David Gardner: What's the worst investment you've ever made? The worst? Did you lose 100%?
I sure hope you didn't lose more than that. The only way to have done worse is to
borrow money that you didn't have, invest that, and then lose all of that.
As many losers as I've had, and as used to losing as I am, I've still never picked a
stock for The Motley Fool that went down 100%, but I've come close. And this time every year,
once a year, I talk about my worst stocks, my biggest losers over the past three years.
If winners win, losers lose, and it's important to talk about both. Come with me, won't you,
to the dark side, the shadow side, the losing side. Let's explore and learn today on
my annual David's Biggest Losers: Volume 4. [...]
Alright, welcome back to Rule Breaker Investing. I'm going to say one final time, Happy New Year!
That's the third podcast in a row this month I've done that. I still feel comfortable
going there. We started off the year with getting your kids started investing.
That was the first podcast for Rule Breaker Investing to kick off 2019. For those who keep score at home,
pretty sure I'm the only one who keeps score at home, that was podcast No. 184
for Rule Breaker Investing. I know some of you have actually been with me from the beginning,
or gone back and listened all the way through. If you're that person, give yourself
five gold stars, four pats on the back, buy yourself a cupcake today and know that, yep,
as of that first podcast this year, that was No. 184 that we've spent this time together.
Then, the week after, it was my pet peeves. That was last week, My Pet Peeves: Volume 3.
I was thinking about it, occasionally I'll re-listen to one of my podcasts. And it makes
a lot of sense, for example, for me to listen back last year to David's Biggest Losers:
Volume 3 just to remind myself how we do it, how I did it, and learn a lesson or two.
But when I go back and listen to my most recent podcast, I do consider that a little bit self-indulgent.
And I did fully listen to My Pet Peeves: Volume 3. I think I probably enjoyed it more than
you did, whoever you are. I'm sorry about that. I love putting out my pet peeves.
It's so much fun. And I thought of another one in the meantime that I want to convey to you
right now. Here it is, before we actually get to our material this week.
It's that time of year where snow happens in the United States of America, and there
are some parts of our country -- no doubt yours, too, perhaps -- where it snows more
than other places. And the pet peeve of mine with regard to snow is, the further north
someone is, the more patronizing they'll be to people south of them when talking about
the weather. Here in the Washington D.C. area, we received 10 inches of snow over this past weekend.
A pretty remarkable snowfall, one of the bigger ones we've had in recent years.
A lot of fun. I'm always the person cheering on more snow. I root for maximum snow days.
I want the whole world to grind to a halt whenever it starts snowing, so I had a lot of fun.
But it doesn't take long for somebody to go, "Well, of course, people have no idea
what they're doing in Washington, D.C. when it starts snowing. I mean, I'm from Maine,"
the person will say, or, "I'm from Chicago, and it's hilarious to me," this person will say,
"just how inept everybody is in the city that's south of me." Now, this isn't about
Maine or Chicago or Washington D.C. This is really just more about Northerners, defined
as anybody north of you, coming and telling you that in your area, people have no idea
what to do with snow. But of course, this wise person talking to you knows a lot,
has been through it all and can't help but look askance with maybe a little bit of a grin
at how sad the state of things is in this southern city.
And it makes me think, since this is, I hope, a pet peeve of yours, too, especially if you're
from the south, it makes you wonder, what if we reverse that? What if any time it got
hot or really sunny, those of us who were in southern areas hung out some around our
friends in the north and just talked about how they don't even know how to embrace the sun.
They have no real idea about how to enjoy the beach or how to get a good tan, they don't
really get out of doors much? What if all of us patronized our northern friends anytime
the weather flipped the opposite way? It's just a what if!
Alright, well, the actual topic this week
-- it's easy for me to procrastinate in the face of having to talk about my biggest losers
and just keep going off the rails and not tell you, because I don't want to talk about
my biggest losers. But I do. We do that on this podcast at least once a year, and it's
this podcast. What we're going to be doing is looking back over the last three years
and finding the six worst stock picks that I made in Motley Fool Rule Breakers
and Motley Fool Stock Advisor. I sure hope you're a member of at least one of those services. If not,
come join us at fool.com and sign up for Motley Fool Stock Advisor. That's our starter service
for so many of our members. It's our most popular, it's our longest-running, and in
many ways, our best-performing service. It's been around since 2002, we're now in our 17th year
of picking stocks every month, month in and month out, new picks and Best Buys
Now among our old picks. I sure hope you know the service and you're already subscribed.
