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Rule Breaker Investing Over 15 Years

In this episode of Rule Breaker Investing: Essays from Yesterday, Vol. 2, Motley Fool co-founder David Gardner talks about some interesting companies, recommendations, trends, and technological innovations spanning over 15 years. He also discusses what lessons they hold for investors and people, in general. There are spectacular success stories and some businesses that didn't do so well, and there are some timeless truths and much more.

Also, get a sneak peak of what's coming up next week and how you can chip in.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on October 7, 2020.

David Gardner: For years and years and years I wrote essays in Motley Fool Stock Advisor and Motley Fool Rule Breakers, essays to kick off the issues. So it would be May 2008, wow! Remember 2008? And in addition to our new stock picks and Best Buys Now that month, the mailed issue of Rule Breakers led off with the page one essay from me, and same with the next month, and the month after that, for years.

Recognize any old-school references, issues, mailed issues? [laughs] These days, our services are digital, we don't do paper copies anymore, and we don't do opening essays. There's no page one anymore -- they wouldn't get the clicks. But I put a lot of time into those essays, and as they occurred over a long narrative arc of history, 2002 to 2017, 15 years' worth of them, 18 per year, it can be both educational and amusing to go back and see what was being said and when.

The purpose of The Motley Fool is to make the world smarter, happier, and richer, and that's exactly what I was doing with those essays for years. So I pulled some favorites with some timeless truths and I want to introduce, or for longtime Fools reintroduce, you to our Rule Breaker thinking over time. But this isn't nostalgia or about yesterday; no, I think it might be a fine way to educate, amuse, and enrich you today, only on Rule Breaker Investing.

[...]

It's the Rule Breaker Investing podcast with Motley Fool Co-Founder, David Gardner.

[...]

Welcome back to Rule Breaker Investing. And if you're like me, you're still doing some heavy breathing after last week's podcast, [laughs] which pretty much broke the bank in terms of the longest podcast we've ever done. That was even a topic unto itself. I'm not going to revisit that topic. I hope you enjoyed at least half, if not all, of last week's mailbag. There were some stellar stories, some great questions; I also had a lot of special guests, people that I haven't got to see for months, but at least got to share with you on last week's mailbag.

Well, it's October, welcome to October. And even though it is October, and I always think about the future, this week we're largely looking at the past. Essays from Yesterday, Vol. 2. And I say Vol. 2 because I first introduced this new series on June 3rd of this year and I asked you if you liked it. And I got enough people saying, yes, I did like that, that was a fun podcast to revisit old thoughts, but updated for a modern context. And so I thought, well, let's do that one more time and see what my fellow Fools think. So I'm fired up to share four essays, kind of extended, not terribly long essays, but extended thoughts with you, and then reflect on them now in 2020.

Before we get into that, I want to mention what's happening next week on the show. It's going to be Vol. 5 of our long-running series Mental Tips, Tricks, and Life Hacks, and this is where you come in, because while I have some mental tips, tricks, and life hacks that I like to share each time we do this. Really it gets a lot better when you give me your best ones. So do you have a mental tip for me? Do you have a mental trick that you use? Do you have a life hack that you'd like to share with the global listener base of Rule Breaker Investing, the podcast? Well, I would love to share that next week.

I'll share only the best, which is, of course, what I do. But our email address is RBI@fool.com. I'll have a few of my own, but really, I would love for you to overwhelm me with brilliant ideas, life hacks, mental tips, and tricks. RBI@fool.com is our email address.

And before we get into the podcast, just make a note right now to get back to me on that, because you might get lost with me in these essays of yesteryear and forget this request. But of course, I'm talking about next week's show, so if you're listening over the weekend, hey, drop Rick Engdahl, my producer, and me a note right back with your best mental tip, trick, or life hack. Again, Vol. 5 of the long-running series next Wednesday.

All right. Now, let's get into it. Essays from Yesterday, Vol. 2. So, a couple of the ground rules about how this series works. First of all, I completely randomize which essay I'll be sharing with you. So, I don't know ahead of time, until we plan this podcast, what I'll be speaking about and I randomize it. Now, I wish I could cherry pick my best and favorite essays, but I like all of them -- it's just that some of them were more ripe than others, so you never know how right or wrong I'll be with any of these, it's completely randomized.

The second ground rule is, they're in chronological order from earliest to latest. So for example, this particular episode, I'll be sharing an essay from February 2004, then we'll jump forward to exactly 15 years ago this month, October 2005, then to March 2009. Wow! The market was in quite a tizzy in March of 2009. And then finally, the most recent essay shared in this episode will be June of 2010. So all of these are 10-plus years old. But now having read through them and thought some about them, I'll be reflecting after I read each one, I think that they hold multiple delights and lessons for us here in the Fall of 2020.

