3 Years In, Is the "Winners for a Thinking World" Stock Sampler Winning?

With each one, he provides a time frame -- a minimum number of years he'd say you should hold on -- and there's pretty much always a clever theme. But while those two things change, one point is constant: When the anniversary of each sampler arrives, he tallies up the share prices, talks a bit about what's moved them, and scores those mini-portfolios against the S&P 500 index. Because win or lose, Fools keep honest score.

Three years ago this month, it was Michael Bloomberg who provided the inspiration for the theme: His 2016 commencement address at the University of Michigan got Gardner pondering the idea that humanity is exiting the Industrial Age and entering the Information Age, and considering what companies were best poised to benefit. In this segment of the Rule Breaker Investing podcast, he'll tell you how they're doing.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

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This video was recorded on May 8, 2019.

David Gardner: Well, Emily, as I've already mentioned, you're here to help us review five stocks picked three years ago this week, "Five Winners in a Thinking World." Now, when I did this list of stocks on May 4th of 2016, I was saying at the time, we're going to be picking these for three years. Now, everything we do really is for three-plus years. But if we kept holding all of these five-stock samplers, this podcast would be nothing but reviews one week after another. So this is, in fact, Emily, the end of covering Five Winners in a Thinking World. This is their three-year birthday. Emily, three years ago, May 4th, 2016. What were you doing?

Emily Flippen: I think I was really excited because I just got an offer from The Motley Fool to come in for an internship. I don't think I'd quite yet started. But I know that I got it and I was really pumped.

Gardner: That's awesome! I'm so glad to know that's what was happening three years ago this week and your life. I've already shared a little bit about mine. So I think we can now move on from us to our stocks. And we've got five of them. And for each of these, I'll be reviewing briefly what the stock was, where it was, and where it is today. The numbers part of it. And then Emily, I've asked you, since the purpose of The Motley Fool is to make the world smarter, happier and richer, I would love it if you could make us smarter and happier about each of these five stocks. So maybe make us smarter, reflect on the three years, and pick out maybe something that really says why this stock did well or not. And then, how about a fun fact, something that makes us happier? And then we'll find out at the end whether these stocks made us richer or not as we do the results. Sounds good?

Flippen: That sounds great!

Gardner: Let's do it! OK. The first stock up three years ago this week was Celgene (NASDAQ: CELG). The ticker symbol is CELG. This is a company that on that day was just below $101. It was $100.90 a share. Today as we tape this podcast the afternoon of Tuesday, May 7th, it's at about, I'm sorry to say, $95 a share. Celgene is down 5.5% over these three years. Here's what really hurts for stock market investors who may have followed my advice three years ago: the market is up exactly 40%. We're taping on a date pretty bad, the NASDAQ's down about 2% today. It's 2% less. But still up 40% over the last three years. So this stock is 46% behind the market. Emily, this stock has not made us richer, but could you make us smarter and happier about Celgene?

Flippen: I think Celgene, regardless of whether or not you're an investor who may be bought in and lost about 5% there, has made us smarter. It's not just because of all the research that they've done into their cancer treatment drugs. I think it's the way that it really opened up the biopharmaceutical industry. I mean, it was kind of the first play that was integrated. It had so many different components to its business. And for a long time, a lot of investors' first step into biopharmaceuticals. Now it feels like every other week in Rule Breakers, at least, we see a different company coming out that's doing something revolutionary and amazing in the space of biopharmaceutical. So in a way, it was an anchor for a lot of investors when looking at investing in the biopharmaceuticals space. And just because Celgene maybe didn't perform the best, I know there are a handful of other companies that came after it, trying to get after very similar things, in the way that they conduct research and create products.

I think that ultimately, we can all come out of it a little bit smarter.

Gardner: I appreciate that point very much. It is, I guess, in a way, even though it is a loser, it's consoling to know that it did make the world smarter. And apparently it made Bristol-Myers pretty interested because Celgene, part of the reason you're using the past tense, Emily, is that Bristol-Myers contracted to buy this company out. That's something that happened just a few months ago. The price is, well, around where it is right now, which is why the stock's trading there. It's a $74 billion buyout, one of the bigger buyouts in pharma history. Celgene didn't exactly fully, in a way, last these three years. It did decline those first couple, so we were sitting on a loser. It got bought out at a premium, but still below where I talked about it three years ago this week.