The picks that I'm going over this week are picks that I've made as my monthly picks in
those services. It's embarrassing for me to think how bad these stocks have been.
After all, you're paying us money -- I sure hope you are. If you're a member at The Motley Fool,
you're paying us money, hoping to make money. The good news is, we do make money
more often than not, and we do beat the market. That's good. But, it's really sad to think
you'd be paying us money for us to give you advice that would lose you a substantial amount
of money. And for every one of these six stock picks, every one of them has been more than
cut in half over the last three years. And it's been a very good three years for the market.
Before I go into those six picks, I have three
primary points I like to make up front, especially if you're new to this podcast or new to investing
when we talk about losers. Let's go there. Point No. 1: this is normal. This is normal.
Losing happens all the time. In fact, studies have shown that if you look for stocks that
beat the market, you might think that half of the stocks in the stock market beat the
average and the other half, you'd think, would lose to the average. But the truth is,
it's actually skewed. A minority of stocks actually beat the stock market averages. They pull up
the losers, but there are far more losers to the market than winners to the market when
you look at broad studies of the stock market. That's interesting on its own. It's normal
to lose to the market when you pick a stock. That's, in a lot of ways, why people favor
index funds. They figure, "I can't find the winners. How could I possibly, especially
if I'm not interested in the subject or ever studied it? So, why wouldn't I just by the average?"
After all, the majority of stocks lose to the averages.
But we're not just talking here about losing to the averages, I'm talking about losing flat-out, like,
losing money. Going down from 0% into the negatives, losing 20%, 30%, 40%,
or, in the case of our six stocks this week, stocks that have all lost between 55% and
70% of their value inside the last three years. And yet I'm here to say, again, this is normal.
It's normal, especially if you take the Rule Breaker approach. After all, as I've many
times discussed before on this podcast, at fool.com, in our books, in press interviews,
I've talked about how we invest like venture capitalists. We take risks. We look our CEOs
in the eye and we say, "I like that person. I believe in him or her. I believe in the product."
It's kind of like what they do in Silicon Valley with startups. We don't focus
too much on the near-term results. We think much bigger and longer-term about what things
can grow into, what they can become, which caterpillars will become butterflies,
and we buy them in those caterpillar larval stages, and we hope that they become butterflies.
We hope that our flowers bloom. But we're used to many of them not, just like any venture capitalist.
Many venture capitalists comb through any number of ideas, invest in some of them,
lose with many of them, but find some winners, and the winners win so well
that they do well overall. That largely describes the Rule Breaker approach to investing.
This is normal. In fact, if you don't have a significant loser, if you've never bought
a stock that got cut in half for you -- well, on the one hand, I'm going to congratulate you,
but on the other hand, I'm going to wonder whether you're investing like a Rule Breaker,
whether you're taking the risks that you should to really find the best stocks. So, even though
this week, we're going to be combing through the laggards and the ugly, ugly dogs,
at the same time, you should know they're surrounded by some wonderful companies.
We'll talk a little bit about that this week, as well. And just know that it's normal to have a mix
of losers and winners. It's also normal in one other regard.
It's normal for The Motley Fool, it's normal for me, to talk about losing and losers. I realize
we live in a world where you'll rarely see somebody talk about how they blew it or lost
on CNBC or in the Wall Street Journal. Most people are talking about their winners.
The ads that you see are going to be all about what's winning and what's working.
People don't really want to talk much about their losers. But from day one, when we called this company,
The Motley Fool, I hope it made it clear to you, our customer or prospective customer,
that we're very comfortable saying, "Hey, I'm a Fool. I blew it. I didn't do that well."
It's just natural for us to fall on the ice as we're ice skating. It's part of
the game of learning how to invest, being willing to fall out there on the ice.
