One year ago, Motley Fool co-founders David and Tom Gardner moved their stock-picking service from to a subscription-only newsletter called The Motley Fool Stock Advisor. Last week, Mark Hulbert's industry-standard tracking service rated StockAdvisor the #1 best-performing investment newsletter in the nation for its 25% returns for the year ended April 30.

Here begins an occasional series in which the Gardners share their insights on the stock market overall, some specific stocks they have recommended, and key investment lessons they've learned over the years -- and teach today in the pages of The Motley Fool Stock Advisor and here on  -- Bob Bobala, Editor-in-Chief, The Motley Fool

BOB: "The Motley Fool Stock Advisor" is #1 in the land this month according to Mark Hulbert's newsletter report over on CBSMarketWatch. Your returns are beating the market by 25% over the past year. Hot damn, guys -- you're sure killing my portfolio! Is success going to your heads, or do you think it's too early to deduce anything from your outstanding performance?

TOM: Success is not going to my head, but as usual I have worries about Dave. His picks are up 36% over the past 15 months -- in a flat market -- including three recommendations that have more than doubled. Marvel Enterprises (NYSE: MVL) --which he selected twice over the past year -- has tripled for him. After making money off all those guys in tights, I'm worried Dave's starting to picture himself in tights... and, frankly, I don't want to see him coming to work at Fool HQ in some Lycra-neon get-up.

DAVID: Me in tights... not a pretty picture, I agree.

TOM: And not earned yet. We're proud of the launch of our newsletter and such a strong first year, but our goals for these investments are three years out, not one year, and we're not going to get excited (or dismayed) by a single year's performance.

DAVID: That said, we're making selections month in and month out and Tom's beating the market on 13 of his 15 picks so far, which looks good short term or long term. But as he's my younger brother, I tend not to give him any credit. So forget I said that.

TOM: [laughs] I think the most important feature we have -- something Nobel Prize winner William Sharpe has been a strong advocate of -- is a clearly defined benchmark. Our goal is to beat the S&P 500 in three-year bunches. With Dave up 37 percentage points per pick on the market, and given my 17 percentage point per pick lead on the market after year one, we are very pleased. Although it's hurting me to run second to my older brother.

But what I'm most excited about is the number of investors subscribing to Stock Advisor. This is among the fastest-growing stock newsletters in history, with nearly 30,000 subscribers in our first year. So it's great to be serving so many Fools.

BOB: Tom, what's with the three-year timeframe for your stock picks? What happened to "the long term"?

TOM: You'll find that a lot of great money managers in the 20th century have used that timeframe. It's long enough that you give your companies time to perform, but not so long that investors and subscribers are guessing at whether you're any good. Mark Hulbert's #1 rating for Stock Advisor over the past year is exciting. And we are beating the market soundly. But I am aiming for the #1 rating over a 36-month performance period.

DAVID: Yes, I think three years is a good general timeframe for most investors to shoot for market-beating numbers. In any given year or two, your stocks may be out of favor. But if you're not making money or beating the market with a given stock -- or your portfolio overall -- within three years, you're starting to pay a significant opportunity cost in terms of your time in the market. You could have just invested in the stock market index fund, spent no time, and done better. And in fact that's exactly a situation where you should be considering the index fund, as we've always preached. Invest in individual stocks and beat the market, we've said, but if you're not beating the market, fall back on the index fund.

TOM: I should also point out that this isn't to say we don't sell stocks along the way --even stocks that are beating the market. But our newsletter is designed to hold us accountable every three years for market-beating returns.

BOB: You mentioned selling. That's exactly what you did recently with Whole Foods Market (Nasdaq: WFMI), after holding it for less than a year. Tom, what was your thinking there?

TOM: Well, I learned this lesson the hard way when the bear market began to devour many of my Rule Maker portfolio holdings on Ouch! I was not rigorously valuing the businesses I was investing in. I ended up with clearly great companies, but companies whose stocks were badly overvalued. I had felt that emulating Philip Fisher -- buying great companies and holding them through under- and over-valuation -- would serve me well for decades.

That has changed. While I love Fisher's writings, I now spend a lot of time in Stock Advisor pricing the businesses I recommend. When it came to Whole Foods, I had recommended the stock twice in the past year. Both selections were beating the market by more than 30 percentage points. This is a very well run business in an attractive niche with top-flight management. I loved -- and continue to love -- everything about Whole Foods... except the valuation.

In the past, I would have held through the overvaluation. But this time, I recommended the sale at $61.46. At that price, Whole Foods was valued at 40 times free cash flow. Looking over the business, I anticipate 16-18% annual growth in free cash flow. With the accompanying share dilution, I just couldn't convince myself Whole Foods would beat the market over the next three years, at a price above $60. So I recommended the sale.

BOB: Today, Whole Foods is down at $52. Is it time for a sequel newsletter, Tom Gardner's Market Timer?

TOM: With a hot 1-900 fax service? [laughs] No, no. We'll see how this plays out over the next two years, but I do suspect that investors will get a look at Whole Foods stock in the low-to-mid $40s. Anyway, valuation has become very important to my investment approach.

Next up, we'll ask the Gardners how their investing perspective has changed since the 1990s. Does David still pick Rule Breakers? Find out, only on