So Rick, if I could get, please, a little bit of way back music.

[...]

Yep we're going way, way back. In fact, we're going to just the start of the second full year of Motley Fool Stock Advisor. It was February of 2004. I actually wrote the essay in January. That doesn't really matter -- that's just for those scoring at home. But this was entitled Introduction to February 2004 Issue, [laughs] a very imaginative title. It starts:

Dear reader, what's the right price to pay for a stock? Well, that's an important question that should titillate anyone who dons the cap and Motley. Before investing, demanding Fools will typically ask, should I even be buying that stock in the first place? We help you with that every month here in Motley Fool Stock Advisor by giving you our top picks. If we're recommending a stock, we believe it will beat the market over time at its current price.

Having then decided to buy, here comes step two, what would be a good price, the right price? I, David here, have two approaches for you on that question, and Tom and I use both. First, for companies that are profitable, and established, and growing, we like to look for stocks whose free cash flow multiple is about in line with the percentage of the company's five-year expected growth rate. For example, if a company is trading at 15X free cash flow, and you think it can grow sales and profits by 15% or more annualized over the next five years. Well, get a little bit excited.

Now, by contrast, I'm recommending Dell (NYSE: DELL) in this issue, which trades at a higher multiple than its growth rate, so what's up with that? But Dell is one of the best companies in America, and such companies will almost always break the rule I just gave you and some still perform well over long periods of time; that's what greatness means. On the other hand, when I recommended Hasbro (NASDAQ: HAS) in May 2003, it was only trading at about 6X free cash flow. I got a little bit excited. Result: up about 50% since. Hasbro is a fine company, but definitely not in Dell's category where you'll "overpay" to own the stock, because of its premier status. We're dealing in generalities here, so there can be buyable exceptions.

The final section of the essay is entitled Relying on Experience. The second approach is the right-brained approach to investing, it's less scientific, so I do not advocate it for everyone, but truth be told, had I used this approach over the years I would have done far better than I have done, not that I'm complaining. It's this, the right price to pay for a stock is whatever price it's trading at when you first have a great consumer experience and find a great business. Don't buy a ton, just buy a little. Get in the game, follow the story, learn. And then invest more over time if the company continues to grow and meet your expectations. I try to live a life without regrets; nevertheless, I do greatly regret that I didn't buy Dell, when I bought and loved my first Dell computer. And Schwab, when I first opened a Schwab account. And Electronic Arts, when I first played the Dr. J vs. Larry Bird PC hoops game during my undergraduate days at North Carolina, etc. I would be a far richer man today had I invested right along with my early adopter instinct, just a little bit at first and adding over time to those that went up from there.

The good news is, it's never too late to invest in great companies, so read on to see why I'm recommending Dell, now. Tom also has a brand-new pick that he believes could just about double in the next few years. We also answer your questions and recommend some of the best investment books you could read to help you beat the market. So, as Lou Rukeyser has been one to say, read it, and reap.

[...]

Well, that was a fun one to revisit, because it was really packed with things [laughs] that we can comment on now, more than 15 years later. I think the first thing I want to talk about is Dell. Dell was a great company back then, and it was a $90 billion market-cap stock, which in those early days, at least early days for Stock Advisor, there were no trillion-dollar market caps back then. And the idea of a $90 billion company was a large- to mega-cap back in 2004. Dell was a great company. However, unfortunately it did not stay great. I made a very poor stock pick with that February 2004 issue. The stock was at $33.50, it would end up declining by 44% over the course of the next four years and three months, and I eventually recommended selling it in the May 2008 Stock Advisor edition. So Dell got cut in half, [laughs] its market cap from $90 billion to $50 billion over a very bad period.

It's worth noting, by the way, that even as we did sell Dell, down 44% in 2008, five years later, the company would get taken private, and what was the market cap as it was taken private? $25 billion. In other words, Dell kept losing value. A lot of people pointed out that Dell was highlighted as a company that was brilliant at logistics -- you could order directly from Dell. This is all, kind of early days, pre-internet -- they had logistics nailed. However, part of doing that was they didn't invest a lot in innovation. Dell, as a company back then, didn't invest much in R&D (research and development), and so it was just a very efficient low-cost provider of computers which were increasingly PCs commoditized. And so, it didn't keep up with the times very well as more innovation came into the space. So eventually, Dell -- we sold disconsolately in 2008, and then it went down ultimately from there.

