it goes from 120 down to 90, it just went down $30 in one day, that's more than your cost basis. That never feels good. But what I've always said back, Dog Dynasty and to many other Fools is that you can only get spiffy drops generally if you've had spiffy pops, and you'll have a lot more spiffy pops than spiffy drops if you keep holding great Rule Breakers over time. In fact, this could have been answered more succinctly had I just read back what Sanmeet Deo, our longtime analyst and frequent guest on the show at SVDEO 21 said back to you on Twitter.
When Sanmeet said, "Spiffy drops are definitely tough, and we feel for you, follow the business. Has anything materially changed? Many great growth companies, Sanmeet writes have gone through significant drops on their way to success." That even includes The Trade Desk where that's happened before, and I'm sure it will all happen again, as well. Thank you for calling us out on Twitter. This podcast is at RBI podcast. If you are on Twitter X, and you ever want to drop us a line and maybe be featured on a mailbag at RBI Podcast. I'm at David G Fool, if you ever want to follow me or drop me a line as well. Let's get now into our six Rule Breaker Investing mailbag items. Mailbag item Number 1. This one comes from Amit Somani writing in from Bangalore, India. Thank you, Amit, for taking the time to write. Hi, David. Kirsten Guerra's stock story resonated with me on multiple levels. It brought back nostalgic memories of Costco. Amit writes and Peter Lynch. My related story could be titled simplicity is Bliss. Now, before I go on, I'll just mention this is, of course, reacting to our stock stories, Volume 10 Frosty Campfire fiery stocks from a couple weeks ago. Kirsten Guerra told the story of buying as an early Fool employee.
Kirsten today is now an accomplished analyst at The Motley Fool, but she didn't even start in our investment group. She started outside of it, and she just decided since I had recommended a stock recently that seemed interesting to her as a new employee without that much investment experience, she just bought Axon Energy, ticker symbol AXON and around the campfire, she told the story of what a fantastic winner it's become for and she didn't really know what she was doing at the beginning.
I think it's one of those stories that democratizes investing and makes us all remember, especially those early days, maybe those first stocks that you bought. Maybe some of the fears you felt as you hit that buy button or as you watched the stock make a big move up or down, and we're all muddling through, so it was a really heartwarming, inclusive story. Kirsten just reminding all of us we're basically human beings trying to figure out the future and buying good stocks and holding onto them. Sometimes it really works out. I'm going to go back to Amit's story, but it is worth mentioning, since we're talking about spiffy drops this month, we've had some great Motley Fool stock gains in February, but Axon Energy is also one that has taken it on the chin. In fact, it was just a week ago. The stock in a single day, this is after Kirsten and I were celebrating Axon around the campfire. The stock dropped 700-500. Just over the last week, a lot of that in a single day. It's a reminder that the stock market is volatile and especially our Rule Breaker investments can make these moves, and yet, we're not investing in the zigs and zags of recent stock moves. We're looking at the companies themselves, and Axon Energy remains very solid. In fact, with it down at $500 today, it's still up 100-500 over the last five years. Let me go back to Amit's letter. Amit you wrote in the late 1990s, I often found myself irritated while shopping at Costco. The parking situation was challenging. The aisles were crowded and everyone seemed to have large carts at the checkout counters.
Then, thanks to Peter Lynch, that of course, would be the famed Fidelity Magellan fund manager and the writer of what to me is one of the great investing books of all time, One Up on Wall Street. Then thanks to Peter Lynch, Amit writes, I had an epiphany. What if I were a shareholder in Costco? Rather than just a shopper. Wouldn't I be pleased to see so many people shopping, even if parking was difficult or everyone was buying too much? Of course, I would. Amit continued so like Kirsten. I decided to buy Costco stock without much financial analysis or diligence back then.
As a result, I enjoyed the bustling crowds at Costco for the next several decades and became wealthier, wiser, and happier. Beyond that fortunate stock pick, I've learned that sometimes Amit writes in conclusion, simplicity is more valuable than complex research in public market investing. Fool on, Amit Somani. Well, Amit, I think you've really cut to the quick and anytime somebody rocks Peter Lynch, I'm conscious, many of us knew or grew up with Peter Lynch, but many others, especially younger investors may not be as aware of him, but I think many of us credit him with the concept of buying what you know. If you see something in a mall or if you enjoyed a new meal at a new restaurant and you find out it's a public company, you should maybe add that to your watch list.
