10 Years Later: 5 Low-Risk Stocks for the Next Year

0:00Ten years ago, September 7, 2016. Do you remember what you were doing that day? We did something we'd never done before and would never do again among our 30 five-stock samplers. We picked five stocks specifically for the next year. There was plenty of bearishness around at the time, so I went looking among the very lowest risk companies in my universe for five safer bets to beat the market. One was a railroad. Another was a company whose stock had somehow underperformed the market over the previous five years, despite having one of the world's great brands. And the other three? Well, we'll get there.

0:40Though the picks were made for that year ahead, neither with this sampler nor any of the other 29 did we say or think you should sell at contests. And on the contrary, all 150 stocks across my 30, five-stock samplers were already Motley Fool recommendations, and in most cases, we continued holding them well beyond the sampler's finish line. So yeah, today, we fire up the time machine 10 years later, and my Rule Breaker sidekick Rick Munarez returns with the numbers, the stories, and the surprises. Did low risk, so-called, actually mean low risk? Did these five beat the market in the year they were picked to do so?

1:22And what happened when we simply let another nine years roll by? Five low-risk stocks for the next year, 10 years later. Only on this week's Rule Breaker Investing. It's the Rule Breaker Investing Podcast with Motley Fool co-founder, David Gardner.

1:46Yep, every 10 weeks we open a time capsule, a past five stock sampler, hitting its 10-year birthday. We score each pick equal weighted from the original air date, see its return, and compare it to the S &P 500 over the same span. And then we do the real work. What we got right, what we got wrong, and what we may have been missing. Well, actually, I have on a Motley Fool friend to help do the real work, And this week, it's longtime fool Rick Munoriz back to join me and discuss together what the decade actually taught us as investors. We'll finish with the sampler's overall result and whatever key lessons and go forward views we may want to share out to you.

2:26So yeah, if you're new here, that's 10 years later. We're not just keeping score. We're learning how and why rule breakers win. Oh, and sometimes lose too. On a side note, before we get started, I want to mention, I have for the next five weeks, this one included grand jury duty in Washington, D.C. Thus, my Cal Ripken, if you're a baseball fan, my Cal Ripken streak of a brand new podcast every week now in its 12th year is severely threatened by the prospect of going nine to five downtown Washington, D.C. to the courthouse day after day. I'll be trying to record all my podcasts at night, this one included.

3:07Rick Munaris has been part of the Motley Fool since 1995 as contributing Rule Breaker writer, analyst, and cheerleader. When not breaking down stocks, Rick is breaking down scenes as part of the management team for Just the Funny, Miami's oldest improv comedy theater. Rick, welcome back. Thank you. I feel grand, not grand jury grand, but grand, just grand. Do you remember what you were doing this week in 2016? I sure don't. I probably felt younger. But I know it was not a good time as the climate for investing. It was definitely a time to put out a sampler of low risk stocks, which is exactly what you did.

3:50Well, thank you. And there were some surprising volatility and drops in 2016, that second half. And the key to the sampler, Rick, as you just foreshadowed, was low risk. Even back then, we were using our risk ratings that, Rick, you and I have worked on and published over the years here and there, my 25-point risk rating system. Most recently, by the way, I brought that back on February 7th of this year on this podcast. We ran both Etsy and Duolingo through the 25-point risk rating system to demonstrate that for listeners old and new. So if you're new and you'd like to hear how that 25-point risk rating system works, which you can run on any stock in your portfolio.

4:28Just listen back to February 7th of this year. But back on September 7th, 2016, that is what we were using to search out our lowest risk rule breaker stocks. People were getting really bearish in the second half of 2016. And now looking backward, Rick, and knowing how the market performed, it's pleasing to note that the stock market was actually up over that following year. We'll talk about overall performance. in a bit. But before we get started, I should mention how the market has done since that day, 10 years ago this week, to now. And this is pretty impressive because the stock market has more than tripled over these 10 years.

