Chit Chat Stocks - DAVID GARDNER: Finding The Next Nvidia With Rule Breaker Investing (NVDA, AMZN, NFLX, MELI)

Episode Date: December 11, 2024

On this episode of Chit Chat Stocks, Brett and Ryan dive into David Gardner's investing philosophy. Gardner has produced 20%+ returns for over 20 years with a strategy that anyone can run, no matter how small of an investor you are. We discuss: (00:00) Introduction to David Gardner and The Motley Fool (07:07) Understanding Rule Breaker Stocks (12:12) Characteristics of Rule Breaker Stocks (28:26) Tactics for Managing a Rule Breaker Portfolio (42:10) The Importance of Higher Purpose in Business (43:58) Portfolio Management Strategies (45:34) The Value of Long-Term Investments (48:42) Highlighting Successful Investments: Amazon and Nvidia (55:57) The Evolution of Netflix as a Disruptor (58:57) Mercado Libre: A Case Study in Disruption (01:01:48) Evaluating David Gardner's Investment Returns (01:04:50) Lessons from David Gardner's Investment Philosophy (01:11:01) Identifying Today's Rule Breakers ***************************************************** JOIN OUR FREE CHAT COMMUNITY: https://chitchatstocks.substack.com/  ********************************************************************* Sign-up for a bond account at Public.com/chitchatstocks  A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. As of 9/26/24, the average, annualized yield to worst (YTW) across the Bond Account is greater than 6%. A bond’s yield is a function of its market price, which can fluctuate; therefore, a bond’s YTW is not “locked in” until the bond is purchased, and your yield at time of purchase may be different from the yield shown here. The “locked in” YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. Public Investing charges a markup on each bond trade. See our Fee Schedule. Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. See https://public.com/disclosures/bond-account to learn more. ********************************************************************* Bluechippers Club is a tight-knit community of stock focused investors. Members share ideas, participate in weekly calls, and compete in portfolio competitions. To join, go to bluechippersclub.com and hit apply! ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use. Use our LINK and get 15% off any premium plan: ⁠finchat.io/chitchat  ********************************************************************* Sign up for YellowBrick Investing to track the best investing pitches across the internet: joinyellowbrick.com/chitchat ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

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welcome to chit chat stocks on this show host ryan henderson and brett shaffer analyze businesses and riff on the world of investing as a quick reminder chit chat stocks is a ccm media group podcast anything discussed on chit chat stocks by ryan brett or any other podcast guest is not formal advice or recommendation now please enjoy this episode welcome into chit chat stocks my name is brett schaefer and as always joined by my co-host ryan henderson we are doing one of our wednesday research episodes this month and we are doing another super investor case study where we try to learn from some of the best investors of the last few decades, or maybe older in some cases. I don't know if we're going to do a

Benjamin Graham one someday. But this week, we are covering David Gardner, co-founder of The Motley Fool, one of the best, say, never-sell investors, one of the best rule-breaker investors, a term he coined, and someone with a track record that has beaten the market for the last 25 years. So before we get into it, we're going to be covering who David Gardner is. We're going to be covering his investing style, how he manages his portfolio, how he analyzes stocks, and what we can try to learn and become better investors ourselves. Before we get started, I want to say you should follow our Substack newsletter. Join our chat within the Substack community where we have conversations with our listeners

and follow-ups along with each episode, along with the show notes and graphics from this episode that we're recording right now. And if you like this episode, give us a five-star review on Spotify and Apple Podcasts. So Ryan, let's get right into it. Who is David Gardner and what is The Motley Fool? Yeah. For those that are not familiar with the story of The Motley Fool, I am sure you've seen them around somewhere. If you're interested in investing at all, maybe even if you're not, you've probably seen their logo, you've seen their ads, their articles, podcasts, or really anything else. They're very popular in financial media.

But here's kind of the quick story of how they came to be. So in 1993, two brothers, David and Tom Gardner, started a traditional print newsletter out of Alexandria, Virginia. It was apparently out of David's shed that he had in the backyard, so I guess one of those humble garage beginnings type of thing. But here's a snippet on their founding from ConsciousCapitalism.org. It says, they cobbled together a mailing list including friends, family members, and a cousin's wedding invitation list. That might be frowned upon these days, but back then I guess – Yeah, with emails now, I think that was made illegal, right?

I think so, but anyway – it's fine and his friends and family yeah all told a thousand copies of this first newsletter were put in the mail with the humble request to subscribe and 37 people did the newsletter lived on for a year eventually serving more than 300 readers each paying 48 for the subscription so pretty humble beginnings um starting out just 300 people basically uh paying 48 for the subscription and as far as i understand it was basically stock recommendations um there was here the stocks are interested in here's the stocks you like going out to family and friends and it it seemed to really resonate that was kind of the genesis of the motley fool but it's

obviously become much more than that today they've hired a bunch of writers they've hired a bunch of analysts they have a contracting business which brett knows very well because he's a contractor Yeah, let's full disclosure here for anyone that wants to watch any bias. I do work for the Motley Fool. Ryan has worked for them in the past, and I should say I'm not a full-time employee. I do contract writing for them. So you see those, I don't want to use the term clickbait because I think they probably don't like that, but let's say catchy headlines for us.

They're there. Those may be some of my articles out there on the internet. Yeah. It's not that important for this episode, but it's kind of nice to understand that there are two sides to the business. There's the full-time Motley Fool employees and there's the contracting side. The contracting side, I think, is just kind of more public-facing in general because you see more headlines and stuff like that. For anyone that doesn't know, it's important to kind of distinguish between the two. But today, they have more than 500,000 subscribers. So it's obviously grown quite a bit. As for David himself, he did a lot while at The Motley Fool. He and Tom, his brother, ran a service called Stock Advisor together.