Consider, rather than, I don't know, maybe your broker telling you you should buy three stocks you've never heard of, maybe you should with Lynch, buy what you know. A great story by somebody initially annoyed by how many people were ahead of him in line at Costco with how much stuff to somebody who became a Costco shareholder and started to see the beauty of the other side of that coin. Let's move on to Rule Breaker mailbag item Number 2. This from Sam Becker. Thank you, Sam.
David, I'm enjoying the Pet Perks series, and I had thought I had an original idea, only to have you incorporated in Pet Perks 2, just last week. I was surprisingly happy when a stock I invested in which promptly tanked, finally got back into the money earlier this year. Sam goes on, I likened it to the dividend happiness that you mentioned in the first Perks podcast. It was indeed an example of my believing in a company under a dark cloud that the market abandoned for a while. I'm enjoying your readings from your upcoming book. In listening, I was wondering if you were doing the excerpts as a weekly way to do the audio version, signed Sam Becker. Well, first of all, I love that, Sam. The joy of a stock recovering after being under a dark cloud, as I like to say, and thank you for rocking the language when we can see through dark clouds, and then eventually, it turns out we were right. Everybody else thought things were going to be really bad. We didn't, and in those times in your life, it doesn't always work, of course, but when it does, and you're right. That is one of the most rewarding feelings in investing.
You were likening it to the dividend happiness point that I made in Pet Perks Volume 1, where I basically said, one of the pet perks of being an investor if you have dividends is just getting paid. How much fun it is to look at your brokerage statement or your online account and see that you just got money paid to you by the company because they pay a dividend. Maybe four times a year. Dividend days are definitely a Pet Perk. That came from Pet Perks Volume 1, but I do think that there is a parallel to that delight of receiving dividends right through to the real tangible rewards you get from patience and conviction when you go against the grain.
Again, one of the most rewarding feelings in investing, Sam, I think about Apple. In 1997. Apple, of course, was the stock I featured around the campfire a couple weeks ago. At the end of that episode, that was a lot of fun to talk about. Apple in 1997 was left for dead. It was being ridiculed. Its stock was under $1. Steve Jobs returns. I was not one of them, but the few who saw it and its design-driven future, think about how big Apple became over the next 25 years. Absolutely astonishing story all occurring in our lifetimes. By the way, it's not the only one.
There are a lot of others out there. But when you do find a dark cloud that you think you can see through, you're still going to have to live through the market eventually figuring out that it was being too pessimistic and that people who saw the other side like you were right. You're still going to have to show patience and resilience to that point. It's fascinating recovery stories, just more broadly and culture and lore, recovery stories create a unique happiness. You got that mix of relief, validation, and usually it gives you a little bit of an extra bump to your optimism, as well. As a sports fan, I'm thinking this the investing equivalent of a Comeback Player of the Year award. I think in some ways, Sam, whatever that stock was for you a comeback stock of the year. You get to be comeback player of the year that you took the time to believe and hold so congratulations to you. Thanks for your nice comments on our Page Breaker previews.
There certainly will be an audio version of Rule Breaker Investing. I'll be reading it, of course. I can't wait to do that early this summer. That'll come out in the fall, as well. Yes, a Rule Breaker investing audio edition is imminent. But no, my Page Breaker previews here will not be cobbled together by my talented producer in order to make them into an audiobook later in the year. This is just for this podcast and for my listeners. Let's move on to Rule Breaker Mailbag item Number 3.
Speaking of talented producers, I'm going to call this one there and back again because after more than 24 years at The Motley Fool, longtime Rule Breaker investing producer Rick Engdahl took a well-earned full baticle from April of last year to mid-September 2024 his goal to reconnect with his creative self, dedicating time to music, travel, and photography with a little rust kicking along the way. Rick planned to visit Nashville, as I recall, to perform at Open MCs, maybe with songwriter friends, we'll see, explore new music production techniques, and refresh his sense of artistic exploration. Now, while he acknowledged the ever-changing landscape of music technology, he saw this time as he conveyed to us in the April 2024 mailbag. As he waved goodbye, he saw this time as a chance to rediscover and evolve his craft. Guess who is back, and guess who is my producer. Rick, welcome back.