5:10The bogey, what we'll be shooting for, the performance of SPY, that would be the S &P 500 ETF, is plus 251.7%. So 252, that's what these five stocks are competing against. The stocks Rick and I are going to go over are Apple, Canadian National Railway, Walt Disney, Ecolab, and Alphabet Google. Okay, we're going back in time this week into our Rule Breaker Investing time machine. Rick lets you and I strap in. And Conductor, please send us into the past 10 years ago this exact week.

5:55all right stock number one apple ticker symbol aapl apple in september 2016 was in the unusual position of being one of the world's great companies and a decidedly unimpressive stock it had underperformed the s &p 500 over the previous one two and five years the iphone 7 was arriving amid headlines that apple's product launches weren't cool anymore questions swirled around the Apple Watch. And yet here sat this immensely profitable company stuffed with cash, possessing one of the world's great brands and products that I, I won't speak for you, Rick, but I and an awful lot of other people loved.

6:35And well, why I picked the stock, I was attracted partly because expectations had just become so subdued. I was saying something like, I'm looking backward and seeing underperformance, and yet I'm seeing one of the best brands in the world. So that negative chatter around Apple actually made me a little bit bullish. Rick, your thoughts about Apple either then or now? So, yeah, I mean, Apple just basically the last 10 years back then. I mean, they're on the iPhone seven. That's how long 10 years ago is that. That's how long it's been. And as you mentioned earlier, it had underperformed the market, but specifically to Apple, it managed to somehow successfully go from one of the greatest, if not the greatest, innovator in consumer tech in Steve Jobs to a new CEO with a penchant for improving its operation.

7:21So very different CEOs. And these are the kind of relay races that when you get different running styles, the baton usually doesn't get handed off well, but it worked perfectly here. Steve Jobs and then Tim Cook were the right CEO at the right time for Apple and it paid off for Apple. It did. And I'll do the performance in a sec, but it is somewhat ironic that Tim Cook has just retired within the last couple of weeks. So here we are 10 years later. Of course, he was there more than 10 years, but that transition, that baton pass, Rick, as you say, was spectacular. It's a reminder. It's not always about the founder.

7:54You can find some great operators. And in the case of Cook, he stacked on more market cap gross value than Steve Jobs did. It's also fun, Rick, as you pointed out, to think about how the iPhone 17 is the phone these days, And it is, in fact, plus 10 over the iPhone 7. So Apple hasn't skipped a beat another new iPhone every year. The stock 10 years ago this week,$27.09. The stock, as of Friday's market close, of course, the 7 this week was a holiday. It closed at$319.97. So Apple, an 11-bagger, up 1 ,081 % versus the market's 252. Rick, quick schoolboy math says that's plus 829 alpha here for stock number one.

8:44Rick Munars, what would you say is the single biggest reason the stock did what it did? Yeah, I mean, two words, Tim Cook. And again, I think, again, now, I mean, just last week, obviously, John Turnus became the next CEO. I mean, so when you succeed 15 years at a company, you obviously did a pretty good job. But again, when he got there, and again, this was a company built on innovation, and that wasn't his forte. That was Jobs' forte. Jobs had the iPod, the iPhone, the iPad. Cook had the I want to make things better and left it at that. Jobs equals dreamer. Cook equals executioner. And I mean that in a good way, not in a grand jury way.

9:24But so he made sure that Apple was executing as far as improving its operations. Its gross margins have been increasing for the last seven fiscal year. This will be the seventh fiscal year in a row where gross margin expands. So again, and yes, I mean, Cook wasn't like completely devoid of innovation. You had the Apple Watch that came out just before this 10-year cycle started. But it happened under Cook. You had the AirPods, the Apple Wallet, Apple TV Plus. but again he was more of a renovator than an innovator if i can say that again but to me apple became this this great efficient company that was able to become not just a product company as it was at a da's but a services company and also one that would just keep building on things and making the experiences even better for users and making it stickier and the engagement even better so clearly uh cook did a great job and without him i don't think uh under a lesser ceo we obviously would not have gotten even close to this.