I'm a little sad about Celgene for a few different reasons. I really appreciate all the inroads they've made to go after blood cancer. It's great work, and it's obviously very valuable. About $75 billion or so, Bristol-Myers says. But Emily, can you make me a little happier about Celgene?

Flippen: Well, there's a lot of things to be happy about for Celgene. Going beyond their products, which I'm sure have made a lot of people happier who had the unfortunate exposure to things like but cancer, whether themselves or through their family or loved ones, Celgene as a business actually makes me happy. It's because it's not well known that Celgene has continuously been ranked as one of the best places to work internationally, especially in the biopharmaceutical industry. They have an extremely robust CSR program --

Gardner: Corporate social responsibility.

Flippen: Exactly. They really see themselves not as a company that's out there to make money even though clearly they are. They see their bigger obligation to humanity, which is really saying something in the environment that we're seeing today with a lot of these companies, which we now are seeing dragged in the water because they're preventing treatment from being sent out to people. The fact that Celgene has taken the high road in a lot of regards is really nice.

Gardner: Alright, well, thank you! That was stock No. 1. Great to hear! Emily, let's go to stock No. 2. ticker symbol as well known to many longtime investors and Rule Breaker Investing listeners. The ticker symbol is DIS. The company is Disney (NYSE: DIS). A company that has a ton of properties, data. A lot of our thinking, in many ways, is driven by a company like Disney. I've noticed some people have been focused on the Avengers: Endgame. When we talk about a thinking world, a lot of people are thinking just about the biggest box office hit of all time, which is still in early days for Disney. But of course, it's about a lot more, not just superheroes, but businesses than that.

Walt Disney was at $103.67 three years ago this week. As we do this podcast, I have it just over $134 a share. Hey, great news, right? Up 29.5%, we'll round that to 30%. Bad news, though, the market up 40%. Disney up 30%. So, Five Winners in a Thinking World, so far, we've got two losers. Emily, make us smarter about Disney.

Flippen: Well, it's a good lesson to be learned from Disney that sometimes the best run companies, doing the best things in the world that you love the most, may not outperform the market. It's a reminder that smart investors take that three years is not a long enough time horizon. That's purely because I don't think there's a single person looking at Disney in the state that it's in today and thinks, "This isn't going to continue to do amazing things in the future." Whether you bought in three years ago, or you're buying in today, I mean, this is such a well-run company. We can all be a little bit smarter to not be latched onto these historical biases, this small underperformance when in reality, you see the opportunity clearly before your eyes with a company like Disney.

Gardner: Thank you! And you're right. And I'm so glad you emphasize that. This five-stock sampler, Five Winners in a Thinking World, just because we're ending it this week, because that's how long the game was being played on this podcast over the last three years, doesn't mean that we don't still love these companies, admire them, and think great things about them. Had we done this the three or so years before, I bet Disney would have been a winner over those three years. I sure hope it'll be a winner over the next three years. But by no means does our interest or belief in any of these stocks end with this podcast. Quite the opposite. They all remain active recommendations in Motley Fool Stock Advisor or Motley Fool Rule Breakers.

I think in a lot of ways, Disney makes us happier. I think that's at the heart of its brand. Emily, can you make us a little happier about Disney?

Flippen: It's so hard to choose one thing about Disney that can make me or an investor, anybody in the world, a little bit happier. But I keep going back to Disney+. Maybe that's just because it's very topical right now. I don't have kids. But I imagine if I was a parent to young kids, there'd be nothing in this world that made me happier than Disney+. To be able to have an essentially unlimited supply of family friendly content that you can plop them down in front of and feel totally comfortable with that decision... I mean, it makes the project a little bit into that state. But if I were a parent, I would feel very happy.

Gardner: Well, certainly the stock market has not failed to notice that Disney+ will be coming out later this year. It's not yet a present reality. But in some ways, Disney's stock reacted really positively in its most recent earnings report. I think the stock popped over 10% in a single day as Bob Iger began to talk more about Disney+. Everybody knows it's coming. Yes, I still love Netflix too. I don't think these things are opposed. It's a thinking world, and these kinds of companies and brands all do well in my experience. It'll be really interesting to watch. Thank you for highlighting Disney+.