And David also ran a service called Rule Breakers, which we're going to talk about in a sec. I believe David coined that term, at least for the investment world. And it'll be a big focus of today's podcast, but David has now, I believe, retired from the day-to-day operations. He's still on the board of directors and I believe still holds the title of chief rule breaker. He might've done a lot of other stuff in that time as well while working there. He's coauthored several great books, including the Motley Fool Investment Guide, You Have

More Than You Think, The Million Dollar Portfolio, and Rule Breakers and Rule Makers, which is sort of the focus of today's discussion because it really gets into his investment philosophy but we i guess we felt it compelled to research david and his style his philosophy and maybe dig in a little more to some of his specific stock returns because he's put out a lot of great content out there and if you've ever come across some of his returns on certain stocks you automatically feel compelled to figure out kind of more of who he is. So we're going to talk about that as well, but let's start with what a rule breaker stock really is. All right. Yeah. Let's get into it. A rule breaking company. And I think that's how Gardner would like us to talk about it

because he always wants to distinguish for the people that subscribe to the Molly Fool. Hey, we're not talking about just stocks on a price chart. These are underlying companies that we are investing in and are being, you know, teaming up with with our money. So he describes it as a way. I mean, I would say it's another word for a disruptive company that's very similar, maybe 90% of the way there. This is a company that is trying to shake up how a sector operates through new technology, business models, marketing, you name it. So there's some form of innovation, not solely on the technology side, for example, one like Costco is more of just the business model framework or Amazon with e-commerce. There's a lot of technology in that business, but the actual

business model was some part of the innovation there. If we simplify his approach, which we'll be expanding on later, it is looking to find the most important companies, the most disruptive companies of our time, of this era, whatever era you're investing in, buy some and then never sell. I think that sums it up right there. Now, we're going to talk about the returns here. and for people that maybe just see the advertisements from the fool online or they're the ones that you might be a professional analyst a professional investor and you go this is just it's not very advanced stuff where they go well you know aren't they just spraying and praying at every growth stock and then hey you know we find a couple of winners and we can

brag about them in marketing and while they're going to use some of their best investments in their marketing material the track record does speak for itself and as we'll get to you can hate on the strategy or the marketing or whatever all you want the strategy has worked and if we look at David Gardner's I'll get his rule breaker returns right here he has turned I think the Rule Breaker portfolio going back from about 2004 about doubled the returns of the S&P 500 through the beginning of 2024. So regardless of how much you like the strategy, it clearly works. Now we're going to get into his returns. And I should note that The Motley Fool uses time-weighted returns to track the success of their cumulative stock picks. So they have one in February,

one in January, or one in March, one month each year. You have to do time-weighted return on that. I think they're all equally weighted. But then if they recommend something 10 times, it's going to have a 10x waiting versus something else. So if we look at the Motley Fool's old marketing page, Rule Breakers was shut down in 2024, I believe. This is what it says about finding Rule Breaker stocks. Quote, we believe the greatest investments of our time are companies that we call, quote, Rule Breakers because they break the rules of the business status quo. Rule Breakers bring a disruptive technology, diabolically clever marketing, or a totally new business model into the world and they rattle our capitalistic foundations. In so doing, they

can create serious profits for the opportunistic investors who find them early on. So Gardner and the other Rule Breakers, they are trying to find disruptive companies early on in their corporate history and generate 10-bagger, sometimes 100-bagger returns. And as I mentioned earlier, the returns of this strategy and the Rule Breaker service speak for themselves. The time-weighted returns and i won't maybe i can share the screen here but or maybe ryan can do it yeah as as i'm talking uh we'll have the visualization here in the show notes you can find on the newsletter the time rate returns as of march 15th of 2024 uh which is i believe when the fool shut down the servants give us given his retirement uh is pretty darn good ten thousand dollars invested

at the start of rule breakers in 2004 was worth around 120 000 on march 15th of this year compared to just $60,000 for the S&P 500 total return. And I would like to highlight that returns have still not reached highs set in 2021 and that the rest of 2024 was likely very good for the service here. So the returns versus the S&P 500 have likely widened today. I think this, while also talking about

what the basics of this strategy is, I think rule breaker investing clearly works if you do it in a rational way. And I think anyone that hates on this strategy, which there are many out there, needs to have their returns compared to what they have put up over at, you know, the Rule Breaker Investing Service. And you can only really, I think, complain if you've beaten their returns, which given the law, you know, given the stats out there, it's probably very, very few of us. So let's dive deeper into all this. How does Gardner find these stocks, Ryan? How does he manage a Rule Breaker portfolio?

And what have his returns been? What are his biggest winners? Let's start out. What is the characteristics? What are the characteristics of a Rule Breaker stock? Yeah, before getting into it, all this is documented in the Rule Breakers and Rule Makers book, which was written, I believe, in 1998. So we're going to highlight some of his best investments here. And for anyone that hasn't read the book, whether you are a super professional, you've read every other book in the world, you think The Motley Fool is too marketing heavy, or you're on the novice side, this is a fantastic book. I think it dives into some of the characteristics for true multibaggers. And the other part, it's not just highlighting his winners because this book was written in 1998.

he calls out a lot of his losers and some of his winners at the time have since become losers but the few multi-baggers that he's had uh more than account for the the i guess dogs of the portfolio but let's get into the characteristics of a rule breaker there are six criteria for what he looks for in a quote rule breaker and i'm gonna go kind of one by one you can pause me as you want brett And I'll try to use some examples. Maybe we can talk about some examples that we see ourselves. So the first rule is top dog and first mover in an important emerging industry. While giving a presentation, he said, if I had only one trait that I had to pick and

I couldn't use any of the others, I would use this one. And so I'm going to steal this quote from his book because it really defines why he looks for this. He says the reason for gravitating to top dogs is simple top dogs as a result of their positioning possess natural advantages over all other competitors top dog advantages include any of the following pricing power due to market share rapid deployment of new products using established distribution networks automatic marketing hype gained from constant mentions in the press and even by competitors safety margin a benefit of sheer size top dogs can get away with some horrible errors that would cripple a smaller canine. and numerous others. So it's not enough that you... So there's, I think, some important context with this rule. Being a top dog in a niche industry is not going to generate you the returns that you're probably looking for with a true rule breaker. Some of the companies that he calls out are Amazon, obviously was kind of a top dog or a top dog and first mover in e-commerce.

And obviously, the industry was large and ultimately was going to be very important. I think you could tell probably pretty early on that e-commerce would have the potential to be a big industry. Yeah, Brett, I see you getting ready to just talk there. Anything to chime in? I'd say I guess the way maybe he would look at it is at the time, e-commerce was not big, but they were trying to disrupt an overall industry for retail sales. i guess that's a ginormous industry there's probably subsectors within that they probably that they were analyzing at the time more of things like books and music and all the stuff they were selling on online first on amazon but the key here that he talks about is that it is an

emerging industry one that has been established that there's consumer demand for and there could be that and it really compares to some of the stuff munger talks about too riding that wave of consumer adoption, market share gains, disruption over a multi-decade period. Yeah. And one of the ones here, I find this part interesting. One of the advantages of being a top dog is, quote, automatic marketing hype, especially in an emerging, growing industry. We're seeing this right now with AI in a big way. Everything OpenAI does, every time ChatGPT has some new launch it's automatic marketing everyone pays attention to it the competitors talk about it businesses that are built on top of it talk about all the changes it becomes this big event because

they are the top dog if someone else has a innovation that is on par with chat gpt uh in the same realm and they're not as well known they're not going to get as much buzz about it And maybe it's a little easier today with such seamless digital distribution, but I think we see this in a big way with AI currently. Any examples that come to mind for you? I think Airbnb is a good example here of that. When they do stuff, people talk about it. Uber, I guess, Uber and Airbnb always get grouped together, probably because they have the top-dobbing and first mover in an emerging industry. And I think without knowing exactly what stocks have been recommended, because I've never worked behind the services, I'm guessing Airbnb and Uber qualify for all the real bigger criteria.

