Our Biggest Regret

0:04Don't go on a path to sell destruction. Motley Fool Money starts now.

0:20I'm Rick Munarriz and today I'm joined by two of my favorite voices in Fooldom, Jason Hall, and joining us for Hidden Gems, Lou Whiteman. We're going to take a look at some stocks that we believe will 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. We spend a lot of time discussing meet-cutes 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?

0:50Mine 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.

0:58Lou Whiteman:So I'm a terrible person to ask this because it's so boring, Rick. Not because I'm brilliant, not because I don't have terrible mistakes, but rather, I don't tend to dabble in the early stage companies that get these great 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. But I do have a lot of regrets, and I do think there's 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 up like 200 % since then.

1:34Lou Whiteman: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, 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 guiding principle. I basically got bored with them, and I saw something shinier and flashier. And that is the worst reason to sell. Not dramatic declines, nothing that, like, this just eats at me because this is the danger of acting on the whim instead of with real intent.

2:11Lou Whiteman:So every time I look at those, I get a little sad inside. A lot of real-world relationships end for the same reason, Lou. Jason, what's on your plate?

2:20Rick Munarriz:I could go with one that Lou mentioned. I could go with Tesla. I bought, I believe, in around 2016. I sold a couple of years later for a decent little profit. Stock's up 2 ,000 % since I old. Rule Breaker investors that follow the Rule Breaker's portfolio have enjoyed 16 ,000 % in wins owning Tesla. Now, clearly a financial mistake, but not sure that I regret it because I didn't solve for concerns about the business as much as just concerns about Elon 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.

2:56Rick Munarriz:I could also go with selling half of my NVIDIA stake about two years ago. Stock's up 446%, and it's never been below the price that I sold. I 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. And that was selling Microsoft. And it was right as Steve Ballmer was leaving and set to be replaced by Satya Nadella.

3:40Rick Munarriz:I sold entirely because I just ran out of patience at 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. Invest long enough and you'll get a 10 bagger. If your aim is true, you may even wind up with a hundred bagger, a thousand bagger, a 10 ,000 bagger or understandably even more rare, I have a 100 ,000 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.

4:17After 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 pared back much later as the position became a larger part of my portfolio.

4:37Lou Whiteman:My heart goes out to all of us and in terrible stories. I don't think we should be afraid to sell. 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. Again, I come back to it 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 in any more selling because you actually want to use the money for a life event. If you're going to get married or you have kids that you look, that's a reason to sell. We're going to use the money, but buying or selling, I, you know, I've tried to work on being more purposeful to slow things down, to not react, not look for shiny objects.

5:18Lou Whiteman:Uh, 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, it's, there's so much stimulus coming out at us. How do you stay on a plan?

5:31Rick Munarriz:Yeah, Lou, you're right. I think regret minimization is something that as investors, we have to sharpen that skill and really build that muscle. And that doesn't mean ignoring mistakes and pretending like they don't happen. You have to learn from them. But one of the things that I've learned to do is to build a framework that helps me reduce 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.

6:05Rick Munarriz: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. 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 stories with others that have made mistakes.

6:36Rick Munarriz:Fools 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 empty AMC 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 NSYNC, we're going to go over some buy, buy, buys.

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8:25Jason, what's one stock you think will rise in the fall?

8:29Rick Munarriz:Jason Moser I'm going to go out 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. I'm going to give you a hot take on Starbucks. I'm going to give it to you in a lot less time than 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, highly volatile losing streak. Revenue growth has 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.

8:58Rick Munarriz:I know that sounds like a terrible stock to expect to go up. Right, Rick? Yeah, but you had me percolating, 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 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.

9:34Rick Munarriz: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 Nickel, I believe is 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. There've 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' Back to Starbucks initiative.

10:13Rick Munarriz: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 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.

10:42Lou Whiteman: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 in mind, what I'm watching is a stock called Montrose Environmental, ticker MEG. They're only about a billion-dollar market cap. They're a roll-up, and they're an active acquirer, so they have a lot of debt, specifically 330 million debt compared to just like 11 million in cash. They're the type of company that I think gets a longer lifeline or the life gets a lot easier for them if their cost of debt can come down.

11:16Lou, I remember you writing about Montrose a couple of years ago when it was a beneficiary of COVID-related testing. Why do you think it will rise in the fall?

11:23Lou Whiteman:Yeah, that was kind of more of a distraction. I mean, what they do at Accor, they provide necessary services with environmental cleanup and 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 the 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.

11:56Lou Whiteman:They've been a consolidator. 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. 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. If they can get borrowing rates down, their odds of success improve.

12:22Rick Munarriz: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 taking a look.

12:38Lou Whiteman:It's just expensive. And if the debt 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 ZG. Zillow operates the leading residential real estate portal with 243 million average monthly unique users.

13:00Rick Munarriz: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. It's going to breathe new life into the depressed residential real estate market that has seen its transaction volume. It's just one to 2 % 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 aren't afraid to cash out of their low rates on existing digs. Zillow lights the housewarming candle on both ends.

13:30The 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 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 growing even faster. It's doing well now. It should really be doing well a few months from now.

13:58Lou Whiteman: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 is over. Oh, we will in harmony. When we get back, I break out a new game to see if Jason and Luke can sort this year's biggest gainers from its biggest losers. Stick around. We'll end the show in sync.

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14:51Rick Munarriz:Whether you're debugging code at midnight or strategizing your next business move, Claude extends your thinking to tackle the problems that matter. For problems worth solving, get started with Claude at claude.ai slash fool. That's claude.ai slash fool. And check out Claude Pro, which includes access to all of the features mentioned in today's episode. Claude.ai slash fool. Jason, Lou from our Culture Exchange program with Hidden Gems, let's play Double Trouble. 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.

15:26If you think it's lost more than half of its value in 2025, say trouble. Simple enough, let's go. First one, Fresh Pet, FRPT, the company behind refrigerated dog and cat food. Double or trouble, Jason?

15:40Lou Whiteman:I'm going to say trouble. You know, I hear about it so much, but maybe I was going to say double. Well, 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. So next up, Wayfair, ticker symbol W, online furniture retailer. 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've also doubled here.

16:10Rick Munarriz:I think it's bounced back. It's struggled so much coming out of the pandemic. I think there's been a little bit of a recovery. Yeah, it's been quite a recovery, at least for the stock. Up 103%, so a double. You're both correct. Wayfair is getting market share during a cyclical downturn, but in its latest quarter, adjusted earnings nearly doubled. Third up, we're traveling far away for Banco Santander. S-A-N is the 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.

16:48Lou Whiteman:Yeah, definitely double for me, just where Europe's going. Yeah, up 110%. The banking giant has been expanding across Europe and Latin America for some time. And earlier this year, it formed a partnership with Verizon to boost its presence in the US. Next up, C3.ai, ticker symbol AI, a provider of AI software tools for the energy industry and other enterprises. Double or trouble, Lou? This is trouble.

17:11Rick Munarriz:Yeah, absolutely trouble. I don't want to get sued, so I'm not going to say anything but trouble. Yeah, down 55%. 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, Newegg Commerce, N-E-G-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. They're still the gold standard. They were crazy a while ago.

17:44Lou Whiteman: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 it's riding the new wave of meme stocks. 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.

18:15Lou Whiteman:Rick, I'm bullish on you. 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. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool 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.