Rick Engdahl: Well, thanks. It's great to be here. It's been a while.
David Gardner: It has been, and I'm just delighted to have you back as our full time producer for Rule Breaker Investing where you've done well, really, most of the last 10 years has been you, but I did have some good talent subbing in for you over the last eight months. Thank you to Dez and to Heather. But, Rick, I remember in my conversation with you on that April mailbag, you said, "I hope to feel grounded in my creative self again. I hope to be able to bring that energy back." Have you?
Rick Engdahl: Certainly, to some extent, I've written new music, which is always a good thing. I've been playing more around the neighborhood both in the band that I have with my wife, but also there's some other opportunities. We have a pretty vibrant community here, good music community in town here. Just last weekend, I played in a thing called Insta Band, which a friend is organizing that basically you're assigned a part and a song, and you just show up and you join your bandmates right there on stage, and you play for the first time ever without rehearsing. It was great fun.
David Gardner: What did you play?
Rick Engdahl: I played guitar for Crimson and Clover by Joan Jett and the Black Hearts and Billy Idols White Wedding. There's a color theme. All the songs were based on colors.
David Gardner: Well, and thanks for sharing songs I know these days because I find increasingly. I don't know as many songs from the kids.
Rick Engdahl: That might just give a clue as to the general demographic of who is playing in the Instant.
David Gardner: Works for me. Well, more broadly, Rick, just reflecting back on the experience, what'd you learn?
Rick Engdahl: Well, the downtown is useful for one thing. I think it was a good move. It was good timing for me. It was good to find some space again. Often, vacation plans can be just as stressful as your day-to-day life because you're trying to get everything done. You have a short couple of weeks or something like that. But to really have a bunch of time off where there was not a strong agenda was really useful and restful and good for mental health, I think.
David Gardner: That's wonderful. You said you were going to go to Nashville. Did you go to Nashville? Did you go any other places?
Rick Engdahl: I did go to Nashville. In fact, you'd know that because I happened to run into your daughter there.
David Gardner: It's true.
Rick Engdahl: Who is by random chance, the next-door neighbor of my friend who I was staying with. I also went to New England on some college shopping trips with my kid. I went to Ireland to visit a good friend who lives there in Cork.
David Gardner: Wonderful.
Rick Engdahl: Went to Colorado to visit. I did a fair amount of traveling.
David Gardner: That's great. Any surprises?
Rick Engdahl: It's a negative thing, but one of those surprises is that I really didn't do anything in the way of photography. That was one of my goals, but I think that because I was successful in reconnecting with music, that went by the wayside. There was a little bit in my travels. There was a little bit of photography, but I didn't really dive back into it. I was going to have to wait for the next sabbatical.
David Gardner: You had your iPhone. You're snapping pictures, everywhere, but not beautiful pictures, not photographer Engdahl.
Rick Engdahl: I didn't take out my big camera and go out on the Zenquest of moving slowly through nature.
David Gardner: Well, rocking our mutual enjoyment of JR Tolkien and Lord of the Rings, I called this there and back again. But in some ways, Rick, you're the Fool who never left. For podcast listeners, though, Rick was officially away. Was he ever was he ever really gone? Could you tell? Rick, did Foolishness creep into your summer in any unexpected way? Or did you still check your stocks? Did you have any random encounters with Fool-minded people?
Rick Engdahl: Foolishness is pretty deeply ingrained in my mindset, so I never really went away from me. I don't really check stocks that much. I'm very much the buy-and-forget type of investor, so I wasn't really checking stocks all that much. My friend who I visited in Ireland is actually professor at the University of Cork University, something like that.
David Gardner: Awesome.
Rick Engdahl: Teaching courses on Shakespeare and Bob Dylan and all other things. A songwriter friend, but also a Shakespearean scholar and therefore, totally Foolish.
David Gardner: Hundred Soul.
Rick Engdahl: Absolutely.