Alright, Emily, stock No. 3. Now, spoiler alert, things are about to get better with this five-stock sampler. Because after all, the purpose of Motley Fool, Emily, is to make the world smarter, happier, and what?

Flippen: Richer!

Gardner: Let's hope so! This company, I can say, has done so. This is a market-beater, company No. 3. The ticker symbol is SPLK. The company is Splunk (NASDAQ: SPLK). Three years ago this week, it was at $48.87. At the close on May 4th, really happy to let you all know that it's at about $130 a share right now as we talk. Just short of $130 a share. I have it then up 166%. The stock market up 40%, so we can put a big plus 126% in the win column. 126 points ahead of the S&P 500. And if you compare the previous two stocks, which were a minus 46, reviewing quickly, a minus 46 and a minus 10, and you do the math with me, 126 minus 56 looks like a plus 70 right now as we look over these three stocks.

Emily, make us smarter about what's been happening over these last three years with Splunk.

Flippen: Well, Splunk has made all of us aware, gave us information to what a zettabyte is. David, do you know what is a zettabyte is?

Gardner: I'm going to say it's a ton of data, but that's about as far as I can go.

Flippen: A zettabyte is one billion terabytes. One terabyte is 1,000 gigabytes. So you can get an idea about how Splunk is making us smarter. Splunk sees the 44 zettabytes, which I don't even know how to do that math quickly in my head, this huge amount of data.

Gardner: I'm glad you know it's 44, not 40, no round number here.

Flippen: Somebody at Splunk found that number, with all the universe of information that we have out in the world, and they're making sense of it. That makes us all a little bit smarter.

Gardner: So you're saying, Emily, that the world's data at this point equals 44 zettabytes?

Flippen: By 2020, the world's information will equal 44 zettabytes.

Gardner: OK, great! You know, Splunk, I'm going to supplement your smarter lesson with a little bit more smarter. This was kind of interesting to note. Splunk had been a losing stock the one year leading up to when I picked it three years ago. The three years leading up to it, it had also been a loser stock. It had IPO-ed not that far before. It had a big initial IPO. But then it just dawdled for a while. So, I'm so happy to think that we did pick it three years ago this week, because it's gone from basically about $50 to about $130 over these three years, and shows that often, the winners win out there. And it is a winning company.

Thank you for making us smarter! How about, make us a little happier when we think about Splunk?

Flippen: Splunk is subtle happiness. It's that happiness that you feel when you wake up in the morning and you see a nice sunrise, you see the birds tweeting. You don't know exactly what it is, but it makes you happy. Let me name a couple of companies that maybe conduct this happiness for you, because they're all Splunk customers. Splunk makes all these customers run and make you happy. Do you like Yelp?

Gardner: I do like Yelp!

Flippen: Zillow (NASDAQ: Z) (NASDAQ: ZG)?

Gardner: Sure!

Flippen: Groupon?

Gardner: I know it.

Flippen: Coke?

Gardner: Coke makes me happier than Groupon, personally. I'm referring to Coca-Cola.

Flippen: Yes, Coca-Cola. The only thing that's important to me is the fact they help Domino's run their information system.

Gardner: I transacted with Domino's last night.

Flippen: And that's a vital part of my everyday life, for better or worse. So, Splunk, I like to think, makes a lot of people happier without them quite realizing that Splunk is in fact making them happier.

Gardner: Love it! Yeah, it's a great company! Of course, we like it a lot for the next three years, but we're going to stop tracking it with this five-stock sampler as of this podcast. That leaves us with two final stocks to talk about, Emily. One thing I want to say about these two companies is they both have silly names. There's Splunk and the next two. Since we named our company The Motley Fool, an inherently silly name, especially in the area of finance, you can see that I'm probably a little bit of a sucker for companies that have silly names. So Splunk, probably playing into my subconscious, part of the reason I picked it three years ago or years before that for Rule Breakers, is because I like the silly. I like the happy and silly. So, let's next go to some more silly. Stock No. 4, the ticker symbol, tell me if you can guess the company name from this ticker symbol: TWTR. I think a lot of us, even if you're not an investor, maybe you can guess along with me. Twitter (NYSE: TWTR). Stock No. 4 was Twitter. Three years ago this week, Twitter was just below $15 a share. $14.84. It should be noted that it had lost 70% of its value in the years leading up to our picking it three years ago this week. It had lost 70% of its value, down to $14.84. As we speak now, it's at about $38.50. Twitter, therefore, is up 160%. Again, the stock market, up 40% over these three years. So that's up 120%, making me really happy that we found some winners in this thinking world.

