Motley Fool Money - Our Biggest Regret

Starting point is 00:00:00 Don't go on a path to sell destruction. Motley Fool Money starts. I'm Rickmanars, and today I'm joined by two of my favorite voices in fooldom, Jason Hall, and joining us for Hidden Jams, Lou Whiteman. We're going to take a look at some stocks that we believe we'll head higher in the coming months. We're also going to play a new game called Double Trouble. But first, investors spend a long time treating their stocks as soulmates. Sometimes they should be treated as cellmates.

Starting point is 00:00:41 We spend a lot of time discussing meat cutts when it comes to stock ideas. today I want to talk about breakups. More to the point, what's the decision to sell that you regret the most? Mine is easy, but I want to start with you, Lou. Like, trying to figure out what to do with a blank spreadsheet square. Let's talk about your worst sell decision. So I'm a terrible person to ask this, because it's so boring, Rick. Not because I'm brilliant, not because, like, I don't have terrible, you know, mistakes, but rather, I don't tend to dabble in the early stage companies to get these, like, great, you know, explosions later, higher, I assure you, if I would have owned Amazon or if I would have owned Tesla back in the day, I would have sold them and I would have regretted them now.

Starting point is 00:01:21 But I do have a lot of regrets, and I do think there's kind of a lesson there because they share a theme. Two really good companies I sold years ago. One, Axos Financial, the online bank. I think it's of like 200% since then. I really regret that. The other is Lowe's, not the home improvement company, but the financial hotel conglomerate. It's, I think, almost a double since then. and the similarities, the reason I regret them, these aren't the, you know, oh my gosh, I'd be a trillionaire now, but I'll be honest, I sold them without any good reason. I had no magic process. I had no, like, you know, guiding principle. I basically got bored with them, and I saw something shinier and flashier, and that is the worst reason to sell. Not, like, dramatic declines,

Starting point is 00:02:05 nothing that, like, you know, this just eats at me because this is the danger of acting on the whim instead of with real intent. So every time I look at those, I kind of, I get a little sad inside. Yeah, a lot of real-world relationships end for the same reason, Lou. Jason, what's on your plate? I could go with one that Lou mentioned. I could go with Tesla. I believe in around 2016. I sold a couple years later for a decent little profit. Stocks up 2,000 percent since I old. Rule breaker investors that have followed the Rule Breaker's portfolio have enjoyed like 16,000 percent and wins owning Tesla. Now, clearly a financial mistake, but not sure that I regret it, because I didn't sell for concerns about the business as much as just concerns about Alon

Starting point is 00:02:47 Musk's ability and interest in staying focused on Tesla and concerns about the company's ability to deliver more than just EVs and maybe batteries. I could also go with selling half of my Nvidia stake about two years ago. Stocks up 446 percent, and it's never been below the price I don't really regret that, though, because I sold it at this point in my financial life where I'm thinking about position sizing, and it had become such an outsized position in my portfolio. I'm still kind of okay with that decision, even though maybe I should have let that problem become a much bigger problem. But the one that I really regret, Rick, I even wrote about it on Fool.com in August of 2013,

Starting point is 00:03:32 and that was selling Microsoft. and it was right as Steve Ballmore was leaving and set to be replaced by Satya Nadella. I sold entirely because I just ran out of patience. It really the absolute wrong time to have been running out of patience with Microsoft. And it's been an 18-bagger since I wrote that article and since I sold my shares. Ouch, Jason. All right. I have a story to share, too.

Starting point is 00:03:56 Invest long enough, and you'll get a 10-bagger. If your aim is true, you may even wind up with 100-bagger, a 1,000 bagger, a 10,000 bagger, or under understandably even more rare. I have a hundred thousand bagger in my portfolio, and it's killing me. I bought 500 shares of Netflix in October 2002 when it was a broken IPO, just a few months after hitting the market. After a pair of stock splits, I would have 7,000 shares worth $8.7 million today. Unfortunately, I have sold 99% of my shares over the past 23 years. I sold 80% just a couple of months into my shareholder tenure, and I regret that a lot more than the other 19%. I paired back much later as a position became a larger part of my portfolio.