David Gardner: Well, Rick, let me finish Mailbag item Number 3 by saying, welcome back. I hope your time away was everything you wanted, even if you didn't get a photograph of all of it. Well, they any of it and that Foolishness found you even when you weren't looking for it. We're just delighted to have you back and thank you for the production you're giving. This week's episode. In fact, last week's episode because you were here then, too and here through 2025. Onto Rule Breaker Mailbag item Number 4. This is from Brett Weinman. Thank you, Brett. Hi, David. It brings me great joy seeing so many of the great companies recommended by the Motley Fool in my daily life.
For example, it's wonderful when I go out to dinner and see that the restaurant is powered by Toast, knowing that I am a part owner of the company. One of the struggles I've found with owning individual stocks, Brett Writes, is selling them. I love the companies I own. I've taken the time to get to know them, and I bought them because I believe they have a bright future. But as Morgan Housel says, money is a tool, and like any other tool, it's meant to be used. My portfolio is of little use to me, if I cannot sell some of my investments to fund the life I want to live. Do you have any tips on getting comfortable with selling even when stocks have a bright future? I've gotten pretty good at flexing my rarely sell muscle and resisting the temptation to jump in and out of stocks, but I'm still trying to figure out how to sell skillfully to take advantage of gains that these wonderful companies produce when held for long periods of time. Full on. Brett Weinman. Yes, Brett, the joy of ownership. Now, I love that you see investing this way and I'm, of course, torn as I read your note because you're saying things like, I love my companies. I love being a part owner. At the end, you mentioned taking advantage of gains that these wonderful companies produce, and you added when held for long periods of time. That's why we don't spend that much time talking about selling, except in two regards. I'm going to just remind you of something I've certainly said over the years.
Yes, it'll be there in my book, too, because it's really how I think about selling. The Rule Breaker approach to selling comes down to two reasons. The first is, if you find a better place for your money, a new stock that's better than some old stock you have, a new technology you're more interested in than some older thing or maybe you have too much money in a given position, so you can find a better place for some of that money in a new stock. Now, it's not always a different stock that might be a better place for that money. The second reason you sell is because you have a new life need or an opportunity. The reason we invest in the first place is to fund something meaningful, whether that's a home, a passion project, or just simply financial security. For some of us, there are obviously many reasons to sell, but too often people look for reasons to sell and don't realize the reasons to hold are much more powerful, especially if you're in it to win it over the only term that counts the long term.
Clearly, you are, Brett, and I hear that from you. But my answer back to you, when I think about if I've decided it is time to sell, I think my Number 1 tip is that you don't have to sell everything all at once. Just as we talk about buying in thirds at The Motley Fool, which we've done pretty much since we launched on AOL back in the day, buying in thirds. If you don't feel comfortable putting all $3,000 in that first investment, maybe put 1,000 in now, 100 in a month from now, and 10,000 in a month after that and be committed to that time frame. If it goes up or down, it doesn't matter. You're going to be putting that 10,000 in a month from now so that's buyin
g in thirds. You could buy in fifths, if you wanted to, etc. Can also sell in thirds or fifths. You can sell incrementally, and that can take place either in a given stock, like if you decide to exit a position, you don't have to do it all at once. You could do it, let's say, one 12th, each of the next 12 months of the year and slowly sell out. Roll down that position in order to fund whatever you want to do next with that money.
That's a perfectly good approach to selling or instead of a single stock, which is the example I just gave, you could also just take a percentage across your whole portfolio. Let's say you have 20 stocks, you could sell 10% of each of them. Just broadly sell across your portfolio. It's not the most convenient thing to do if you're having to type in your own trades, and you do have to always consider if you are paying commissions. Some people are these days. Some people are not paying commissions anymore these days. You have to consider the implications of paying commissions. You don't want to sell lots of different stocks and pay way too much in commission.
It's also important to think about the tax implications of what you're selling. Of course, when you sell winners, you'll be paying capital gains taxes on them. When you sell losers, that will soak up some of the capital gains from other stocks as you calculate your tax bill at the end of the year. Of course, there are always going to be commissions for some of us and tax implications to selling. But that decision, I think, to devolve out of a position and not make things so binary, often people just say buy or sell. Yes or no, blue or red, black or white. I see a lot of grays. I see a lot of purples. I see a lot more nuance than often our lizard brains are willing to credit ourselves with and so, taking a little bit of time, which is exactly what you've done, Brett, by taking the time to write me, taking a little bit of time to meditate, reflect on this and say, why are we doing what we're doing? I really appreciate your point drawn from Morgan's work. Just reminding us money is a tool and like any other tool it's meant to be used.