Yeah, I would think so as well. Let's go to number two, the second criteria here. Sustainable advantage gained through business momentum. That includes patent protection, visionary leadership, or inept competitors. And when they say sustainable advantage, he made sure to clarify this in the book. He says, we are defining sustainable here as two to three years. So having – you think about Amazon with e-commerce. They had basically a two to three-year head start or advantage because of all the customers that were on the website relative to a lot of the peers.

So one example he calls out is Amazon had this big advantage. There was another company called CD Now that was trying to replicate the same model, but they were basically pushed out when Amazon ultimately launched CDs because CD had the, or sorry, amazon.com at the time had the advantage because they already had the customers on the website. They didn't have to win them over. They already had the notoriety. So it was that kind of the two to three year advantage at the time.

Another one of the examples that David uses here is Microsoft. He states that Microsoft had both visionary leadership and inept competition in the early days, which some of us might not remember the early days if we're young investors here. But Microsoft, there's this quote in the book that I think is important because at the time it was revolutionary. It might seem like kind of the norm now, but it was pretty revolutionary then. So he says, the decision to focus on software brought with it a radical notion and a fantastic possibility. If software could be standardized, eventually the tables could be turned so that hardware would have to be tweaked to conform to software rather than vice versa. At the time, a lot of the competitors were trying to build everything hardware first and build the software on top of it. when they focus so much on the operating system and the development language, I think at the time

as well, all the other hardware makers had to be compatible with Microsoft software. So it really worked out. That was kind of their, I guess, both visionary leadership and the competitors failing to do it. I know Apple has since succeeded doing it, but for a long time, they were really struggling on the desktop and computer front because they were a closed system. So yeah, that's kind of one. The patent protection – in his book, he talks about Amgen as an example, which is just – it really buys you time. And patent protection is not just medical companies. It can be tech, anything that you can put a patent on and really buy yourself time. um he he calls those out as a business momentum advantage uh even though it might not last forever it certainly uh affords you a short-term advantage or at least two to three years any any thoughts there brett i don't think so i think let's move on to the next ones which

are perhaps the most controversial well two of these are that i would like to discuss Yeah. So number three here – and I think he's since kind of revised this a little bit because I watched a presentation recently and it was a little – this one was tweaked a bit. But in the book, it says strong past price appreciation equivalent to a relative strength performance of 90 or greater. Now in the latest presentation, it just says strong past price appreciation. So the relative strength for listeners that aren't familiar, since we don't ever really talk about it here on this podcast, is just the percentage of all stocks that a given stock outperforms. So a quote from this book, if a stock is a 78, for instance, it has outperformed 78% of all other stocks over a measured period. Ultimately, what they're looking for is stocks that have already done well on the assumption that they will continue to do well. And I mean, it's really sometimes because I said some people do not like this.

Both of us probably have difficulty taking that psychological bias out of buying something that's already been up. But he his reasoning for this, from what I've seen, is that it's hard to argue a business is great if the price hasn't gone anywhere. or it's hard to argue it's going to be a fast-growing winning company in an emerging industry if the stock price doesn't just go up and to the right you know historically obviously you have to be right that that you know emerging disruption will continue and he's not always going to get that right but that's what he's looking for yeah this one's tough for me and it's probably one of the i've got a discussion question at the end here which is the one we have the hardest time with. For me, it's probably this one where maybe it's number six as well, which I'll talk about in

a second. But anytime I see a stock up, especially recent, if it's a 10-bagger over the last 20 years, you have some confidence that it's been a good business for a while. You have a sense of durability. But if it's up 100% in the last 12 months, I don't know if I've ever bought a stock that's up a lot in like a short time frame it just feels so counterintuitive yeah that is it is interesting to think about that there is that bias that we all have with buying something that goes up because you feel like you're the patsy at the table but to push back on his point here there are times when this can get dangerous i would say 2020 2021 and the returns and the struggles they had after that are kind of the downturn they had after that with these

Motley Fool rule breaker picks shows that, you know, if you have something that's up 500% over five years, okay, maybe there's something there, but if it's up 500% in a year, you know, that could be something you, I don't know. I just think that can get kind of dangerous. Like you can always take these type of rules too far. And I think there, there should be some caveats with this one, at least. Yeah. All right. Number four here. This one's, I think, pretty straightforward. Good management and smart backing. Now, it's straightforward in the sense that everyone wants to have a company with good management, but how do you really qualify good management? That's kind of the tougher part. He has four principles for good management.

He says, one, rule breaker managers are usually young and daring. Two, rule breaker managers are driven by a vision, something they have seen before anyone else has. Three, rule breaker managers must communicate well. You can usually see that from like shareholder letters. I know you're probably thinking like, how do we know if they communicate well with their employees? If they can write a good shareholder letter, I'm guessing that they can communicate well

to their team as well. Yeah. Now, though, I think that that's different than a nice looking shareholder letter that a lot of shit coasts do. They put out 30 page, very glossy shareholder letters, but it has just a ton of buzzwords that say we're unprofitable. Yeah. There's a difference between that and what Ryan's talking about here. Yeah. If you're wondering what a good shareholder letter looks like, go back and just read the Amazon shareholder letters because there's nothing preppy or buzzy really about the presentation there. It's just a letter on a blank piece of paper, but it shows that the management team and Jeff Bezos in particular knows what drives value. So number four, last one here, rule breaker managers must really know their marketing. I like this. And the instant one that comes to mind for me here is Brian Chesky at Airbnb.

Yeah, that's a good one. Yeah. Yeah. I told Airbnb, there's a reason that I think it's, I would, but a lot of money that it's a rule breaker recommendation, or I guess that rule breaker is retire whatever is in that vein over at the Motley Fool today. All those criteria get hit. Yeah. Some of the examples that he came up with here were Intuit and Apple. I'm not as sure about Intuit back in the day because when he was writing this book, I think the founders were still running it. That's not the case anymore. Apple at the time, it was Steve Jobs. So certainly easy to call that good management. And he certainly knew the marketing for the business. I mean, he was in a way kind of the marketing for the business.