That's thought No. 1, Dell. Thought No. 2 is Hasbro. I mentioned that as a purchase we had made in 2003 in that essay. And Hasbro, by contrast, has been a spectacular performer. We're still holding it. It's an active pick today here in 2020, 17 years later. It's up 772%. That's way ahead of the market. In fact, Hasbro today is only around an $11 billion company, but it was just about $1.5 billion back when we first recommended the toy company that would later take some of its toys to the movie screen, when people start making movies like the Monopoly movie and other movies from Hasbro products. Not great movies, but it was a sign that Hasbro had a lot of staying power.

Another great stock I picked for Stock Advisor back then was Marvel. Marvel would really go on to move from comic books, back at the time, into the cinema. Marvel had a lot more success than Hasbro did, and obviously, ended up being a much bigger idea and a Disney buyout, and today, one of the real tentpoles of Disney's business here in 2020. But Hasbro and Dell being mentioned in that essay, contrasting them, one, a great company, and the other, Hasbro [laughs], reminds me of how unpredictable the world can be sometimes in the future. I obviously would never have expected that Dell would decline from my recommendation there, get cut in half over the succeeding years, and then be taken private about 10 years later. I am glad that Hasbro has been a stellar performer.

So, I guess point No. 3 then, after covering Dell and Hasbro, is just to talk about surprise and how the real world, i.e., how things actually play out, will often surprise you and me. It continues to surprise me. I certainly didn't predict most of what would happen in 2020 back in 2019. I had no idea. And so, you have to be ready for surprise. Surprises can be good and bad. I think a lot of us are always trying to avoid bad surprises, but if you try to avoid all surprises in life, I think you'd miss most of the best things that happen to us, both as investors and as fellow livers of life. So I think you have to be ready for surprises in both directions.

And then one other quick reflection before we get to essay No. 2, was just that section where I was talking about, hey, a great time to buy a stock is when you have that first great consumer experience. And I do still stand by that. For a lot of us, buying in thirds is not a bad way to get invested. Many people feel a little skittish to pay the multiples that they're seeing today for some of the stocks, and what you're being asked to pay for for great companies like Etsy or HubSpot today, trading at elevated multiples. Well, rather than be too paralyzed by that, we've often suggested in the past to take whatever money you'd like to invest in something, let's say, in Etsy, and let's say it's $3,000. Well, take $1,000 and invest it now. And then you could wait for the other $2,000. At least you've gotten your feet wet, you are in the game, you're starting to pay attention. And then you can add -- I do it systematically when I do this, which I don't always, but when I do, I'll say, OK, whatever it is trading at one month from today, there is my second third, and then one month after that the exact same day, my third third. I like to make it mechanical and take emotion out of it.

As I've often mentioned in the past, studies will show that just buying all at once as opposed to dividing it up into thirds and dollar-cost averaging is actually the more successful way to invest, because every day you don't invest in stocks, since the market tends to go up, you are paying an opportunity cost for waiting. But for a lot of us, we do want to wait or we need to wait or we're just learning about Dell back then, or Schwab back then, or DocuSign today. And so, for a lot of us, just getting started with a portion is what enables you to get started with that company and with investing. So I was glad to hear myself mentioning that.

And I was also playing up my own early adopter approach to life, and that remains just as true of me today. That means I have a closet full of gadgets that didn't work out [laughs] in my house, because when you're an early adopter, you're going to be buying the newest PalmPilot, even though Palms, some years later, will go out of business. But it also means that you have really good experiences with companies, like, yeah, whether it's buying your first Dell computer, when people don't really know what a Dell computer is, or really my first recommendation of Netflix, most of the world didn't know about Netflix back then. So I think being an early adopter and a Rule Breaker is really helpful.

I guess one fun fact side note I mentioned at the end of that essay, that Tom also picked a stock, which he always has, in that month for Stock Advisor, it turns out it was Regis, it was the hair salon company. And history will show that Tom picked that stock at $41.86 that same month, first Stock Advisor, and he would sell it about a year-and-a-half later. It was down a little bit. It was good he sold Regis hair salons, though, because it was still around $40 in 2005. Today, still active, it's down to about $7. So neither of us had a great stock pick that issue. I'm happy to say Motley Fool Stock Advisor is a wildly winning service, greatly outperforming the market, but we both kind of fired errant arrows [laughs] that particular month for Motley Fool Stock Advisor.

Alright. Well, now onto essay No. 2. We're traveling forward through time, so here comes our, we're traveling forward through time, music.

[...]