Emily, looking back over three years now, thinking big picture about Twitter, make us smarter.

Flippen: Well, there's so many ways that Twitter makes everybody a little bit smarter. That might sound counterintuitive right now, especially with all the noise we hear about these fake accounts, information privacy. But Twitter is doing something that's really revolutionizing the way that we learn and consume information. It's democratizing information. It's making people smarter by increasing responsibility, by increasing accessibility. And that, to me, is probably the most strong value proposition at a company like Twitter. This access to information, it's unprecedented. Even in the internet age, having a Twitter, using a Twitter, accessing people over Twitter, that type of level has really never been seen before.

Gardner: I agree. And certainly many of us who love a celebrity or an athlete, we can follow them on Twitter. And really, in a lot of ways, we might in some cases be following their social media manager. Some others are more authentic than that. Side note, I'm a small presence on Twitter, but I just tweet myself. I mean, there are no social media managers here guiding Motley Fool advisors' accounts. That said, whether it's a celebrity, an athlete, or how about the authors that I referenced earlier this podcast? James Clear, Atomic Habits. I follow him on Twitter. I follow David Allen on Twitter. I follow Warren Berger, the author of The Book of Beautiful Questions on Twitter. So yeah, we can follow the people that interest us and hear how they're thinking about the world. Definitely making us think-ier in a thinking world.

Emily, how about a fun fact? Something to make us happier about Twitter?

Flippen: I actually don't have a Twitter account. I really should.

Gardner: That's a fun fact! Why not?

Flippen: It is a fun fact. I'm not sure if that makes anybody happier. But what will make people happier, and what made me happier, even though I don't have a Twitter account, is last week seeing MercadoLibre have a spiffy pop, and seeing the number of people that both tweeted at The Motley Fool, tweeted at you, all of these happy investors, who had bought MercadoLibre's stock on our recommendation, having a spiffy pop last week. Twitter made that accessible, and that made me happy.

Gardner: That made me happy, too! I really appreciate you pointing that out. I'd forgotten to thank all of our listeners and those who did tweet out to @RBIPodcast and @TheMotleyFool, a much bigger Twitter account for The Motley Fool, and reflected on their happiness and joy around watching MercadoLibre, which I think went up about 21% or so that day in one day. But for those of us who've bought and held it a long time, it's not in this five-stock sampler, it's been in some others, but more importantly, it's been a part of Rule Breakers for more than a decade now. And we all made more money in that one day than we had paid for it way back when. That's what a spiffy pop is, a term that I want every Rule Breaker investor to know. Something we talk about probably not enough on this show. But thank you for pointing out that spiffy pop. It was a very happy day.

Flippen: It was.

Gardner: And it was made happier by Twitter. You're absolutely right, Emily, because otherwise I wouldn't have heard that, I wouldn't have known that. And so yeah, that makes me happier! OK, good!

Well, we're going to get to stock No. 5 now, and I'm going to pre-empt any suspense here. I'm going to let you know upfront that this stock also lost to the market. It was a disappointment. But good news, take this five-stock sampler together and we crushed the market once again with this five-stock sampler. Even more meaningful since this is the last time we'll ever talk about it. We're waving goodbye to it. We're sun-setting Five Winners in a Thinking World. Stock No. 5 was one of three losers in a thinking world. The stock was still up. The ticker symbol is Z, and the company, we've already talked about a little bit is, Zillow, another really silly name like Splunk and Twitter and The Motley Fool. Zillow three years ago this week was just over $28 a share. It's now $33.63 as we tape. It's up 20%. The market is up 40% so it's a minus 20. Right at the end, I'll give the final numerical take on the overall performance of this five-stock sampler, but let's focus on Zillow for a sec. Emily, we talk about Zillow some on the Rule Breakers team. It's one of our probably more widely owned Rule Breakers. It's a stock that I own. I'm obviously a little disappointed that it's been an underperformer over these last three years. Why?