And then number five, the stronger the consumer appeal, the better to attract, to habituate, to profit and to protect. So this is kind of, I kind of think of this as saying having a great brand more or less. and he gets into why that is here here's a quote so it says whether you're talking about non-durable consumer product companies like mcdonald's or nike computer companies like dell or service companies like federal express brand is often the powerful differentiator that enables companies to attract habituate profit and protect another thing that he mentions in this chapter of his book is you can see this when there's clear pricing power so one example that he uses is starbucks i think an example i would probably use today is fico the fico score has a great brand especially for um anyone that's uh the credit service bureaus i can't remember what

the the term is for their customers that i think there's like three big ones that end up using the scores the most that's one that comes to mind and we're seeing them flex the pricing power lately as well anything that comes comes to mind for you here i mean apple's a good one starbucks is a good one although maybe the last five years that has deteriorated a bit um others others others well you can look at some car brands but cars there's probably some other you know clarifications here i mean ferrari might match up there but it's pretty easy for this one i i'd say well lululemon is a good one you know it's more expensive than others this one is it's not the i think something that is

counterintuitive or revolutionary versus other investors a lot of people are looking for these qualities and it overlaps with some of the other investors we studied so i don't think this is where the special sauce or the secret sauce comes from with Gardner's investing stuff. Yeah, agreed. I mean, it's also probably the most fickle,

right? And anything that's based on brand can be, especially in consumer discretionary categories. Like we're seeing it with Starbucks now. It can turn quickly, which is why it's helpful to have, but you don't want your entire thesis resting on just one of these rule breaker characteristics.

Then six here, And this is probably one of the ones that is most counterintuitive and people are probably going to maybe disagree with. But he says, grossly overvalued according to at least one significant constituent of the financial media. You're smiling. He's a fake Kramer guy? No. Well, kind of. He doesn't.

He's a – what do they call it? The inverse Kramer ETF? Maybe Garner was the one that first tried out that strategy. It is. Yeah. The examples that he uses in his book here aren't quite as important because valuations can change just a lot faster than business models. So he uses iOmega as one that everyone said was overvalued. I believe it's the watch company.

AOL was another one that everyone said was overvalued. Keep in mind, this is 1998, where AOL was a lot more popular. um but yeah it the gist of the chapter was more so than just like you want the stock to be overvalued i don't think that's quite what he's going for but trying to under like not everyone's going to be in perfect unison on a belief uh or belief in a stock like you want to see why people are calling it overvalued you want to find people that are underrating the business because if you can't find anyone that's underestimating the potential of the stock then you then you might have a bit of an issue there he actually gives a couple of resources to find like uh find people

that are bearish on it um and uh one of the ones he talks about there is barons i think it's a lot easier today you can probably just check a whole bunch of digital channels whether it's twitter whether it's podcasts, uh, to find people that are bearish for that one. Yeah. Yeah. We're maybe we're the people that you need to be bearish on something. Um, yeah, I guess, what do you think about this rule? And then follow up question, which of these do you have the hardest time with? So I think with this rule, one thing to add is that he's not necessarily saying that these people are wrong. It's just that they're focused on a one, two or three year time horizon. And And for him, what he is saying is, all right, look, if I'm right about this being a big winner in a large emerging industry, Amazon, Netflix, NVIDIA, it doesn't matter if it's trading at 50 times earnings and it's going to drop to 30 times earnings two years from now and still be considered overvalued and could be dead money there.

But what he's trying to say is that if there are people focusing on that, the long term, the 10 year time horizon might be underrated. But I think this is again, I'll come back to the 2020 2021 period. It seems like then there weren't very many people on the other like there were so many people just focusing on this 10, 15, 20 year time horizon. And we're building the future of electric vehicles or whatever. And that's where, you know, the fool can get into trouble. And they did. Yeah, it is. It is interesting because it's like, I just have such a hard time with this. This is the hardest one for me. Yeah.

Look, we run a little more concentrated and we'll get to the tactics next. but for me i am not comfortable holding something at or start starting into a position where i think it's overvalued on a few year time horizon i do feel a little bit more concentrated than what gardener has i would say there are some foolish investors out there some analysts that have worked for them for a long time i don't necessarily follow this part of the strategy but gardener i think embraces it and says i don't really care if this is a terrible investment for three years or it's dead money simply because of the valuation over time it'll make things up if we have a 15 20 25 year horizon yeah i think this is the magic of his returns it's that if you were to try to write

a model when he recommended amazon in 1997 what are you going to say oh in 15 years they're going to be the leader in elastic computing like you would have been laughed out of the room like the the for him and i think really where you can find the biggest source of alpha is in all of investing, is finding great companies that people just simply can't project what they're going to do beyond five years. No one's writing a 15-year DCF and doing it accurately. But if you believe that the management team is great, you believe that they have an advantage and the industry is growing, and it checks a lot of these rule breaker boxes, I think

that's where people tend to really, really underestimate it and you get these huge excess returns over the long run. All right, listeners, we've got a new sponsor here on Chit Chat Stocks. The name is Blue Chippers Club. Blue Chippers Club was recently started by two friends of ours with the goal of building a tight-knit community of stock-focused investors. Inside this awesome community, everyone gets to share and break down their portfolios with each other, participate in weekly calls, and compete in fun portfolio performance competitions. I really like this idea and it's why we're promoting it here on the show. In fact, Brett and I are in the community

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in a six percent or higher yield with a bond account only at public.com forward slash chitchat stocks yeah and that leads right into the tactics for rule breakers uh investors he has six tactics that he goes through in some of the presentations and the books and the tactics are essentially how are you going to analyze these companies or excuse me it's how are you going to manage your portfolio ryan just kind of went through the the stock analysis there this is how do you manage a Rule Breaker portfolio, and as what I mentioned with the segue there, when Ryan says they don't know the future, it's almost like Gardner, given the never sell stuff we're about to talk about, he is letting the thesis play out and get confirmed and solidified over

a 10-year period, and then the stock price will take care of itself after that. So, first tactic here, and this is how he describes it, let your winners run, and then it all caps high. So, this is emphasized very much. It's the first one. This is the most important tactic, which Garner says trumps all other tactics. He's essentially espousing a never-sell strategy for your winners. It doesn't matter if the stock gets extremely overvalued for a year, or three, or maybe

even 10. Keep holding. Keep it simple. is how you hold a hundred beggar i'm stealing this quote from various other people i think it's used often at the molly fool i've seen some analysts say that or this quote you can only have a hundred beggar if you hold a hundred beggar so it can only be a hundred beggar for you if you hold throughout the entire period i'd say two notes here in regards to how we try or how any listener can try to implement this this is a strategy to keep you from defeating yourself