This is normal, point No. 1. Point No. 2. This one is particularly for
people who are new to the stock market, and this time of year, tapping into fool.com or
listening to this podcast. We probably have far more new people than usual because we
make our new year's resolutions, and a lot of us think about our health or our wealth
to kick off the new year. You might well have tapped in and found our podcast, and you might
be thinking, "Here's the one thing I don't want to do, I don't want to lose." When most
people come to The Motley Fool as new investors, the one thing they don't want to do with their
first stock is lose. They might pick one of my stocks. They'll listen to me and by one
of my stock picks, and it'll go down 7% that first week. And we'll see messages on our
discussion boards, people expressing worry out there on social media. "What do I do now?
I'm down 10%. Maybe I shouldn't have done this. What should I do?" They're reacting
to what the stock's done. The market is very volatile. The vicissitudes of the market aren't
worth paying much attention to from one day or week to the next. But people very naturally,
especially as new investors, really get involved in that up and down and in the day-to-day,
especially if it's down a little bit. That can be very disconcerting. So, point No. 2:
I don't want you to live in fear of losing. As has often been pointed out, psychologists
tell us that the pain of loss is three times the joy of gain. I'll say that again:
the pain of loss for human beings is three times the joy of gain. And yet, what's amazing about
the stock market is, the worst you can ever do -- and I've still never done this --
is go down 100%. The best you can do is kind of unlimited. We have stocks that have made
more than 100X their value, and they're still going up. What's amazing about this, psychologically,
is even though psychologists tell us that as a species, we fear loss three times more
than we enjoy gain, the stock market directly reverses that. The pain of loss is tiny compared
to the joy of gain. The gains that are earned over longer periods of time are infinitely
more satisfying numerically than the losses that we suffer.
Again, even though we're just going to focus on the losers this week, please know that
you shouldn't live in fear of those losers. You should expect them. They're a normal part
of life outside investing, and yes, they're also a normal part of investing.
Finally, point No. 3. I'll mention a few of these -- over these three years, we've had
some tremendous winners. There's not actually a single podcast that I do every year that
talks about my biggest winners. I mean, I love to thread discussion of what works about
investing in a lot of our podcasts on an annual basis. That's a big part of Rule Breaker Investing.
But truly, I never once focused on just what were the biggest winners and what can we learn
from those, because I think it's more fun to look at the biggest losers. I think we
all enjoy a good explosion in the cinema. It's more fun to do the bam, kapow, whack
moments for this podcast with our losers. But it's worth remembering that these losers
are surrounded by much more impressive winners. Alright, with that said, let's get started.
I've got six to go through. For each of these, I'm going to have a single lesson that I think
we can learn from each of these companies. I'm going to move through these fairly quickly
because I don't want to get too preoccupied on the individual stories and the implosions.
But I think there is something instructive to learn from each of these, so I'm going
to try to tease that out. Let's start off with No. 1. No. 1 is, appropriately enough,
this single worst stock pick that I have made personally in the last three years.
It was on June 28th, 2017. It was in
The Motley Fool Rule Breakers service. The company is trivago,
that meta search engine for travel bookings, finding the best hotel. It's a global company.
trivago I picked it at $20.95 on that fateful day in June. I'm sorry to say
that these days, as I tape this podcast on the afternoon of Tuesday, January 15th, trivago
has gone from $20.95 down to $6.22. Yep, that's down 70%.
What is a reflection or thought that I have about trivago -- other than, I should mention,
that a year ago, this one was also on the list. In fact, a year ago, trivago was my
fourth-biggest loser of the previous three years. So, yes, these recur sometimes from
one year to the next when they do very poorly, and then don't bounce back, which has been
the case for trivago. So, what's one lesson we can take away? Well, trivago is, these days,
the market cap is about $2 billion. It remains a fairly substantial company.
This is not one of those companies that's been so crushed that it's like a little tin can
that's been flattened into a micro-cap of a stock. We'll be having one of those
coming up shortly. No, this is still a fairly well-known, fairly substantial company.
But the problem that trivago has faced is that a lot of its business was coming from
two primary sources: paid count search listings and making money from the big players,
the two largest travel portals were more than half of trivago's business when we picked
this stock, when I picked this stock a couple of years ago: Expedia, which is a part owner
of trivago, and Priceline. A natural vulnerability for a business like this -- again, since it's
down 70%, you can imagine that this was over $5 billion as a company when I first picked
this stock. Now, it's down to just $2.2 billion. But the company began to suffer from these
two big dogs starting to say, "We're not actually going to pay you at the same rate because
we're such a substantial volume player for you." Both Expedia and Priceline started to
undercut themselves and pay lower and lower rates for search successes on trivago,
and that really hurt the company and continues to have hurt the company.