And we've alighted upon October 2005. Again, this was randomly rolled up by me, and it is 15 years ago this month. So it's sort of fun to think about that. This one is from Motley Fool Rule Breakers, the introduction to the October 2005 issue. It starts:

Dear, fellow Fool. When I recently tapped into the pages of Wikipedia and looked up "nanotechnology," I was startled by the image on the top of the page, so startled, in fact, that I decided Rule Breakers readers had to see it for themselves, so take a look. That giant creature is a dust mite, an organism normally invisible to our naked eyes, but massive thanks to a high-powered microscope. And just in front of him, in that picture, six nanogears. I'm guessing he's the first little dust mite in the history of creation to encounter this entirely new manmade object at his scale, the nanoscale.

Marking the end of the first year of our service in this review issue, and the beginning of the next year, I want to say three things about that image. First and most obvious, that picture will remind you that we are your nano-hub. Nanotechnology is still very early on in its technology cycle and few important public companies are focused on nanotech, for that reason we aren't yet ready to pull the trigger on many recommendations in nano, but you bet, that as this technology scales and enters ubiquity in American industry and business, we will be here helping you think through nanotechnology, pointing out the winning stocks in that area, in plain English.

The second thing I'd like to say about that photo, is that over the past year we've all, me included, been a bit like that bug coming across something new and manmade and I hope quite wonderful, for the first time. Rule Breakers has had a truly great year debuting as a world-class advisory, helping you beat the market with the best growth stocks. I hope you've enjoyed discovering us and interacting with us, I know I speak for the entire Rule Breakers team when I say that we have had a great time with you.

Third, that photograph reminds me to remind you to get psyched. As amazing as that picture is, it's just one picture, can you even begin to imagine this world we're moving into? Are you ready to quest with us to find tomorrow's new leaders a day early, hunting for the Rule Breakers? Thanks for your commitment in this first year, particularly thanks to those who created value for all of us via our discussion boards, indeed, we're going to welcome a few of them on to our team, we'll talk about that next issue, every post is appreciated. In the meantime, this issue reviews all existing Rule Breakers picks, have at it and Fool on!

[...]

All right. Well, now back in the modern day. My first reflection on this... there's an old joke that scientists make; [laughs] unfortunately, it's just as funny and true in 2020 as it was in 2005. Nanotechnology has been five years away for 35 years. [laughs] So reflection No. 1 about that essay, I'm saying we are your nano-hub. In fact, we did debut a feature, a regular monthly feature in Rule Breakers in the year 2005, it was called Nanotech Universe, and each month, our two correspondents, Carl Wherrett and John Yelovich, just outside contractors contributing their viewpoint to Motley Fool Rule Breakers, would talk some about where nanotechnology was and what was happening. And sure enough, there were some interesting companies doing business there. We never ended up picking many or any of them really for Motley Fool Rule Breakers, and here we are in 2020, and I'm still wondering where is nanotech today? [laughs] Seems like it's five years away. It is amazing.

I did go into Wikipedia to check the nanotechnology entry. There is no sign of that picture that I was referencing 15 years ago, but then again, after 15 years, Wikipedia entries probably do change. But I do remember the picture -- it was an amazing picture of a dust mite encountering nanogears, man-made objects, at the nano level.

So reflection No. 1 -- nanotechnology remains five years away. It is enticing, though, everything from better fabrics to -- you know, I'm thinking about the 5-Stock Sampler I picked most recently. It was 5 Stocks Indistinguishable from Magic, and there I was talking about ASML Corp. and its extreme-ultraviolet lithography and how it's operating at the tiniest level. Indistinguishable from magic, as Arthur C. Clarke said, and that's the way nanotech continues to feel to me.

The problem is, it really is not much more than just magic, something fantastic that doesn't actually exist because it really still -- even though people I know that are hearing me right now, some of you working in labs working with nanotech. So you're here saying, Dave, listen, it is real, I'm working on it, but it clearly hasn't deployed itself yet in a ubiquitous, meaningful way within our culture. So thought No. 1 -- we are your nano-hub. Yeah, within a few years, I think we discontinued our nanotech universe articles. Carl and John were doing a great job with them, but it just didn't seem like there was that much to talk about.

Reflection No. 2 -- I do want to underline what Carl and John brought. We've lost track of Carl Wherrett over the years, but I'm happy to say, John Yelovich remains a wonderful contributor to the Motley Fool community in lots of different ways. His screen name I see is CMFBreakerJohn2 on our discussion boards. I see he just posted on the Roku board today, 15 years later. But Carl and John occasionally were asked to provide a stock thought or recommendation or two, and I'm really happy I listened to them in 2005, because they started talking about a company called Universal Display (NASDAQ: OLED), ticker symbol OLED. Yep, as in that OLED.