For example, we sold Sprouts Farmer's Market. I know we hopped on this one, but it is one of the biggest mistakes of a mission we made. We sold it on valuation concerns back at around $40 a share. Currently trades about $150 a share. Might be a, I think it's close to a 10 bagger from our original thesis cost, although we haven't realized those returns. And it might end up being a 100 bagger from our cost basis over the next 10, 15, 20 years. Now, it might not be, but it's on that path and on that trajectory. Unfortunately, we will not be reaping the potential rewards because we, you know, we were nitpicking, we thought we were being smart with our portfolio management, but it was actually hurting ourselves by trading too much. Now, the second one is, I would note, if you exclude this tactic and you overtrade, you will not replicate the returns of the Rule Breakers portfolio because it is likely you trim the right tail and those hunter baggers out of it which is where all of the money is made in this strategy and there ryan before we move on to tactic number two no i think it's really

well said it's i'm kicking myself here because it's so hard for me to watch especially in a short time frame a stock that i own jump because all of a sudden my first thought is okay what like the valuation is getting extreme. And this is why I think it's so helpful to, and I'm trying as hard as I can to stick to this for myself and my own portfolio. Whatever stock I buy, I will not sell it for three years, at least. I have to own it for at least three years. Watch the business develop, get a better understanding for the business and ignore the stock price for those first three years. And then ideally you can continue to do it, Um, but you get to see real development, especially in the rule breakers, um, approach.

If you're buying companies that are kind of young in an emerging industry, you want to see how they develop in that space. So, um, yeah, it's, it's difficult to do, but you're right. You errors of omission or not, sorry, errors of omission, but selling too soon is pretty much what every investor we've studied, the biggest mistake they've ever said they made was selling something too soon. And I think this is a good way to kind of take it to heart. Just let it ride. Yeah, that's true. And it doesn't mean after a long period that you can't trim, especially if it's becoming a huge percentage of your portfolio or it's gone on a

monster run in a single year and you think, okay, well, look, this has been a lot. And that usually coincides with each other if it being a huge position in your portfolio and it doing extremely well not that we wouldn't say that's the end of the world but eliminating the whole position it's kind of what Gardner is talking about here and I'm not sure if he for himself he even does the trimming I actually don't know it's kind of hard to just you know we don't have full audited returns from his own portfolio so I don't know what he does but I'd say that he does talk about never getting rid of a position if it's a huge winner now the second tactic he has this one is hard as well it is add up don't double down another counterintuitive part of garner's philosophy

this is re-recommending or re-buying some of his big winners conversely he does not double down on his losers even if he still thinks they are good buys or even better buys than at the original recommendation say as a follow-up to this thought he has this is keeping you again from defeating yourself it's keeping you from pouring money into losers and this is the he might be stealing this from peter lynch the water the flowers turn the weeds um you know get rid of the big losers in your portfolio don't add to the huge losers if they end up being right they'll be right but don't put good money after that yeah this is this is one i've i think i've improved on but it's it's another counterintuitive rule like uh i imagine it's so helpful and i think

one of the things that kind of helps me understand this is and we're not big into trading but the price history of a stock tells a story and if it has 10 years of good performance there have been hundreds of analysts over those 10 years that have sat there done all the digging that you've done that have done all the research and it's not if something if it's not a meme stock it's up 100 whatever that's not what i'm talking about but when there's really good past price performance it's because there's probably good business performance and a lot of the analysts have recognized that as well so that's kind of it makes sense add up on good business performance It's more indicative of better future returns.

Yep. All right. Tactic three, this one will be short. Invest for at least three years. I think it's pretty self-explanatory. Have a longer term time horizon. Don't be a momentum trader on a revenue acceleration. Not that that strategy can't work for some people, but that's not what David Gardner is doing.

Fourth tactic, remember the four tenets of conscious capitalism. I had no idea what these four tenets were, but here's what they say. And Gardner is a huge proponent. of conscious capitalism. One, higher purpose, having goals beyond profit, but not excluding profit. Two, stakeholder orientation, taking care of all parts of the business. Three, conscious leadership, an executive team that understands the company's purpose. Four, care culture, take care of your employees. My one gripe with this is that I think these kind of overlap, where taking care of stakeholders is having conscious leadership and having taken care of your employees and i kind of

think the big thing here is having a vision whether it be someone like nvidia or someone like netflix or someone like amazon or mercado libre or tesla which has been it was a big rule breaker investment you have the goals and the purpose beyond profit which can motivate your employees and give some purpose to where your direction in the business is going and then you just take care of all your stakeholders. Don't screw any part of the business over. That includes shareholders, that includes customers, that includes employees, that includes the other companies you work with, stuff like that. Yeah, I like this. And it kind of speaks to the Bezos quote of like, what's good for the shareholders in the long run is also what's

good for the employees. It doesn't always seem that way because you see the operating expenses ballooning kind of thing and the shareholders think, where's our cut? But in the long run, the the incentives are the same. Yep. All right. Number five, and this is probably the most important thing from a portfolio management perspective, is max 5% allocation at cost. So given Gardner's approach, he does not recommend loading up on a position. He never makes a stock more than a 5% allocation in his portfolio at cost. I will reiterate, this means at cost, he has no qualms with letting a winner ride, which is the number one tactic here. But he won't be adding to his position if it is more than five percent of his portfolio or recommends that you

don't and the reason he uses this I think is because he is entering stocks and this is one of the sayings that he uses and a lot of people that Motley Fool use we want to be one of the first people into a stock and then we never want to leave or be one of the last people out of it like he talked for for example with I think he met or saw Bezos Jeff Bezos after many years in like 2017 or 2018 um it had been a while since they'd seen each other and he went up and he and this is kind of a very uh i don't know it seems like basis is sort of approachable at least when he's at like a conference uh then but he went up and said hey i think we're the only two people that have held amazon since 1997 and that's got to be pretty cool because he was

like yeah you're probably right so the reason i say this is that they want to be in early but When you get in early, there's going to be a lot of misses. So you don't want to blow up your portfolio by loading up 50% in something extremely risky. Yeah. There's another part of it too, right? Which is if you own it for that long and you have a very successful company, like the company ends up being very successful, chances are like you're kind of a part of something for that, that, that point.