Starting point is 00:04:37 My heart goes out to all of us and terrible stories. I also, I don't think we should be afraid to sell. And if anything, I feel like I should be more open to selling for the right reasons. I think you can make bad decisions if you refuse to sell. But again, I come back to it kind of looking at mine, you have to have a reason. You have to have a process and stick with it. If the thesis has changed, you should probably sell. If you don't believe it anymore, it's selling because you actually

Starting point is 00:05:03 want to use the money for a life event if you're going to get married or you have kids. Look, hey, that's a reason to sell. We're going to use the money. But buying or selling, I've tried to work on being more purposeful to slow things down, to not react, not look for shiny objects. I think, you know, you can avoid the worst regrets by just, you know, have a plan, stick to it. It's just, gosh, Jason, there's so much stimulus coming at us. How do you stay on a plan? Yeah, Lou, you're right. I think regret minimum is something that as investors, we have to sharpen that skill, right, and really build that muscle. And that doesn't mean ignoring mistakes and pretending like they don't happen. You have to learn from

Starting point is 00:05:44 them. But one of the things that I've learned to do is to build a framework that helps me reduce those, the unforced errors, basically making short-term decisions with long-term investments, that's a lot of times the things that leads us to sell too soon, and better align my actions with all of my financial goals, whether they are the long-term ones, but also the short-term ones too, right? Aligning those decisions based on what the asset itself is, I think can be one of the most important steps to take. It's certainly the one that's helped me avoid most of the worst mistakes.

Starting point is 00:06:16 And you know what? My heart doesn't go out to you, Rick. My heart doesn't go out to you, Lou. I don't feel sorry for myself here because I look at my portfolio. And overall, mistakes are part of the process. And I know all three of us have done quite well and we're set up to reach all of our short-term and long-term financial goals. So it's part of the process and hopefully sharing these.

Starting point is 00:06:33 stories with others that have made mistakes. Fool's listening. I hope this kind of helps you out a little bit, too. Yeah. My lesson is that you should never buy a stock just because it goes down and by the same, I guess, metrics. You also shouldn't sell a stock just because it goes up. And I agree with you both, not dwelling on the selling, learn something and move on. Or in the words of Nicole Kidman, as she walks into an MTAMC theater, somehow heartbreak feels good in a place like this. Coming up next, we shift gears to talk about stocks we like right now. Lou Jason, we're not a boy band yet, but like NSYN, we're going to go over some buy-by-bys. In a world full of noise, long-term thinking stands out.

Starting point is 00:07:13 On the Capital Ideas podcast, Capital Group leaders explore the decisions that matter most in investing, leadership, and life. It's a rare look inside a firm that's been helping people pursue their financial goals for more than 90 years. Listen to the Capital Ideas podcast from Capital Group, published by Capital Client Group, Inc. The market came under pressure on Friday after a weak jobs report made it even more likely that the Fed will start to cut rates later this month. Every move creates an opportunity. I want to go around the room and see what stocks is on your radar as a potential buy ahead of what could be three months of small but potent rate cuts. Jason, what's one stock you think will rise in the fall?

Starting point is 00:07:52 I'm going to go on a limb here and I'm going to bring up one that I don't think that rate cuts directly are the reason that the stock is going to go up, and I'm going to give you a hot take on Starbucks. I'm going to give it to you in a lot less time that it would have taken you to get your favorite cup of caffeine from that coffee giant over the past couple of years. Starbucks shares are basically on a six-year,

Starting point is 00:08:11 highly volatile losing streak. Revenue growth is stalled. Tons of legit competition has emerged all over the world. We've got another IPO that's coming up pretty soon in that coffee space. I know that sounds like a terrible stock to expect to go up, right, Rick? Yeah, but you have me personally. circulating, Jason. Why do you think Starbucks will rise in the fall? In short, Starbucks looks like it's finally working through years of problems that have hurt the business. And those problems were happening

Starting point is 00:08:37 before we realized they were problems. The collision of too much technology that was driving a ton of orders ran into too much complexity behind the counter, along with a number of other poor operational decisions, hurt the customer experience, hurt the company's relations with its workers. Here's a stat. Starbucks hasn't had a positive quarter of comps. That's that important measure of retail of sales at stores that have been open for at least one year. Has it has a positive comps quarter since the end of 2023. That's seven straight negative comp quarters. Seriously. Now, Brian Nicol, I believe he's the best operator in the restaurant industry, was brought in just 13 months ago to fix really a broken business that's attached to an incredible brand.