So back in 2005, LCD televisions, do you member those? Liquid Crystal Diode televisions were all the rage. They were the high-definition televisions of choice. They were also much more affordable back then, but Universal Display, little Universal Display, became a stock recommendation in 2005, and its partner Samsung has gone on to make OLED big time. It's amazing to think back now on what were OLED's numbers as we recommended them in Rule Breakers. Well, their 2004 sales were $7 million. Yup, that was their sales top line, and they lost $17 million. Their R&D budget was larger than their sales. And that may have seemed upside-down and a crazy stock to recommend. But now happy to see, 15 years later this month, OLED is now up 1,961%, a 20-bagger for Motley Fool Rule Breakers. The market up 300% over that time, an absolute market crusher, as OLED technology is ubiquitous and beautiful for displays of many types today, including smartphone displays. So thank you again to John Yelovich and Carl Wherrett. They have the byline on that pick in Motley Fool Rule Breakers. Universal Display, that's thought No. 2.

Thought No. 3 about that essay. I briefly used a phrase I no longer use. I said "growth stocks." Now, for years on this podcast and years before this podcast, I've said that I don't use that phrase. That's not how I think about the world. I don't think there are growth stocks and value stocks. Nope. I also don't say I'm a growth investor or she's a value investor. Nope. I don't think those are good descriptors -- they're bland labels. There's some baggage tied up around them, they don't mean a lot to me. And when people say, studies show that one type of stock outperforms another, I'm always suspicious, wondering exactly how we are categorizing what is a growth stock or a value stock. But I must admit, in this 2005 essay, I used the phrase growth stocks. So presumably, I was still rocking it in the first 10 years of The Motley Fool back then, but I have certainly thrown off that mortal coil since.

And my final reflection about that essay is, probably just at the end of it, I was celebrating and saying, get psyched about the world we're moving into. And I think that has been the right mentality. Back in 2005, 15 years ago this month, we didn't know about cloud computing, we didn't know that Hepatitis C would be cured, we didn't know that electric vehicles would ever be a thing, let alone be "the thing," it seems these days, and many other changes besides.

Yes, there have been some tough years, including this one, since 2005, but that basic optimism, I think, is the right approach to take in every year. Yep, even through the bad ones. And so, continuing to ask here, in October 2020, what's a stock, what's an exciting new technology or company that you and I want to get invested in, become part owners of, that is our orientation, always will be for Rule Breaker investors.

All right. Let's move forward now to essay No. 3.

[...]

We're going to jump forward almost four years; it's going to be the March 2009 issue of Motley Fool Rule Breakers. This essay, written a few weeks before in February, was entitled Our Community Comes Through.

A year-and-a-half ago, we started an experiment. We knew our Rule Breakers community was smart. You include many working professionals in the high-tech arena, many retired professionals who know business and investing, and we'd be fools not to listen to you more often. And that was the idea behind our first "take that" contest. We suspected there was at least one company on our scorecard that you thought we should sell, so we asked you to submit your arguments for why it would underperform the market, we asked you to help us figure out which company was most deserving of, in modern parlance, being voted off the island. Your choice was XM Satellite Radio, we tallied your votes and recommended selling the stock on Nov. 15, 2006, when it traded at $14.85. XM has since merged with Sirius, and the combined entity now trades for .10\/SHARE"}==!> and just narrowly avoided bankruptcy. Take that, our contest really, really worked.

At the time some of our members didn't like the contest, I disagreed and I continue to disagree, you either believe in community intelligence or you don't, you either believe that our membership, our Rule Breakers community, is an incredible asset, full of knowledge and insights that can improve your investing, or by contrast, you think it's just another heard doomed to make bad decisions. You know my position, much of The Motley Fool, and particularly our CAPS platform, at CAPS.Fool.com, exhibits and asserts, as it has for 16 years, the crowds have wisdom, particularly, our crowd.

Now, you've told us to take that again. It was harder to find enthusiastic nominations in this latest go around, you may have felt that many of our stocks are too cheap to part ways with, and with this I agree. How could I not, with so many stocks down so far, despite impressive profits among what I consider future industry leaders? I have no interest in selling my Blue Nile, by Bankrate, my Baidu, each is a Rule Breaker and each is part of my personal portfolio, but in particular, an entry by AirForceFool, that's the screen name of one of our members, about TASER, ticker symbol back then TASR, caught my attention, and caught many of yours as well. His argument to sell wasn't based on TASER's innovative products or technology, nor does he disagree with most of the rule breaking aspects of the company, but he argues, most cogently, that TASER's management has so little focus on shareholders that it's failed to create value for years, and that the condition will persist. Our community voted this the top entry to Take That. I agree, if with some bittersweet-ness, as I originally picked TASER and I own shares myself. And we're recommending that you sell TASER, as Tim Beyers explains in the issue. I think it's the right call and that the power of community will prove right once again.