In conclusion, Brett, you wrote, my portfolio is of little use to me if I cannot sell some of my investments to fund the life I want to live, and I'll say full stop there because that's true for all of us. But I'll also remind many listeners that most people sell way too frequently. They don't invest. They trade, and it is greatly to their detriment so many of us pay huge opportunity costs when we stop the compounding that's going on, of investment returns in our portfolio because we sell, and then we have to decide when to jump back in. It's so much easier, so much more capital-F Foolish and successful to just keep buying and adding and buying some more over the course of time. Yes, when we do sell, we should sell. Well, thank you for that note, Brett Wayman.
Speaking of the joy of ownership and also sometimes thinking about selling, well, we do both at Motley Fool Stock Advisor. Head on over to wwwfool.com/SignUp and join Motley Fool Stock Advisor. It's our flagship Investing Service. As a Stock Advisor member, you're going to get two new stock picks each month, rankings of a whole Scorecard of companies, many of which I've thrown up on there over the decades and access to all episodes of our premium podcast and that's Stock Advisor Round Table. It's only available to premium Motley Fool members. That focuses on Foolish recommendations, takes a deeper dive into the businesses we cover, featuring Fool analysts you already know in love often heard on this podcast or on Motley Fool Money. My brother Tom appears regularly on bonus episodes of Stock Advisor Round Table to discuss what's new in the Stock Advisor universe and to answer your questions sent in from Motley Fool members. Again, wwwfool.com/signUp. Join us, today.
Onto Mailbag item Number 5. This is from Wilder Serrato. Wilder, thank you for this note. Dear David, congratulations on your upcoming book, Rule Breaker Investing. As a 10-year member of the Motley Fool community and an avid listener of the RBI podcast, I'm thrilled to see your lifetime of lessons distilled into this definitive guide. Some of my favorite episodes, Wilder writes, include those with Shear zad Shaman, Morgan Housel and the Authors in August series. You also Wilder, call out our Death over dinner with Michael Hebb episodes, which was a lot of fun, and you write and so many others, too. Your insights have been invaluable to my investing journey. My 55th birthday is coming up in early March and I would be honored to purchase a signed copy of your book as a gift to myself. Would it be possible to arrange this?
On a related note, I recall you discussing a trip to Omaha for the Berkshire Hathaway Conference. Is there any chance for community members to join this excursion? Thank you for your time and for all you do for the Investing Community Best Regards and Fool on Wilder Serrato riding in from the Woodlands, Texas. Well, I think it's first worth pointing out, Wilder, that my book doesn't come out until late August, I think, or early September, so I can't do it for you. Signed copies aren't going to show up in a few weeks. But I do want you to know that I'd love to sign your book, and I'm not quite sure how to do that yet because we're anticipating a lot of Motley Fool members and Rule Breaker investing listeners wanting me to sign their book, and sometimes their book signings. There are also ways for us to do that at an enterprise level and we're just going to have to try to figure that out over the course of this summer.
I hope our full team, whether it's our PR team or our member services team we'll all figure out how to do that. By the way, I have so many creative, smart, accomplished listeners. If you have some best practice for signing books for a large number of people who may buy them online and then try to send them to you, if you, dear listener, have faced this and figured out how to do it really well, I'd love to hear from you because we would probably copy your brilliant plan. Wilder, of course, I would love to sign your book and I'm honored by your note and the time that you took and happy birthday ahead of time, 55-year-old friend it's just an odd side thought, but 55 the Gardner Kretzman continuum.
Wilder, since you are a ten year member and a long time listener, I suspect you probably already know the GKC and if you do, that would mean that if you're obeying our GKC ratio, which I'm not fully going to explain in this mailbag, then you'd be around 54 stocks right now, which means Wilder, you need to be on the hunt for your 55th stock sometime next month. A quick plug for the GKC which, by the way, gets a little section. It had in my book, I needed to permanently enshrine it as one of the great simple with language incredibly intentionally overcomplicated concepts for all investors of all ages for all time, the Gardner Kretzman Continuum shout out to David Kretzman as well, who'll get a plug a little later this summer. In fact, let me just build on a point I made a minute ago. Very happy to say that already some pretty big time podcasts have lined me up for interviews to come out this summer. Dear listener, in addition to me being here every week for you, but just once a week, if we're doing our job right, you might be sick of me in August. I hope so.