Flippen: Zillow had a bit of a challenge, you could say, with its business model, particularly making money off of its business model. But Zillow recently has been a stock of a little bit more controversy here at The Motley Fool because they're changing their business model. They're changing their business model to make home buying a little bit easier. And so while many people are rubbed the wrong way by that, and I will be the first one to say that I was one of those people, a number of people here see this outdated, dying industry and they think, "Wow, Zillow could really do something! There's a lot of potential there!"

Gardner: Because Zillow's business when we picked the stock three years ago was largely based on realtors, real estate professionals, taking out ads, advertising themselves in their zip code for the houses that you might be looking to buy. That was the bread and butter. Definitely a data-heavy company. I'm not sure any of those full zettabytes are Zillow's, but if you think about all the data, pricing and having specifications around all the properties, just residential properties here in the United States, for one, that's a ton of data. It was more a data business. But as you point out, Emily, this is a company that is now buying houses themselves and becoming a real estate owning company. That's a real shift in the business model.

Flippen: You could say that it's made us smarter by showing that businesses can change. They continue to change. As long as you have a long-term outlook, there's always going to be value behind what these businesses do, whether that be collect data or take out advertisements. You can ever discount a business because the ability to change and innovate is always going to be inherent. But the one way that I think Zillow has really made someone I know smarter, is our recent new hire on the candidate side of our investing team, Joey, who used Zillow to look at and eventually purchase a house here in the area. Almost bought a house, but looked on Trulia, a Zillow platform, and saw the crime rates in one of the areas he was looking. Having never visited the area before, didn't know anything about the crime rates. He was immediately smarter. Immediately thought, "I don't think I want to buy that house anymore." And because of Zillow, because of their platforms, he was able to get a house he loves now that he never, before buying, even stepped into.

Gardner: That's great example! I'm so happy to know that Joey found a house more to his liking. And I think he did. As a new employee, I think he's moved into the area, which I think means Joey's around here for a while.

Flippen: Yeah, not going anywhere!

Gardner: Speaking of change, I also want to point out that Rich Barton has now returned to become the CEO of Zillow, another change, having replaced Spencer Rascoff, who was running the company last few years somewhat successfully, especially early on, but not as successfully. Obviously, a market loser here over the last three years. I think it's very promising to have Rich Barton back. We'll see how things play out from here.

OK, so I hope we made our listeners a little smarter about Zillow. It's a stock that I still favor and own. And Emily, you're not as big a fan, which is fine; it takes two to make a market. We'll see. You were certainly right the last three years. I wish I'd listened to you as a summer intern, summer 2016, when you were probably talking daggers about Zillow. But, no, more seriously, how about a fun fact? Make us happier about, in this case, current underperformer?

Flippen: Well, Rich Barton has one job, and he says he's going to make your life happier by making home buying and home selling easier. If he's able to succeed on that, I think all of us will be a little bit happier. The process as it is today is complicated, long, and full of unnecessary fees. If there's a way that Zillow and Rich Barton, with all of his amazing vision, can come in and smooth that process, maybe three years from today, we're all happier because of Zillow.

Gardner: Well, I sure hope so! In many cases, whether we recommend our own stock or not, we're wanting better things for the world in which we all live. Competition in capitalism, sometimes viewed as negative, but I think it's pretty great. I'm glad that Redfin exists, or Trulia used to compete with Zillow. Competition often forces people to become better and usually the winners win in the marketplace, and we all win as investors of these companies. Well, thank you Emily, for joining in!

Let's just talk up the final numbers for this set of five stocks, this five-stock sampler, Five Winners in a Thinking World, dated May 4th, 2016. You can go back and listen again to that original show where I picked the stocks and share my thinking. But I'm really happy to say as a group, they're up 74% on average, the market up 40% on average. Therefore, plus 34% per stock. 74% against 40%. I would say even though some of them weren't winners, we really did win on behalf of our listeners with Five Winners in a Thinking World.

David Gardner owns shares of MercadoLibre, Netflix, Walt Disney, Zillow Group (A shares), and Zillow Group (C shares). Emily Flippen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Celgene, MercadoLibre, Netflix, Splunk, Twitter, Walt Disney, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends Redfin and Yelp. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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