Some of my lessons are about the stocks themselves and about how we invest in those stocks,
but this is actually about the business and a business consideration. Lesson No. 1: recognize
the vulnerabilities of your companies. It is something that we recognized. This wasn't
a surprise to us, that trivago was very dependent on these two players. At one earlier stage
of our corporate history at The Motley Fool, we were very dependent on just a few big discount brokers,
that back when The Motley Fool was free and fool.com was a free site, ad-supported,
it really, really hurt. I remember back in the day, when a few of those discount brokers
that were sending lots of customers too said, in the horrible year of 2001, as the NASDAQ
lost over 60% of its value, they said, "We're not actually going to advertise on your site
because nobody's clicking any ads and we don't have money to advertise on your site."
That hurt us a lot. We were a company that was highly dependent on a few sources of revenue.
And that's kind of trivago, even though it's a much bigger company than The Motley Fool.
It's just something to be thinking about and conscious of when you're investing in stocks.
It isn't to say it never works. We picked trivago knowing that. And yet, in this case,
those companies began to lower their rates, and really hurt this company. So, that's a lesson
to learn from this $2.2 billion company today.
By the way, I should mention, a year ago, it had dropped from $20.95, as I mentioned,
in June of 2017, it had dropped to $7.31. One year later, it's now down to $6.22.
The stock has actually sold off not dramatically, but another 15% over the last year.
It's a reminder that we don't bottom-fish much at all at The Motley Fool. If you want to take
a second lesson away from this one, you won't see me re-recommending trivago anytime soon
to Motley Fool Rule Breakers members because when a company is down and out like this,
I need them to prove their way back into my confidence in them. That's how I handle companies
like trivago. And yes, often, they do just keep sputtering along. This stock is actually
down from where it was a year ago. Alright, what's my second biggest loser of
the last three years? Well it's Camping World Holdings, the RV company. Camping World Holdings,
also a Motley Fool Rule Breakers pick I picked on November 22nd of 2017, right around Thanksgiving
here in the U.S. It was at $41.37. Today, it's gone from $41 down to $13.83 as I quote
it doing this podcast. $41 down to $13, a drop of 67%. This one is not that different,
in some ways from trivago. It's also still worth more than $1 billion. It's a consumer
brand that perhaps you would recognize. trivago you might have used before on the internet
to book something. Some of us, those of us who are interested in recreational vehicles,
this is the big player, Camping World Holdings within the RV industry.
A problem for this company, several set in in 2018. One of them was that RV prices for
new vehicles started surprising us, and especially management at Camping World. They weren't
able to raise prices. Prices started to come down for new RVs. Not only that, but it got
worse for used RVs. So, the company started decelerating with its growth. Then, even worse,
accounting problems started cropping up. The company announced it had to restate some earnings,
and the market began to lose some trust, especially when it was discovered that management,
including the CEO, Marcus Lemonis, the pretty popular well-known CEO of this company, had sold a lot of stock.
A lawsuit then popped up in 2018, people accusing management of knowing
that the numbers weren't accurate and selling their stock in advance of that or before the
rest of us knew that, and then some of us are left holding the bag. So, it was a year
of problems for the core business, and then a lack of trust and a lack of performance
on the part of management. What is a lesson to take away from this one?
I'm going to have a little fun with this, but I'm going to say beware of CEO TV stars.
Marcus Lemonis is the star of CNBC's show The Profit, which is a show about saving small businesses.
He's the authority, he's the driving personality. He's a charismatic person.
Somebody in our initial writeup, when we recommended Camping World Holdings, we were saying,
"We like Marcus Lemonis, and you can watch him on CNBC." But maybe in retrospect, I should have
thought about Nick Woodman, the CEO and founder of GoPro, who also had become a TV
star a few years ago on Shark Tank. GoPro, which will not be featured on this year's
David's Biggest Losers, was in fact featured last year and I believe the year before because
GoPro was a horrible stock pick. I picked it at about $80 a share, it touched down somewhere
around $9, and these days, it's even a little bit lower than that. GoPro, Nick Woodman,
Shark Tank. Camping World Holdings, Marcus Lemonis, The Profit. I have a queasy and bad
feeling now when my CEOs end up spending a lot of time on TV. If Elon Musk starts to
launch a reality business TV show, or if Reed Hastings decides he's going to feature himself
on a new Netflix streaming series, if these things or anything like it happens, drop me a note,
remind me that I'm making this point to you, that I think we should be a little
leery of CEOs who are going on and spending a lot of time on TV. Because now, it's happened
a couple of times, these aresome of David's biggest losers.