Starting point is 00:09:25 there have been signs of life the past couple of quarters. Comps have still been down, but much less worse than prior to Nichols implementing the Starbucks's back to Starbucks initiative. So when we combine that positive momentum over the past six months with a really brutal comp period that was last year's fall quarter, it was particularly bad comps were down a brutal 7%. I think the combination of low expectations and a low bar for what could look like pretty good results. That set Starbucks up to beat expectations when it reports in October. And I think there's

Starting point is 00:09:59 going to be momentum that can drive the stock up. Yeah, let's hope so. Lou, tell us about a stock that you like here. So conventional wisdom has it that small caps do better in a rate cut environment because the cost of borrowing should come down. And smaller companies tend to be more on the edge when it comes to debt. So with that mind, what I'm watching is a stock called Montrose Environmental, ticker M-EG. They're only about a billion-dollar market cap. They're a roll-up, and they're an active acquire, so they have a lot of debt, specifically 330 million debt compared to just like 11 million in cash. There's a type of company that I think gets a longer lifeline, or life gets a lot easier for them if their cost of debt can come down. Lou, I remember you writing

Starting point is 00:10:40 about Montrose a couple years ago when it was a beneficiary of COVID-related testing. Why do you think it will rise in the fall? Yeah, that was kind of more of a distraction. I mean, what they do at a core, they provide necessary services with environmental cleanup, up in environmental air quality monitoring, water quality monitoring. These are long-term needs, Rick. These are things that we just, any administration, whatever's going on, there's a need for this. Montrose has a lot of patents in areas like neutralizing microplastics and getting them out of water. What sets them apart for me is this roll-up. It is a risk, but they are in an industry full of basically small and regional players. They are a national player. They've been a consolidator.

Starting point is 00:11:20 They have the scale to take on bigger projects. And also, large corporate customers that have operations all over the country, they have the option with Montrose to just do business with one vendor. Like, if you're a mining company, you can work with them nationwide instead of having to find a partner in every market they operate. This is no sure thing, but it's intriguing. And if they can get borrowing rates down, their odds of success improve. One of the things that's so compelling about what you're talking about, Lou, is the market is littered with these sleepy little underappreciated companies in markets like that that are massively fragmented that have a good record of rolling up and consolidating. So I think that's worth

Starting point is 00:12:01 it's just expensive. And if the deck gets cheaper, just life gets easier. Yeah, find a consolidator in a fragmented sector and you can make a lot of money that way. My stock is Zillow Group. There are two classes of shares here, but I'm going with the Class A voting stock, trading under the ticker symbol ZEG. Zillow operates the leading residential real estate portal with 243 million average monthly unique users. Wow, housing, not a beautiful market right now, Rick. What's got you thinking that Zillow can rise in the fall? Yeah, so financing rates start moving markedly lower in the coming months.

Starting point is 00:12:33 It's going to breathe new life into the depressed residential real estate market that has seen as transaction volume inch just one to two percent higher over the past year. Demand will spike as homebuyers cash in on getting more bang for their mortgage buck. Supply will also finally start to ease once homeowners are afraid to cash out of their low rates on existing digs. Zillow lights the housewarming candle on both ends. The surge in demand creates more app and website traffic, and that's a dinner bell for the real estate agents and other advertisers paying for exposure to this lucrative audience. More homes hitting the market will make it even more important to pay up to stand out on the platform. Zillow's stock is beating the market over the

Starting point is 00:13:08 past year, but it's also flat with where it was five years ago. It doesn't seem fair. Zillow is back to posting double-digit revenue growth and adjusted earnings is growing even faster. It's doing well now. really be doing well a few months from now. Rick, I love the stock idea, but I'm more intrigued with the three of us as a boy band. We need to talk about that more after this over. Oh, we will in harmony. When we get back, I break out a new game to see if Jason and Lou can sort this year's biggest gainers from its biggest losers. Stick around. We'll end the show in sync. These days, I'm all about quality over quantity, especially in my closet. If it's not well-made and versatile, it's just not worth it. That's honestly what I love quince. The fabrics feel elevated,