Fool on!

[...]

Well, my first reflection is I feel just the same way about the Motley Fool community in 2020 as I did back in 2009. It was funny to think we were running the Take That contest -- I'll explain a little bit more about that in a sec -- in the face of a stock market that had sold all of our stock, in many cases, down 75% or more in the horrendous market of 2008-2009. And in fact, this issue came out at almost the market bottom. And there I was, disconsolately deciding, yes, we'll just go ahead and sell TASER, because that XM Satellite Radio contest winner or loser, if you will, from a few years back, had really nosedived, and I do believe in our community's intelligence.

A bit about the Take That contest. It's something we don't do anymore at Rule Breakers, and I'm actually scratching my head as to why. I love the idea of it. We definitely did it for years after that, at some point, maybe it was a changeover in who was helping oversee the service and I took my eye off the ball. I'm not sure why, but I still love the idea. And maybe we'll reinvigorate it here in the year ahead of the Take That contest -- namely, one where you, as a Rule Breaker member, and I know many of you listening to me right now can look up and down our scorecard and say, hey, Dave and team, I really think this one [laughs] is a bad stock pick and is not going to beat the market from here. And then having our community vote and acting on that. Well, that's how Take That worked.

An additional reflection, of course, is about XM and Sirius Satellite Radio. [laughs] I mean, what a crazy stock chart it is, if you just look up SIRI, which is today the still active public company that is a merger of XM and Sirius and Pandora, if you just look at the stock chart over the last 20 years.

In the mid-90s the stock was in single digits, kind of a penny stock, and people were still trying to figure out whether satellite radio is for real. Starting from that single-digit stock, which is often enticing to newer investors who love to see lower-priced stocks, it became a darling. The stock went from about $5 at the start of 1996 and it topped $70 at the height of the dot-com era in March of 2000. And it would go from $70 down to nearly $0 in the years after that. And frankly, it's not that much higher years and years later today; as I record this episode, Tuesday afternoon, it's just over $5.5/share. So it had one amazing move from 1996 to the year 2000, and since then, it's kind of been dead money.

Another reflection, I have to mention it's an active stock right now on Motley Fool Rule Breakers. If we do reinvigorate the Take That contest again, it might be high up on people's list. Why do we have it in Motley Fool Rule Breakers? Well, we had Pandora. Pandora was a 2013 selection. And it was initially a winner and then a loser, and just generally an OK performer for us for five years or so, but then got bought out by Sirius XM (NASDAQ: SIRI) in 2018, and so we just rolled, as we are want to do, we rolled our Pandora shares into ticker symbol SIRI, and we have held them since.

I regret to update the story and let you know that entire Pandora investment, which was initiated my pick on June 26 of 2013, from that point, including Sirius XM today, so if you just held dollars all the way through from June of 2013 to today, you would be down 54%, and the market over that the time is up 146%. If you're doing the math with me, that means you're exactly 200% behind the market averages, behind the index fund with that very poor stock pick of mine, Pandora transitioning into Sirius XM. And speaking of Sirius, I need to take a serious look again at that company.

One final reflection about this essay, how could we not talk some about TASER? Yep, we did sell TASER from Motley Fool Rule Breakers reacting to the Take That contest of that year of 2009. It hurt a little bit, it was a double-wreck of mine at the time, but it was also quite a loser. I had initially recommended it at \/SHARE"}==!>, it dropped dramatically, and I decided it will come back, so I added to a loser, which I've done very seldom ever since. So, from $28 then to $9, we eventually sold it under $5 with that Take That contest in that issue in March of 2009.

2010, and '11, and '12 -- it was still pretty much right there at about $5/share. The market was recovering, TASER was not, but in 2013, '14, and '15, all of a sudden, with really the same management in place and the same technology primarily powering the stock, although the company began to get into police body cameras, the stock was rising from $5 and up to $23 in 2015. And I just decided at that point, let's reenter TASER.

It was still TASER International; the ticker symbol was still TASR. One of the two brothers who had been running the company years before had moved on. Clearly, the world was starting to believe in TASER. Do you remember how many negative articles that were written, headlines about how tasers kill and how they're not safe. And while that is tragically true in some rare circumstances, it's now evident that they are much better [laughs] in many cases than firing real bullets. And many of the problems we still have today -- boy! I wish people were being tased instead of shot. I think that leads to a better world.