Anyway, to that same point, if you'd love to see Rule Breaker Investing appear on one of your other favorite podcasts, let him know, or let us know. Some of you are, of course, yourselves, popular hosts of podcasts. Feel free to reach out. I love doing podcasts to see if I'd be a good fit for your audience here in 2025. You can use [email protected]. Always a great way to reach us direct, or, of course, just [email protected] at The Motley Fool. On a side note, Wilder, I will not be going to Omaha, Nebraska. I've been once before. It wasn't for a Berkshire Hathaway meeting, but I know it's a pilgrimage for many and I wish you the best if you choose to go. Some people are worried. This could be Warren's last full appearance at one of these, so probably worth catching. There are always many Buffett fans among Fool fans and always many Fools in attendance. I bet you'll bump into a few friends if you're looking out. Anyway, happy birthday again, Wilder. Fool on.
Best for last, I say so. Rule Breaker Mailbag item Number 6. This comes from Long time Fool and Annual correspondent, Steve Hostetler. Hi, David, it's that time of year. I hope all's well with you and your family. Attached is my annual letter. Now, let me pause for a second, just say that Steve has written himself an annual letter reflecting on his investing journey each year and sent me a copy and maybe all the time, but most of the time, I've shared it directly with you, dear listener, as well, because I really appreciate where Steve's coming from, his diligence, his wisdom, and his reflections. This year is no exception.
Dear David, for this fifth year in a row, I write to you as a way of reviewing my investing world and sharing what I've learned for the possible benefit of fellow Fools should you feel it's valuable. This year, I learned a lot. You often advise us to keep score and know why we purchase and sell shares of a company. I've been tracking the results of my portfolio for years, but have not recorded why I bought and sold shares until 13 months ago. I don't trade a lot, Steve writes, but I do have about 70 companies in my portfolio. I made most of my purchases as a result of a company's story that I liked, usually told on the Rule Breaker platform and made my sales because of poor stock performance and/or a bad news story. This hasn't worked out horribly because I don't trade much and fortunately, I've picked up some winners that I let win from Motley Fool recommendations.
Over the last nine years since I've tracked results, I've beaten the S&P, but I know the emotional and somewhat whimsical aspect of my investment decision making process, Steve writes, has hurt my performance. Most of the damage came on the sell side. Let me pause it right there for a second. Most investing mistakes do happen on the sell side because the worst you can ever do if you fail to sell a stock that goes down is lose 100%. But if you buy a stock and it goes up ten times in value and you only let it go up 20% for you or 75%, that is a much larger loss than that supposed bigger loss of -99%. Most of the damage, as Steve Hostetler has just said, comes on the sell side, selling based on price movement or bad news or short-term thinking, often will lead to regret. Not for every stock, of course, but especially for companies that we esteem.
As Rule Breaker investors, we're investing in companies to make our portfolio reflect our best vision for our future. If you're investing in companies that are a big part of your belief in what's good for the world, you love the brand. You love their products. You're with Peter Lynch, buying what, yeah, short-term thinking is often going to lead to regret if it leads you to sell. In Steve Hostetler's case, a journal helps counteract emotion with evidence. I will say I've never really kept a journal myself, Steve, but what I did keep is a scoreboard, spreadsheets, things that show me the score of what I'm doing. I would often write myself notes or on Motley Fool caps. I would explain why I'm doing what I'm doing or in any Motley Fool Service Stock Advisor or Rule Breakers, we would lay out our full buy thesis as we bought stocks and if we sold them, you'd see that, too. In a sense, I guess I was journal all along. Anyway, back to your note.
Over time, Steve writes, usually years, I would forget why I originally invested in a company, didn't track its progression, sold it when the stock price went down or was stagnant. I also might sell as the result of an isolated, bad news story. I paid too much attention to the stock price and chart and not enough to the internal company performance. At the end of 2023, I started an investment journal. It's something I should have done a long time ago and suggests that your listeners consider starting one.