Alright, before we get to losers No. 3 and No. 4, I feel like I want to bring back a
few of the inspirational quotes I had in this podcast a year ago. I was quoting football
coaches talking about winning and some good quotes about winning. Amidst all this losing,
I'm thinking of Lou Holtz, the longtime successful college football coach who said this,
"Winners embrace hard work. They love the discipline of it, the trade-off they're making to win.
Losers, on the other hand, see it as punishment, and that's the difference," said, Lou Holtz.
I feel like you and I are kind of winning right now because we're embracing the hard work
of combing through losers. We're loving the discipline of that. It's not easy to talk
about losing. But losers, on the other hand, just see this stuff as punishment. They don't
want to talk about it. They want to sweep it under the carpet or ignore it. Inspirational
Lou Holtz quote, let's keep moving. Alright, my biggest loser of the last three years
No. 3. This one, I have to say, the ticker symbol is fairly ironic,
because the ticker symbol is IQ. You'd think, if I had a higher IQ, I never would have picked IQ
when I did, but thereby hangs a tale. Let's talk a little bit about iQiyi, which is sometimes
called the "Netflix of China," probably a phrase that we used in our buy report that
we put out June of this past year. That's right, my biggest loser No. 3 I only picked
about seven months ago. The stock was at $40.51. IQ now has touched down from $40.51 down to $16.75,
and that's down 59% since June 14th just this past year.
Of all six of these companies, iQiyi, IQ, is the largest still standing. This company
still has a market cap of $12 billion. And in many ways, it's a successful and impressive company.
It's had a poor stock market run in the last seven months. But then again,
so has all of China. Chinese markets, I think, were down around 25% for the year of 2018.
We had a little bit of a disappointing year in the U.S., we were down single digits.
China lost a quarter of its value for its stock market in 2018. So, it's not surprising that
more volatile, higher-priced kinds of companies, with higher multiples like iQiyi, would get
especially badly hurt, and indeed it had. So, what's the lesson that I have for you
for No. 3 here? I'm going to say this: adding to winners works more often than you think.
I said thereby hangs a tale. Let me now briefly tell the tale I'm referring to. When I picked
iQiyi in June of 2018, I'd actually picked it two months before that. The June 2018 was
a re-recommendation of iQiyi. I first picked it in April of last year at $18. It had risen
from $18 to $40 in just two months. It's there, from that position at $40.51 down to $16.75 that
we find ourselves today. But the truth is, from the very first position, I picked it at $18,
and today it's right around $17, so it's down, but not that badly. What I did,
if you heard me right there, the stock more than doubled in just two months and I re-recommended
it again. And while now, I look back with some regret, I'm here to say that that strategy
is something that I regularly do, and I'm not dissuaded by this example from doing it again.
In fact, let me just look at Motley Fool Stock Advisor
over the last three years right now. I'm going to give you four companies.
Texas Roadhouse, Illumina, Match Group, and Okta. All four of those companies, Texas Roadhouse,
Illumina, Match Group and Okta, all four were re-recommended within the last three years.
And each of those four respectively is up 95%, 99%, 193% -- thank you, Match Group -- and
68%. And those are all bigger winners, for the most part, than any of the losers that
I'm telling you about today. So, the very strategy by which iQiyi appears as my third
biggest loser of the last three years, which in fact, it has been, from that June position,
that very strategy has also led to many of my biggest winners. I haven't even talked
about Shopify, which I'll mention a little bit later this podcast. Those are just four
companies from Stock Advisor alone. So, lesson No. 3, ironic in the face of a dog stock pick,
which is what iQiyi was now in retrospect in June of last year. Ironically, the lesson
here is adding to winner works more often than you think. I don't think we should be
dissuaded by a result like this to think we shouldn't do that. I'm going to keep doing it,
even when it sometimes hurts. Alright, my biggest loser No. 4.