Anyway, we recommended TASER October of 2015, so five years ago this month, at $23. In 2017, with its new police body camera business, Axon Enterprise, [Axon] (sic) the company changed its name to Axon International, [Axon Enterprise] (NASDAQ: AAXN) (sic) which is what it is today, ticker symbol AAXN. And then in 2018, with the stock having risen from $23 to $43, I decided to add to our winner and I officially rerec'd that month for Motley Fool Rule Breakers. Well, I'm delighted to report that TASER/Axon Enterprise today is at $94. So it was a great buy at $23 in 2015. A great buy at $43 in 2018. Was it a great sell at $5 in 2009? Well, it seemed that way for several years, but now looking backwards from the future, that would have been a great time to buy the stock. So maybe Take That doesn't work every time, and certainly, community intelligence won't work every time. And my picking, as is clearly evident with Pandora, is not right every time.

But here again we see that the benefits of finding a winner, whether we're talking about Universal Display from the previous essay or in this case, Axon Enterprise, the winner so far wipes out the losses you have in your losers that it really is reminding us that stock-picking is about finding the winners. You know, buy-and-hold investing doesn't work on its own. And compounded returns don't just happen at any good number -- you actually have to find the great companies to make buy-to-hold investing and compounding returns work.

And I'm happy to say that through the Rule Breaker traits that I'm constantly talking about on this podcast, whether we're talking about the companies themselves or the traits you need to exhibit as an investor, these work. And one thing we're reminded as we go over Essays from Yesterday is, they work over time.

I hope you're having as much fun as I am, or at least half as much fun as I am going back through time and then forward through time, thinking about the conditions of the investing world and what we were saying back then, and then reflecting on it today and the lessons that we're learning. Well, my fourth and final essay is probably my favorite essay from these four -- Rick, we're going to move through time again.

[...]

But not that far -- we're going to alight in June 2010. This is another Rule Breakers essay, I actually wrote it on May 26th, 2010 for the June Issue, so-called, and it was entitled by my editor, A Lesson from An Investing Deadhead, here we go:

I honestly can't name a single one of their songs, but I'm still a big fan of the Grateful Dead. No, it's not because the Grateful Dead songbook album cover features a jester. I'm a deadhead because of the band's business brilliance. Jerry Garcia and his bandmates understood open source, the free sharing of information decades before the concept gained popularity. Don't let the bands 1970s psychedelic vibe obscure the incredibly savvy business thinking behind this concept, by welcoming the sharing of their music. Garcia and his bandmates unleash the power of open source, enabling fans to share the band's music with one another and with new listeners.

For the past six months, I have repeated a quote from Garcia so much that it's become one of my mantras as an investor: "You do not merely want to be considered just the best of the best; you want to be considered the only ones who do what you do." Why do I love this quote, why can I be heard repeating it in the halls of Fool Headquarters, in meetings and in speeches around the country? Because it reminds us to be what only we can be. In our quest for great purpose and profit, we need to find what makes us unique, our vision, our passions and even our idiosyncrasies. Connect this concept with a commandment from internet marketing wiz Seth Godin, who tells businesses to take their edge to the edge. That's exactly what the members of the Grateful Dead did by open sourcing. It was their edge, their unique vision, and they took that willingness to share freely to the edge. The result was blowout success, the stuff of history books.

There's an investment lesson here, find and invest in companies that are the only ones doing what they do. Many of our Rule Breakers fit this bill. Have you looked at OpenTable recently? At its scale, the company really is the only one doing what it does. I believe the same to be true for Vistaprint, and one of this month's new recommendations EnerNOC. My mantra is not an acid test for instant investment success, but it is an excellent guidepost for investors, especially Rule Breakers.

The Grateful Dead performed approximately 2,350 shows, and because of the band's stance on open sourcing, nearly 2,200 were taped. These recordings will provide the Dead with a legacy that will last long after the other members joined Jerry in that big tour bus in the sky. This staying power, the kind that only comes from being an innovator, is something we should look for in the companies we invest in.

So, thanks, Jerry, and wherever you are, Fool on!

[...]

Well, in retrospect I think that was a special essay, at least it was special to me, because I now see that the very first Great Quotes, Vol. 1 episode, we've done 15 or 16 of them at this point, over five years. But the very first one -- the Jerry Garcia quote was right in there. So I was obviously licking my chops as we opened up this podcast. It was December of 2015 when we did our first Great Quotes, and one of the first five that came to my mind was that great quote from Jerry Garcia.

The date, by the way, if anybody would enjoy hearing those first five great quotes again, was the December 16th, 2015 edition of Rule Breaker Investing. Also, Seth Godin is mentioned in this essay, and Seth Godin was a guest on this podcast on August 1st, 2018. So, a couple of years ago, he opened up my Authors in August in 2018. In fact, I think that was my first Authors in August. So my first great quote was Jerry Garcia, my first Authors in August was Seth Godin. And there they were both making the appearance in this essay to kick off Rule Breakers in 2010.