Like, the CEO might know who you are, potentially, you've been around that long. It's just, I don't know. I think that's part of one of the joys of investing outside of any sort of financial returns is you get to actually really know the business and feel like a part of it. Yeah. And what's interesting is in 2002, both Amazon and The Motley Fool were struggling a lot. And you could argue that they both helped each other where The Motley Fool was pounding the table that Amazon was, you know, the future of retail. When everyone said it was Amazon dot

bomb, there was the sentiment could be worse on the company. And I'm sure Amazon helps the Motley Fool, you know, maybe not in 2002 because the returns weren't good then. But from 2002 to today, I mean, it's been just a huge winner for them. All right. Sixth tactic, aim for 60% accuracy. Last one here, but this is kind of setting your expectations for the amount of winners and losers you have. Your owner says you want 60% of his picks to be successful. I would even argue this is optimistic given his approach. And if you define a winner as something that, you know, materially adds to the gains in your portfolio is a 10 bag or something like that, I would say 90% of his picks will likely be inconsequential to his returns. I mean,

the wealth is accumulated through the Netflix's, the Tesla's, and the NVIDIA's of the world that you hold through a hunter beggar status and then never sell all right we're going to get to his specific investments but ryan what tactic do you think and i'll answer this too you need the most improvement on add up don't double down and the first two let your winners run i think at this point i'm trying as hard as i can to adopt the never sell approach um and we're going to talk about why that is here in a second which is you like if you are going to have a hundred beggar you not only have to weather huge drawdowns the harder part is you have to weather extreme valuations without selling i mean you can trim which yeah which you've mentioned but

that for me is probably harder than not trimming on the drawdowns oh yeah yeah because you feel like you're making a mistake and you might be over a single year period, but it's very hard to time it. As people have said time and time again, I would for myself say letting your winners run high, but it is only in any Rule Breaker style investments that are in my portfolio. The ones that come to mind would be like a Coupang or a Remitly are kind of in the Rule Breaker style for me, but there are some stocks in my portfolio that don't follow this. So I had a little bit different um idea you know if it's a deep value pick for you know something that yeah it's just not a rule breaker type investment so if altria hits 50 times earnings you're not gonna let it

yeah exactly although i don't own that i should have i did say i think about a year ago or maybe i don't know when that was i said something like i would buy at 38 it hit 38 and i didn't buy but it's done quite well since then but besides the point let's talk about some of his investment investments ever best investments ever uh david gardner here first one ryan the granddaddy of them all the first pick maybe that they've done that they did well maybe not the first exact one but one of the earliest ones that still lasts on to today amazon yeah so and i if i'm getting any of the numbers wrong just know that ballpark wise they're all incredible investments but i think i'm getting this one right. So David first picked Amazon in 1997 at a split adjusted price of 16

cents per share. This, I believe, is still an active recommendation today in Stock Advisor. And I assume it was a holding when they left, when Rule Breakers closed. I don't think this one gets talked about quite as much, but it is a fantastic example of him investing in people. So there's actually – in that presentation I mentioned, David actually says at one point, the visionary leaders – like investing in a company with visionary leaders, that is often the best source of a sustainable advantage. So we talked about one of the characteristics is looking for a sustainable advantage. Visionary leaders can be that sustainable advantage. And the example he gives is what better advantage could Amazon have had than having Jeff Bezos at the helm? And having him tied to the ship, he's an incredible leader. He's pushing the company constantly towards what he wants, towards the goal. And he's aligned with you because of his ownership.

I think I'm getting the math right here, but Amazon today would be more than a $1,400 bagger on the original purchase price. So $0.16 per share, split adjusted, I think it's at $229 today. They do tend to average up though, so I imagine it might be a little lower on the cost basis. But yeah, outrageous investment. and uh yeah it's like the things we've spoken to like you have a visionary leader it's you think about the periods of overvaluation that amazon had to endure like they were not profitable for so long you could have made the case that they're overvalued so much and at any point probably other than maybe like late 2022 uh in the

company's history or maybe late 2002, whatever. And they've just constantly grown the TAM and grown their share of the addressable markets that they're in. regular listener, you know that we use Yellow Brick every single week here on the podcast to discover new investments or just find reports on companies we've already heard of. Try it for yourself. Simply go to joinyellowbrick.com slash chitchat and search a company or ticker you are interested in. You are bound to find a great report on just about any company. That's joinyellowbrick.com slash chitchat. Yep. I got nothing to add there. Let's move on to the next one, NVIDIA. Gardner recommended NVIDIA back in 2005, back during his microcap club appearance,

which they have the video of that on YouTube. This is where we got some of this sourcing. So go check that out. We might put the link in the show notes there, but just check out or search David Gardner microcap summit. He has a full presentation during 2020 around some of his long-term picks and how he got, you know, how he tries to make rule breaker investing work. So during that, he said he recommended NVIDIA at $6.55 a share. That was in 2020. So since then, NVIDIA has gone through two stock splits that accumulate to 40 to 1 today. So Gartner's split-adjusted recommendation was $0.164 of a penny.

I had to put it to three decimal places because that can matter when calculating the returns here. Today, NVIDIA trades at around $144. I guess he gets 10-bagger returns basically every day or a 10-bagger loss if the stock goes down. He might have had 100-bagger in one day earlier this year, but who knows? He probably had. He had to. Yeah, something around that. Yeah, yeah.

Or at least close, at least fairly close. Yeah, today it's at $139 a share. Either way, it's not bad returns whatsoever, and you're getting close to 1,000-bagger in two decades. And this lines up with what I checked with NVIDIA's total return chart. So from around the beginning of 2005, NVIDIA has generated a 39% total return on TAGR or shareholders. And I'm guessing Gardner is one of the only investors to hold the stock the entire way. What's interesting is that we had to go through two, or if you were Gardner or someone that

held NVIDIA to today, they had to go through two big psychological periods where it'd be tough to hold. from 2006 to 2015 the stock didn't do much it was dead money many people perhaps us would you know would have sold at the time said ah it's a big loser we don't you know the stock hasn't gone anywhere you can just see it like someone complaining to you like oh this this dog has been such a dog you need to get rid of it and refresh your portfolio or why do you still hold that thing you're really still holding nvidia it'll never be a winner and then this is where Gardner's philosophy can come into play of being extremely patient almost lethargic with some of

his quote-unquote losers at the time because he doesn't want to give up on them if they turn into the thesis of what he's saying and if that thesis materializes you know was NVIDIA still a disruptive innovator in 2015 yes was it still run by a founder yes did it qualify for the other rule breaker tenant of a stock yes except for the fact that you know except for the stock price stuff There was no reason for Gartner to sell at the time, and he wouldn't have. Now, conversely, today, you have the opposite issue where it's been close to over 100 bagger since 2005, or sorry, since 2015. And now you got people saying, you're still holding NVIDIA? I mean, it's been such a good run.