The company name is Impinj, ticker PI. I first picked Impinj for Motley Fool Rule Breakers on December 21st,
of 2016, a few days before Christmas. Not a very good stock to put under the tree
that particular year because at the time, it was at $38.33. Today, it's down at $16 a share.
It's down 58%. What is a reflection that I have about Impinj?
This is a company that has developed a platform for RFID technology, those RFID chips.
You see those tags put on everything from packages to devices to keep track of inventory management,
tracking where things are going. Maybe at your corporation, you have these little tags
placed underneath the chairs so you can figure out where all the chairs are in the conference rooms.
There are multitudinous ways of using this technology. This company has built out
a platform to help you as an IT manager manage all of your assets. But this company,
now having lost 58% of its value in the last two-plus years, is down to just a market cap of only
about $340 million. Lesson No. 4 is: when you have a company get
crushed down to be that small, I would typically suggest that you refuse to add to those positions.
Ignore crushed micro-caps. Not only is this stock pick of mine in Motley Fool Rule Breakers,
but I also personally bought it for one of my children's accounts. I've taken this on
the chin just as much as anybody else, and I'm not looking to add to that position.
The reason I'm saying that and highlighting this is because a lot of people, when they
see a stock go from $38 down to $16, they start thinking, "Well, I liked it at $38.
$16, heck, if it just doubles back to $32, it's still below my costs, but it would be
a double from here." Sometimes people get excited when companies lose this much value.
They start thinking -- this isn't a penny stock, but this is really prevalent in penny
stock thinking -- they start thinking, "Yeah, it wouldn't take a lot to double from here.
Maybe I should buy some more." While that can be true, and we have had some all-star
performers bounce back -- in fact, two years ago, when I did David's Biggest Losers: Volume 2,
I highlighted RH, also known as Restoration Hardware. The stock had dropped from $93 down
to $30, which was a huge loser two years ago. Within the following year, it bounced back
from $30 to $95. Today, I'm happy to say it's at $127.50, up four times from when I did
David's Biggest Losers: Volume 2 two years ago this month. So, it is possible
that some of these companies, especially ones that are more substantial companies, with maybe a brand
that people recognize, they probably have a better bounce-back opportunity than some
of the others. I'll give another quick example. A year ago on this podcast, David's Biggest
Losers: Volume 3, Under Armour was on the list. Under Armour had dropped from $39 down to $14.
Well, over the last year, it's up 29% from where it was a year ago.
Some of these bounce back. In my experience, it's probably the bigger, more branded companies
that do that, not the Impinjs of the world. Now, I still hold my Impinj shares. It's still
a part of our active Rule Breakers service. I sure hope it comes back. But I would typically,
lesson No. 4, ignore these crushed companies that get down to Micro-Capville.
I do want to point out one other quick thing about Impinj before we go to No. 5. That is
that this company has had decelerating sales growth. When we first picked it back in middle
of 2016, sales were growing about 50% year over year. From the previous year's quarter
to that quarter, it was up 50%. Then, the following quarter, the end of 2016,
that dropped to 49% year over year. The following quarter throughout 2017, it went 47%. The next one
was 31% growth. The next one was 5% growth. And then, six quarters or so after I'd first
recommended it, sales actually decelerated to the negative, down 20% from that quarter
a year ago. So, especially when you see sales growth decelerating and going negative for
smaller-cap companies, that's a really bad sign. Of course, not something I was expecting at all.
Very disappointing. Makes me wonder about the RFID technology, period. We probably
need to reassess this. Anyway, that's where Impinj is, my fourth biggest loser with a
couple of thoughts you can take away about Impinj.
To summarize again, ignore these crushed companies once they get to be so small. Two, plummeting sales,
an especially bad sign, and an especially bad sign for small companies.
Alright, before our final two, how about another inspirational football coach quote?
Yep, I feel it coming on. Tony Dungy the very talented NFL coach, who these days, football fans will know,
is an analyst on TV analyzing the game. Tony Dungy once said, "I just think winners win.