I have no doubt there are better ways to do it. But here's what I've done. I've started a running Word document with a bullet point for every company I own. I did this at the beginning of 2024. As each company reported earnings, I wrote what the company does, if I didn't already have a good handle on it, how the company performed in the most recent quarter, and a narrative regarding how I feel or think about the company now. I use Motley Fool data, write ups, and videos as well as other resources to write my narrative. I finished with some buy-seller hold considerations for the next quarter. The initial entries took a little time, but it felt great to have a better grasp of my portfolio when I was done. Now, if I hear, read, or watch something of significance about a stock I own, I add a dated narrative under the last entry. At a minimum, I log and update four times a year following quarterly reports. It only takes a few minutes. In a separate area of my Word doc, I write down general investing nuggets I read or hear that would have entered and left my brain without the possibility of ever being actionable had I not written them down. There's a lot that doesn't get written down, Steve writes, but at least I have a place for it when I make the conscious effort to do it.
Now when I hear bad news about a company that makes me feel like selling it, I have much more than one or two isolated pieces of information and my emotions to base the decision on. The result of reviewing my journal entries when considering a stock sale is usually to do nothing. The action you repeatedly mentioned and is statistically proven to be the best decision most of the time. Well, let me just pile on briefly, Steve, by saying, doing nothing is often the best move. Reviewing your journal when tempted to sell clearly has helped you hold more than if you had not and that just reinforces the principle that staying invested time in the market, as we say beats market timing, back to Steve's note, closing it out. When I do sell, my journal is evidence that I put some serious thought into it. Usually over a few quarters.
In addition to making decisions based on more information and less emotion, I'm also better able to learn from my mistakes because they are recorded. I don't know if Rick Engdahl is going to do this, but if he could make that word echo, as I say it one more time, it'll really hammer the point home because Steve just wrote, "I think, in addition to making decisions based on more information and less emotion, I'm also," Steve writes, "better able to learn from my mistakes because they are recorded. I have already had the experience of looking back in my journal and seeing when I was wrong in my thinking. At least I have the possibility of doing something different in a similar situation." That's so bright of you, Steve. I love it.
Continuing on, "Starting this journal has made it painfully obvious how I repeated the same investing mistakes, mostly emotional over and over throughout the years. "To your readers" Steve writes, "Don't wait until you are 60 to start an investment journal. One resource I found very helpful for consistent journaling. Here's a good plug is the website Earnings Hub." Steve writes, "For about 55 bucks a year, I get notifications when earnings come out for each company in my portfolio. When an email hits my inbox, it doesn't get deleted until my update is complete.
The site has an AI review of earnings calls and a lot of other info, but the notifications alone are worth the money to me. Each subscription can have multiple accounts, too, so it can be shared. I share an account with my brothers. There are probably other websites that do this, but it's the one I use." Maybe an idea for the Motley Fool site someday. Thank you for that, Steve. As stated, I'm sure there are better ways to do all this, but this system works for me and doesn't take a lot of time. I'm pretty sure AI could convert my Word doc into an Excel sheet, which would probably work better, but I'm not there yet. That's it for this year. Be well and Fool on Steve Hostetler.
It goes for the latest annual Hostetler letter, and I think what Steve, a retired firefighter among other callings, does so well is he's modeling diligence, hard work and support not just of better returns, although, yes, that's a good reason on their own, but also better thinking, learning from his experience that that if he hadn't documented it, he couldn't learn from. Makes me think of Author Warren Benis' fourth lesson of self-knowledge, which is true understanding comes from reflecting on our own experience. This gets richer and more valuable, the more experience, and the more gray hairs that we may gain, but it only gets richer and it only gets more valuable if we're paying attention. I guess I should mention and also investing in the first place, taking the time to build up a 70-stock portfolio. Here's Steve at the hearty age of 60, GKC of 1.17, by the way, no less. A little structure and a little extra elbow grease can make a lot of difference. So good on you, Steve Hostetler. Thank you. To all of my correspondents this week from Bangalore, India, to Woodlands, Texas, to you, wherever you are, this week. Fool on.