You know, why don't you get rid of that? There's something better. The stock's overvalued. And we would say that from starting our position today, but Gardner's rules say, if you got in at a good price, let the business take care of itself. And you want to be extremely hesitant selling strictly on valuation. Yeah, this one, I think NVIDIA and Netflix are probably, NVIDIA and Netflix, which I'm going to talk about here in a second, are probably the two that would have been the hardest to hold. over the last 20 years of the big winners that we're discussing so i'll go through netflix real quick so david first bought netflix in 2004 at 1.85 cents per share split adjusted today the

stock trades for 909 dollars per share so it's a 490 bagger for him keep in mind we talked about like not being able to model out visionary leadership like business model transitions adapting or creating a new industry which netflix really sort of did when they bought netflix it was a dvd delivery business and they have gone through lots of ups and downs i imagine it helps to have people like reed hastings at the helm where david kind of uses netflix as one of the go-to examples of the good management and smart backing principle when hastings who you've probably listened to i don't know five years worth of conference calls events whatever maybe you've met him and you've really got a belief that i like this guy i think he does a really good job

and he owns a whole bunch of stock in the company it makes it a little easier to weather the drawdowns i've got a chart here of netflix's drawdown history they have had let's see for sure three three separate 70 plus drawdowns over the last 20 20 years and each one of them felt convincing at the time it all they all felt like okay this is a real this is like you know the business model is screwed. It's changed, all that stuff. And you think back to 2022, 2023, the stock was down, I think 75% roughly from its highs. This is when I think about Bill Ackman got shaken out after one quarter. It's all of a sudden this business that had grown digital subscribers consistently for like 10 years straight saw negative, saw declines. And they

go on to the conference call they're like what's what's causing this you know what are the issues and reed hastings more or less said i don't know it would be pretty easy to get shaken out and obviously a ton of investors did but general yeah it's back up to highs um and a lot of that is just you know i mean just kudos i guess to david for holding the other part is we talked about 70 percent dry down it's not getting shaken out from 2014 to 2020 it averaged an enterprise value to gross profit multiple of 24 times and at one point in 2018 it hit 45 times that that would feel extreme like it would feel like man that's a steep valuation i don't really know how to make the numbers work from here but it's still been a great investment from that high in 2018 so

yeah that's yeah maybe not the best investment since 2018 kind of a you know a double maybe a little over double since then it's probably at least tracked the sp500 but he's not saying i'm recommending it in 2018 i'm holding through this period right all right last one brett what's the last one you got here so this one is mercato libre i think it's a good example of trying to pattern match from a prior winner or historical success and someone that's doing it in an international market so he recommended mercado libre in 2009 at 14 and 13 cents a share i don't believe it's had any stock puts so oh so i am seeing i basically 138 x returns it's not 100 beggar on the current share price so from 2009 through 2024 not that long a period already over

a hundred beggars. So what makes Mercado Libre a rule breaker? I think Garner saw a company learning from Amazon's retail success and then tailoring its business model to specifically disrupt the Latin America retail sector. That's it. You might argue that's too simple of a thesis, but Garner is okay with that. He's saying, let the company tell him whether he is correct. He's almost giving them a test like, all right, you have this idea. Now prove you can turn it into a business model, and you can win in this industry. And he's going to decide, or excuse me, the financial performance and the stock performance is going to tell him whether he is correct or not over the next 10 years.

But I think he would tell you in 2009, he had no idea if it was going to work, but he was going to bet on the management team, bet on the disruptive business model, and bet on that being an emerging industry. So there are plenty of risks one could have identified early on in Ricardo Libre, foreign currency headwinds uh crime risk although that one is almost always overblown you know there's there's crime uh groups that might not be as powerful as the mexican cartels but there are crime groups in the united states there are still good stocks you know it doesn't mean that the entire country is overrun by them uh there are socialist governments in latin america that might

not be too friendly to business it might screw stuff up there's poor infrastructure that makes delivery difficult and you could have said how are they even gonna you know they don't have the same modern infrastructure as the United States. And I'd say it's probably not that far off. But those are the things that people could have said back then. And Gardner didn't care. He lets the company work this out or not. And MercadoLibre was one of the ones that worked it out quite remarkably. Revenue has grown at a 37% annual rate since 2009. I think this is in USD. If not, I'm getting this wrong, but I'm seeing $173 million in 2009 and over $18 billion in the last 12 months. Pretty good.

Even if it's not USD, it's a ludicrous growth rate. It's a good growth rate, yeah. Yeah. Okay. Now, we've kind of alluded to it, and you might think if we just talked about the 100 baggers, you'd probably think this is absolutely insane. do we have any idea what his actual returns are i think we can ballpark it so we don't but you can look at the rule breaker performance and the stock advisor performance but you don't necessarily at least i'm from the outside looking in know which ones were his picks and luckily during that micro

cap club uh presentation he did a and he probably just had someone at the molly fool do it a cumulative growth return for all of his picks from 2002 through September of 2020. I would say that we do not have access to his portfolio returns. In fact, we've never met him, although we do have something potentially cooking in 2025 for a new product that he's working on. I'd say stay tuned with that. You're going to forget about that if we actually do an episode on that. But hey, just a little tease that could show up next summer or sometime later.

Well, I'm going to just give out a full disclosure that these are not guaranteed to be his returns. These are just what we estimate them to be. And what they said was from March, 2002, September, 2020, $10,000 turned into $315,000. And then S&P 500 was much lower. I'm thinking, what is that? Probably they don't have the number on there. Maybe 50, 60, 70,000. Either way, the returns that he put up were 20.45%. The S&P 500 total return was 8%. percent uh i would say from 2020 to 2024 you know 20 september 2020 was a good period for growth stocks they didn't really reach the peak and the pinnacle in 2021 so it's not like we're timing at the exact peak here but i'd say going from then to today i'm guessing his picks especially

if you include nvidia or at least match this 20 annualized growth rate even if there was a ton of losers there so i'd say he's done over 20 for for uh two decades yeah that's phenomenal um and you think about the stocks he's held that would seem i imagine that checks out uh yeah that's that's one where this is not a fluke and people can say well you're just riding off of amazon's coattails but yes i would reiterate he is the only one that is holding it for that time period everyone else decided to sell even bezos is getting out now he's now he's finally outlasting bezos there's a funny uh quote from that microcap club summit where the the guy that runs it i think he's the founder of microcap club is ian castle and he knows gardner so he kind of you know loads

up this question he says hey david what's your cell discipline and then gardner doesn't even answer he just starts laughing and he's like well that's a good question i don't ever do it so he's the true never sell investor that's the best i think of at least this generation and he's the ones that that's actually stuck to it and had the discipline that i think is really underrated to have to hold through the overvaluation periods okay two closing questions One, I did not write down here, but to start, let's go lessons from studying David Gardner. What do you take away, Brett? I've got three ones.