And guys who won all the way through high school and college, the best player at
every level, they have a way of making things happen and winning games." One of my secondary
themes for this podcast throughout 2018 was somewhat tongue-in-cheek at times, the phrase
"winners win." And now I realize, I first brought this quote out to you a year ago on
this podcast, and I think that influenced me. I'm now looking backwards and realizing
it was Tony Dungy who got me on the whole winners win track. So, thank you, Tony!
I agree with you. That's why it's a good reminder after we talk about a company like Impinj, which,
frankly, has been losing. So often, the momentum of winning and losing
continues longer than most people think. Often, things win for good reasons, underlying reasons
that continue to happen. For example, if someone's a great athlete, and that person has a great
experience and keeps winning, they feel inspired by their fans to keep working hard, they know
how to win because they've won before, so that helps them win more in future.
Factors start to show up to propel winners into more and more winning positions. Similarly for
these losers that we're talking about in this podcast, there may well be factors in play
that cause things to make it harder for them to turn that losing around and to win.
Just a thought. Thank you, Tony Dungy! OK, biggest loser No. 5. Of all the companies
on this list, I think this is probably the best-known. The company's market cap today
is about $1.5 billion. I first picked it on May 25th, 2016, at $14.06. The stock is down
to $6 today, from $14 to $6. The company is Fitbit. The ticker symbol is FIT. Yep,
this stock did appear on my last year's list. Again, I keep these lists for the preceding three years,
so if a company has a really bad first year, it'll come back for a couple of years
on this annual losers podcast that I do. But a fourth year, it won't show up. It'll drop off
the list because I'm only looking backwards three years. I will point out, when I presented
Fitbit a year ago, it was down to $5.67. It's actually up to $6 now. It's up a little bit
after a down year for the stock market. What's a good lesson about Fitbit? I know
a lot of people wear a Fitbit. They appreciate how it helps them track their steps; in some cases,
perhaps their sleep, other aspects of their health. Being more attendant to health data
is definitely one of the micro trends worth paying attention to. When I had Mark Penn
on this podcast doing micro trends in my Authors in August series last August,
we talked in part about self-data lovers, a micro trend. You and me keeping track of our steps
and a lot of other things through our iPhone these days. Fitbit very much fits within that micro trend.
But I think the lesson here is that hardware is hard,
especially when you're competing with Apple. So much of the world is moving
toward becoming software. A lot of the devices that we used to carry around -- for example,
like a watch or a GPS, or how about a camera? That's a much better example. My talented producer,
Rick Engdahl, who's a wonderful photographer, quickly furnished me that idea.
There are a lot of other examples of hardware that an iPhone these days has replaced. Frankly,
Fitbit could be added to that list. Fitbit's not the only company operating in the space.
It just happens to have been the leader before Apple when its Apple Watch showed up.
Hardware can be a hard business. I've always appreciated that Fitbit has
a lot of data. I've always hoped that that would be a good reason to own the stock. If you've
used a Fitbit, then there's a lot of data that Fitbit has. It can get you data insights
about your own data. It can also aggregate populations of data and create lots of value,
I had hoped. Turns out, I wasn't very right, at least so far, about Fitbit. But competing
against Apple is a big reason I think that Fitbit has been such an underperformer.
I also want to point out two other quick points about this stock itself. The first is that
this stock went down fast and hard. That can happen, especially with small-cap companies.
In October of 2016, Fitbit was at $16 a share. It looked like it had been a good stock pick.
We picked it in May. It had gone from $14 up to $16 just half a year later. And then,
from October 2016, four months later, to January 2017, it went from $16 to $6. Ouch!
It lost more than half its value in just four months. That's micro lesson No. 1 just about this stock:
these small-caps can go down hard and fast.
Lesson No. 2: sometimes, it takes them a long time to come back. Now, two years later,
I just mentioned that in January 2017, it was at $6, guess where it is here in January 2019?
That's right, I already said it, it's at $6. For two years now, in a very tight band,
Fitbit has just kind of bounced around, $5, $6, $5, $6. It's been dead money in a very good two years
for the stock market, albeit a very poor fourth quarter of 2018 and kind of a
ho-hum year overall, 2018. But Fitbit just kind of has sat there and done very little.
That excitement that you might have as a well-known company like Fitbit has a stock drop into
the single digits, it hasn't been rewarded. That excitement has only consistently been
disappointed by a company that's having a hard time pulling itself up out of the morass
of underperformance. Again, I hope for good things for Fitbit.