I have to mention that in the very first line of that essay, you may have heard me say, and the pedants among us, and those who are fans of my own pedantry can't help but notice that I lead off with, I honestly can't name a single one of their songs, but I'm still a big fan of The Grateful Dead. Well, I have certainly invade against the use of the word "honestly" or "frankly" or any of those catch phrases we use, which really are unnecessary, and as I've often tried to wonder aloud, makes me think, were you not always being honest with me, friend, if you're telling me "honestly" right now? And so, we've certainly had fun with that on a past pet-peeve podcast. I apologize that I stepped into my own pet peeve there in 2010; clearly, I'd be getting much smarter in the following 10 years.

It's also fun to think about the three stocks mentioned in that essay. Two of them, kind of losers. Vistaprint, which became Cimpress, which is no longer in Motley Fool Rule Breakers, we sold that as just a poor performer, and EnerNOC, which really was a bad stock. I think I picked it back in 2012, it was cut in half and bought out by an Italian company a few years later. But here again, if you bought the third one, OpenTable, which I kind of opened up with, well, that's been a spectacular performer for Motley Fool Rule Breakers, or was because, having picked it in 2009 and watch it go up a few times in value, it was bought by Booking, or Priceline at the time, but Booking Holdings. Today in 2014, it's gone up another 50% or so since.

So, here again, if you had bought those three as a basket, OpenTable leads you to market-beating returns, even adding in Vistaprint and EnerNOC. But we're not going to focus on those three stocks or any group of three stocks or any 5-Stock Sampler. Nope. With our closing reflection on this essay, let's focus on the critical point. And that is this idea of not trying to be the best at what you do, but trying to be the only one doing what you're doing. I'm quite sure I said something similar when I first rocked this one on Great Quotes, Vol. 1 back in December of 2015, so maybe I'm repeating myself today. But I've often asked myself, whenever I'm looking at a company, if they're the Coca-Cola of the industry, like, if they're a big player, can I find a Pepsi? [PepsiCo] Now, in many industries, including beverages, there is a Pepsi. But in some of my favorite situations, when we're looking at Rule Breakers and you're finding a top dog and first mover in an important emerging industry, sometimes you can't find any Pepsi. I certainly couldn't, back in the day, when I found Netflix. I guess you could have kind of said that Blockbuster was sort of a Pepsi, but no, Netflix was an upstart, tiny compared to Blockbuster. And Blockbuster was demeaning Netflix's approach to mailing DVDs using a queue on the internet, but using the U.S. mail service to get you your movies when you could just drop it off at the Blockbuster on the corner. And a lot of people didn't believe streaming would work out too well, either, and wow! -- has it ever so.

As I continue to look around at stocks today, I often ask myself, where's the Pepsi? And when I can't find one, I'm reminded that that company is probably conforming to Jerry Garcia's dictum to be the only one doing what you're doing. You know, Rule Breaker trait No. 2 is competitive advantage, and one of the best ones is when no one can even play the game that you're playing. And even as I look at Amazon today, as large as it is, working across multiple industries, it has Whole Foods, for goodness sake. There really isn't any company that's doing what Amazon is doing today. And what a spectacular stock it's been.

So Jerry Garcia's line is sometimes also attributed to his band leader, but their practice of open source, go ahead, bootleg our concerts. Share it out. So contrary, so Foolish at the time, I love seeing that same vibe in some of our best Rule Breakers.

Well, a reminder. Next week, it's Mental Tips, Tricks, and Life Hacks. And I'll be providing some of mine as I always do, but I really want some of yours. And in fact, just send me your best, because that's what we focus on, on this podcast. So, RBI@fool.com is our mailing address. Mental Tips, Tricks, and Life Hacks next week.

And if any of the essays from today or reflections on it spur additional thinking and you want to drop me a line, of course, RBI@fool.com is the email address we use for our mailbag episode at the end of this month.

Well, I hope you have a great week, wash your darn hands! Stay Foolish out there. Fool on!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Gardner owns shares of Amazon, Booking Holdings, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Amazon, ASML Holding, Axon Enterprise, Booking Holdings, DocuSign, Etsy, Hasbro, HubSpot, Netflix, Roku, Universal Display, and Walt Disney. The Motley Fool recommends Charles Schwab, Electronic Arts, and Sirius XM Radio and recommends the following options: long January 2021 $60 calls on Walt Disney, short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.


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