First, think extremely hard before selling. Talk about that again. Personally, I'm still of the opinion that you should at least trim your position if you think a company gets to an indisputably absurd level. That's rare, but maybe Shopify in 2021 is a prime example. It's going to be a long time before they get to a value. Even if they just crush it, which they keep doing, it's going to take a long time for them to get back to that stock price. Because I think that, you know, maybe Ryan can pull it up for me. I think they're still in a 50% drawdown.

Second one, think about size when making a pick. If it's a high risk stock, it's not the end of the world to make it a 1% position at cost. Because if you're right, it's going to be a huge winner. And if you're wrong, which it likely will be, it's not going to blow up your portfolio. if you buy and it turns into a big loser don't sell for many years i would say you can implement a tax loss harvesting strategy and get trim the losers and this this is regards to a real breaker investing strategy but with that nvidia example i think you should be hesitant to just sell stuff no matter what as long as the business and the founder all the stuff that you care about are

still intact just stay patient with selling winner stay extremely patient with your winners in selling and stay also patient in selling your losers because they can develop into that nvidia that becomes a one of the best investments ever after a period of you know being dead money for a decade yeah i just went and looked at shopify it's now it's down around 30 percent from its highs in 2021 but here's the thing is if you look out 10 15 years what are the chances that you look at this and it was just a blip you know like i think that speaks to the the strategy here which is the ultra ultra long run obviously in 15 years it could be a two trillion dollar business maybe maybe yeah it's easy it's easy to sound cynical now

So, but it's easy to make that seem crazy, but imagine asking that same thing about any of these other companies 15 years ago. Yeah. Amazon could maybe make the case. So the argument I have with Shopify is that if we were going to return to all-time highs, given its growth rate, and if it keeps up, it probably would have taken 10 years to catch up to that valuation. And when you get to that point, especially if it becomes a huge part of your portfolio, and when I mean huge, probably like 10, 15, 20%, it's not the end of the world to sell if the valuation gets absurd at 50, 55 times sales. They're like, look, you need that.

I think, what did I talk about? The, like, it's sports when they have that guy that's just the clock management guy. I think the Motley Fool just needs a valuation person that just comes in and says, look, I know you don't care about it for 99% of the time, but when is that 50 times sales? You know, give me a ring and I'll tell you not to recommend it yet. Maybe not wreck, but I don't know if I'd sell it. You can maybe trim a little bit. Trim, yeah.

That's the first step on the road to selling. Yeah, I mean, it is a sell. But look, again, I think it's when you get to that period where you can look pretty clearly and say, unless this business grows revenue at 50% for a long time, and it matches up with that Peter Lynch philosophy of if it's a tiny company and it looks overvalued, it's maybe not a big deal. But if it's $100 billion market cap, you know, that upside is getting more limited the higher the stock price rises. Fair. All right. My lessons, the number one thing that came to mind for me studying Gardner is the Charlie Munger quote, the big money is not in the buying and the selling, but in the waiting. I mean, I don't know if there's anybody that embodies this better other than maybe Buffett of just waiting and holding and owning it. So that's number one. And it clearly is the big money is there in the waiting. The other one, I didn't write this down, but I kind of thought about it as we've talked. The analysts, Wall Street, investment banks, pretty much all investors, I think there's – for the really, really good companies, for the rule breakers, the top dogs in the emerging industries, not only do they underestimate the long-term potential.

talk five plus years but i think they drastically underestimate it i don't think anyone can properly guess and at least the majority investors cannot properly guess what's going to happen five plus years out and so when you have these true true rule breakers that's where i think you get these idiosyncratic returns where it's just impossible to predict the behemoths that these companies will become um and i think a lot of it is typically because it kind of goes back to this quote from blanking on his name but um the altimeter capital guy and i don't agree with everything he says but he says great management teams always find a way to expand their town i think with mercado libre for sure amazon for sure netflix which was a dvd distribution business

they all found a way to expand their town um and so i think a lot of it comes down to that visionary leadership so that's kind of my number two now last question to close things out and you might not want to play this game but we'll see if you had any pick on stocks in your portfolio that could be the rule breakers of today who would they be let's pull up the portfolio but I think I mentioned them earlier. It's going to be Coupang and for Nittly. I think they both qualify

quite a lot. You know, people talk about being overvalued or whatever, being in, I don't know. There's just a lot of complaints about those two companies. They're founder-led. They're in emerging industries. They're disrupting them. Let's see. Other ones. Other ones. Probably not. Yeah, probably

those two. I guess Philip Morris International is a bit of a rule breaker. They're trying to disrupt their own, themselves. in the nicotine space but definitely for me coupon and remitly now one thing i want to mention though when you regard those analysts stuff about how analysts constantly underwrite underestimate potential i think that's true 95 percent of the time but there's very few periods 1999 early 2021 late 2020 where the opposite occurs and everyone's just thinking about how beautiful the future is going to be and all these companies are going to disrupt disrupt

disrupt. And that's when this strategy doesn't work very well. So I would push back. We've been very optimistic about the strategy, but that's my one pushback is that there are some periods when it can be very, very tough to invest like this and ignore valuation. All right. Let me change the question a little bit. And I agree. I'm looking at my own portfolio here. I think global remittances is an important and emerging industry, especially as costs are coming down and digital remittances i should say um same with the the e-commerce and the vertically integrated e-commerce in south korea with coupon um which company in your portfolio currently would you feel the most comfortable adding up like we talked about add up don't

double down which would you feel the easiest doing that with i think we got to learn from gardener and say i'm going to say the same two ones because the the coupon and remitly are the in my portfolio are the two fastest growing on a revenue perspective so they they're really proving themselves and i wouldn't be afraid to add up given those characteristics what about you any any thoughts for the two those two questions the probably the same yeah i think remitly you know i thought they had a really really good quarter they're accelerating growth and this might be one of the first times that i end up it's rare that and the stock jumped after earnings it's rare that i have ever felt compelled to like buy after something pops after earnings but um

trying to teach myself a little bit of that david gardner habit so yeah remitly and and And Coupang as well, it isn't up that much since I've owned it. Yeah, the Marshall Law thing is hitting the stock right now. Luckily, that got resolved quickly, but yeah. All right. Well, I think that's going to do it. Anything we need to say before we close out here? I don't think so.

We got some fun interviews coming up. We got some fun stocks coming up. We're going to have 2024 predictions as always. the investing power hour is going to be live on wednesdays and we are in the midst of planning uh content improvements for 2025 trying to continuously you know learn from the dan harris the kaizen trying to have continuous improvement here and make the show even better in 2025 so keep watching out for that if you like the show if you listen to this full hour here and you want to you know give thanks just give us a review on spotify apple podcast if you want

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