Maybe it'll be one of those bounce-back companies we talk about a year or two from now.
But that's not usually where I put my new money. I don't like to throw, as the old saw goes,
good money after bad. So, there's a thought, a few thoughts, from Fitbit.
Finally, stock No. 6, my sixth biggest loser of the last three years. Yep we've actually
already talked about this one. This is one of those that I recommended and re-recommended,
and it is Camping World Holdings. The sixth worst performance
comes from my pick on December 21st, 2016.
Discerning listeners will note that two of the six worst picks I made in
the last three years were from the same issue of Motley Fool Rule Breakers, December 21st,
2016 -- Impinj and this selection of Camping World Holdings.
Now, I already covered Camping World earlier. This is another case where I picked it in
December 2016, it went up some. I initially picked it at $30. It went up. I then added
some a year later at $41 in November 2017. But since, the stock has come down from
$41 down to $13. Both positions, the one initiated at $30 and the one initiated higher at $41
are badly in the red. This one is down 55%, my sixth worst loser.
We've already talked about Camping World Holdings. But in maybe a lovely and sadly ironic way,
drawing a lesson from this last one actually brings together almost all the other lessons
I've shared with you this week. Beware of CEOs who are TV show stars. That's true of
this sixth position as well. Marcus Lemonis, talked about that earlier. Companies with
accounting problems. Yep, that's also been true. That was true of Impinj, it had some problems.
I mentioned Camping World had some accounting problems in the last year, as well.
Adding two winners works a lot. Here, I added to a winner. It's done horribly, but I mentioned earlier,
all of the wonderful winners we have added to that have far outperformed this.
I should mention right now Shopify. Shopify is my No. 1 winner that I've added to in the
last three years. The winner that I added to is up 469% on its own, Shopify within the
last three years. Yep, it went from a lower position to a higher one, then I re-recommended there,
and that is up 469%. Adding to winners works more often than you think. And finally, yep,
Camping World is kind of a hardware company. Hardware is hard. RVs, big, heavy vehicles
to build, to sell, and to maintain. Maybe in sort of an elegant way, this final pic
brings together many of the things we've talked about this week on
David's Biggest Losers: Volume 4. Alright, there you have it! Thank you for
slogging through the utter mediocrity and disappointment with me over the time that
we've had together this week. I never really enjoy doing this, but I still try to make
the best of it. I'm going to add in one more inspirational quote from a football coach
to close before I talk about what we're going to do next week. This quote comes from the
former Washington Redskins great head coach Joe Gibbs, who won at least one Super Bowl,
I think was a couple of Super Bowls for the Washington Redskins back in the day.
Here's what Joe Gibbs, the Redskins coach of yore, said. He said, "Failures are expected by losers,
ignored by winners." While in some ways, that contradicts what I said earlier -- because
I've said you should expect failures. That's part of investing. Losing is part of investing.
But the really key part is what he said secondarily in that quote. Failures are expected by losers,
ignored by winners. I've tried to emphasize that a few times in this podcast and, indeed,
other podcasts in the past. I try to learn as many lessons as I can, not from my losers,
but from my winners. I've had occasion to mention Shopify and a few others earlier in
this podcast, and of course many other podcasts in 2018. We talked about what works. I think
it's by observing the things that work in life, not just in investing but in life,
that we truly can learn our greatest lesson. It might sound irresponsible to simply ignore failure,
to look past it. But once you understand the math of investing, and that a good winner
can wipe out all of your losers -- forget about that three times the joy of gain pain quotient, nope.
Failures are expected by losers, Joe Gibbs said, ignored by winners. Food for thought.
Alright, speaking of picking stocks,
that's what we're going to be doing next week. Every 10 weeks on the show, it's our five-stock sampler.
I pick five stocks from our services, put them right out there in front of you,
and say, "I think they're going to beat the market going forward." I'm going to introduce
my first five-stock sampler for you, my noble Rule Breaker Investing listeners, next week.
In the meantime, one final quote. This one's from Vince Lombardi. Food for thought
for you in the week ahead. "Winners never quit and quitters never win."
As always, people on this program may have interest in the stocks they talk about,
and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks
based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.
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