I dream things that never were and say, why not.
-- Robert F. Kennedy
In the quote above, Bobby Kennedy was modifying a quotation from a George Bernard Shaw play. You might say that he dreamed a quote that never was and said, why not. But I digress.
My topic for today's message is dreams, and how many of us can envision new, different, and better ways of doing things. Inspiration for it came to me the other day when I was watching a confession scene in a movie. I've seen them many times before. I'm not a Catholic, but I think I know the drill -- you say something like, "Bless me, Father, for I have sinned," and then go on to recount the regrettable things you've done. The upside is reassurance of forgiveness, I believe, along with perhaps a few tasks ("Say three Hail Mary's"), depending on the gravity of the transgression. It seems reasonable enough.
Anyway, a different -- and arguably better -- way of handling confession suddenly occurred to me. Imagine this: Instead of confessing the bad things we've done, what if we went to confession and confessed the good things we've done? There would be several upsides to this, I think. For starters, those of us who don't engage in good deeds very often might suddenly move doing them higher up on our to-do lists. We'd know we were expected to do good -- and to report on our good deeds. With more people engaging in good deeds, I suspect even more people would be inspired to do them -- Catholic or not. For example, if someone fills your parking meter with quarters while you're away, you might find yourself inspired to let a harried mom ahead of you in line at the supermarket. It's all win-win. The confession of good deeds might even be done in addition to confessing sins.
Back to investing
This may seem like an odd way of thinking -- envisioning alternate worlds -- but it's the kind of thinking that has spurred much of the progress in society. Florence Nightingale's vision of a world where the medical arena focused on keeping medical tools and bandages clean and sterile led to a spike in successful surgeries. George Washington Carver imagined three hundred uses for a peanut, giving us a new cooking oil and printing ink.
This is the stuff of Rule Breaker investing. Rule Breaker investors -- and the companies that they invest in -- are all about finding their own way and not doing things the ordinary way. Here are a few examples:
- People traditionally buy expensive jewelry (such as engagement rings) at local jewelry stores, right? (Of course, Microsoft's
(NASDAQ:MSFT)Bill Gates flew to Omaha to buy his wife's engagement ring at Borsheim's, a jewelry arm of Berkshire Hathaway, but I think we can all concede that he's not a typical jewelry purchaser, right?) Enter Blue Nile (NASDAQ:NILE), the pioneer in online diamond sales. Will people really buy diamonds online? The company thought so, and it seems to be right. Its sales totaled $49 million in 2001, then increased to $72 million in 2002, $129 million in 2003, and $169 million in 2004. That's an average annual growth rate of about 65% -- not something you'll profit from if you're invested in the likes of ExxonMobil (NYSE:XOM)or Coca-Cola (NYSE:KO). (ExxonMobil's annual revenue and net income growth rates over the past few years are roughly 12% and 18%, respectively, while Coke's are 8% and 7%.)
- Then there's NetEase
(NASDAQ:NTES), a company based in Beijing. Just as firms such as Yahoo!, eBay, and Amazon.com have transformed many lives and lifestyles in the United States, Netease is doing so in China. The company boasts a vibrant online community, featuring games, email, instant messaging, shopping, news, matchmaking, and much more.
These are just a few examples of companies breaking the old rules and breaking new ground. In the process, they hope to make themselves and their investors wealthy. This is what Rule Breaker investing, pioneered by Fool co-founder David Gardner, is all about. He's recommended both Blue Nile and Netease in his Motley Fool Rule Breakers newsletter service, which has a promising young track record; its picks are up an average of 13%, vs. 4% for the S&P 500 in the same period. (Try it for free and you'll be able to access his entire list of recommendations.)
The downside of Rule Breaker investing
Rule Breaker investing has a dark side, too: You can lose money. Since these tend to be young companies making big bets on the future, with great expectations of their own and of investors, when they fall, they can fall hard. One of David's picks, TaserInternational
Of course, such volatility can come in handy, too. After Taser plunged, David recommended it again, at a more attractive price.
The upside of Rule Breaker investing
It would almost be worth ignoring Rule Breaker investing -- and perhaps waiting until the best of these exciting companies grow fat and successful before investing in them -- if it weren't for one little niggling thing. When a Rule Breaker pays off, it tends to do so in a big way. In just the past year, fully nine of David's picks have appreciated by more than 40%.
An even more eye-opening example is my own investment in Time Warner
The bottom line
If you're interested, I encourage you to learn more. Rule Breaker investing isn't something you should jump into with all your hard-earned money -- remember, it's risky. Newcomers to investing should probably consider a more conservative or reliable approach first. But if you'd like to maybe commit a small portion of your overall portfolio to investing in some big dreams, take advantage of a free 30-day trial of our Rule Breakers newsletter. You may thank yourself later.
Time Warner is a Motley Fool Stock Advisor recommendation. Coca-Cola is a Motley Fool Inside Value recommendation.
Selena Maranjian's favorite discussion boards include Book Club , The Eclectic Library , andCard & Board Games. She owns shares of Berkshire Hathaway, Microsoft, and Time Warner. For more about Selena, view her bio and her profile . You might also be interested in these books she has written or co-written: The Motley Fool Money Guide and The Motley Fool Investment Guide for Teens .
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