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Starting point is 00:14:15 The Quince, Mongolian, Kashmir Kru neck sweater, may be the most comfortable one that I own. It's light, soft, and it was a lot more affordable than you think quality cashmere would be. Stop waiting to build the wardrobe you actually want. Right now, go to quince.com slash motley for free shipping and 365-day returns. That's a full year to wear it and love it, and you will. Now available in Canada, too. Don't keep settling for clothes that don't last. Go to QINCE.com slash motley for free shipping and 365-day returns. Quince.com slash motley. Jason, Lou, from our culture exchange.

Starting point is 00:14:47 program with Hidden Gems, let's play double trouble. And let's go over the rules because it's a brand new game. I will mention a stock that's been on the move this year. If you think it has more than doubled, say double. If you think it's lost more than half of its value in 2025, say trouble. Simple enough, let's go. First one, fresh pet, F-R-P-T, the company behind refrigerated dog and cat food. Double or trouble, Jason. I'm going to say trouble. You know, I hear about it so much, but maybe, I was going to say double. We're just, let's have fun. We are having fun. But Jason is right. Trouble. Down 63%. Freshman is still posting double digit sales growth, but it began the year with a steep valuation that's high even in dog years. Next up, Wayfair, ticker symbol W, online furniture retailer.

Starting point is 00:15:33 We probably know this company. Double or trouble? Lou. I haven't personally bought anything in a while, but I think other people have. I'll say double here. I think it's bounced back. It's struggled so much coming out of the pan. I think there's been a little bit of a recovery. Yeah, it's been a quite a recovery, at least for the stock. Up 103%, so a double, you're both correct. Wayfar is getting a market share during a cyclical downturn, but its latest quarter, adjustment earnings nearly doubled.

Starting point is 00:16:00 Third up, we're traveling far away for Banco Santander, S-A-N is a ticker symbol. Spain's largest bank. Double or trouble. Start with you, Jason. Oh, man, I think I'm wrong here, but I'm going to say double because I know European banks have just taken it on the chin. But I think there's some life coming back into that sector. Yeah, definitely double for me, just where Europe's going. Yeah, up 110%. The banking gen has been expanding across Europe and Latin America for some time. And earlier this year, it formed a partnership

Starting point is 00:16:29 with Verizon to boost its presence in the U.S. Next up, c3.aI, ticker symbol, AI, a provider of AI software tools for the energy industry and other enterprises, double or trouble loop. This is trouble. Yeah, absolutely trouble. I don't want to get sued, so I'm not going to say anything but trouble. Yeah, down 55 percent, net losses keep widening, and revenue is now going the wrong way. So having some challenges there, despite it's awesome ticker symbol for the times. Finally, new egg commerce, N-EG-G, consumer electronics, e-tailer, double or trouble, Jason. I'm going to say double. I'm making a wild guess here, completely coming from the perspective of a consumer of computer electronics.

Starting point is 00:17:13 they're still the gold standard. They were crazy a while ago. They've come back to Earth, but I'm guessing it's not trouble. It's got to be a double. Yeah, not just a double, up 452%. Still, wow. Yeah, revenue growth has turned positive in 2025 after three years of decline, so that's the good thing. But what's really carrying it is mostly the fact that's riding the new wave of meme stock.

Starting point is 00:17:34 So that's happening right now for that stock. But clearly, a company that's fundamentals at least are starting to turn the corner. Jason and Lou, thank you for going over the highs and lows of investing. and price moves with me today. If you want to give the boy band a shot, we can try, try, try. Rick, I'm bullish. You're a double. Yeah, I agree. Sounds like trouble. Thank you. Thank you. Thank you to the two of you, a double dose of wisdom to my me them. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against.

Starting point is 00:18:06 So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Full editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosures, please check out our show notes. For Jason Hall, Lou Whiteman, and the entire Motley Full Money team. I'm Rick Minars. May your days be sunny and your life, Motley Full Money.

Motley Fool Money - Our Biggest Regret

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