10:21Even a jobs-like CEO could have been backfired on Apple. That's really a compelling thought, Rick. And it makes me look ahead then a little bit to Ternus. I haven't followed this transition. I'm not necessarily keeping up at the high levels with Apple right now, although I'm awfully glad it's in my portfolio. But do you want to foreshadow anything about this next chapter for Apple? Yeah, I think we're getting an innovator again. And again, I don't know a lot about Ternus specifically, but his first post on X was hello. And people were complaining, oh, he gave us five letters, that's it. But to me, I'm like, no, he's introducing himself like a new iPhone.

10:55When you get that iPhone, it just says hello. And it's just introducing, hey, this is going to be new, this is going to be different. And again, we're recording this the day before they have another presentation. So there is a chance we may get a foldable iPhone. But again, I expect more innovation to happen in the years to come. But I definitely think once the operations are set, I don't think John Turner should affect that at all. should impact that. He knows that's working. Let's see some of the creativity go back into Apple. I'd like to see that. And that's what I hope we get out of the new CEO.

11:24But again, Jobs, Cook, I mean, it's going to be a hard act to follow who was a hard act to follow for the new CEO. Really well said. And I guess before we move to stock number two, it's worth just pointing out that Apple was already pretty massive 10 years ago. I think a lot of people would have said they missed Apple at that point. It was on the iPhone 7, etc. The stock has been underperforming and yet here it is an 11 bagger. It's a reminder to me as a rule breaker that you should never think with great companies you've missed it. I think people have thought they missed Amazon 30 years ago, 25 years ago, 20 years ago, the list goes on and this is another such company.

12:02So a quick thought for rule breaker investors when it comes to approaching truly great companies. I don't think there's ever a bad time to buy and just Keep adding and holding over time. Now, I wish that were true, Rick, of stock number two. It has not been. Stock number two is Canadian National Railway. The ticker symbol is CNI. So yeah, a railroad, kind of boring, but as I said 10 years ago, kind of timeless too. Canadian National had been around roughly a century, moving stuff cheaply and efficiently through Canada and into the United States. I'd recommended it in Stock Advisor in 2008. So eight years later, 10 years ago, the stock had roughly tripled while the market had doubled, which felt pretty good to me at the time.

12:48But business had hit a rough patch. I remember coal shipments were down sharply. Other freight categories were soft. And here was a big thing, too. The longtime CEO of the company, NCOO, chief operating officer, NCFO, financial officer, had all retired that summer. So we have a venerable railroad suddenly undergoing a changing of the guard. So why did I pick the stock? Well, the underlying service, transportation, wasn't going anywhere. And the incoming leaders had grown up inside the company itself, those aforementioned new leaders. And that's the way I like my transitions to happen. Kind of what you just said about Tim Cook, Rick.

13:29I also want to mention there was a roughly 1.7 % dividend yield. So, you know, at a very low risk rating that paid a dividend. And I did provide one final, highly technical insight in that podcast 10 years ago. I think I said, I like railroads. And I thought Canadian Natty could beat the market over the coming year. Rick, your top of mind reaction when you hear the phrase Canadian National Railway. Yeah, top of mind, I think that this is a company that it's, again, especially looking at the last 10 years, it's a tale of two halves. And the first five years were solid on a returns wise. but then obviously COVID and then trying to be a homewrecker into an acquisition that was happening as the third wheel did not play well for the company.

14:14So yeah, the Canadian National Railways suffered, ran off the rails, so to speak. Do you like railroads? I like trains. Is that just like the I like turtles thing? Can we go viral with these things? Yeah, I love trains. Trains are great. Well, the stock market liked trains but didn't love trains. 10 years ago this week, Canadian National was at$65.05. Today,$123.37. I mean, you know, up 90%. Doesn't sound bad until you're reminded the stock market averages are up 252 % over these 10 years. So Canadian National, 162 points behind the market averages. Rick, in your mind, I think you just called it out, tale of two halves.

14:57Maybe you can go deeper here. What is the single biggest reason that Canadian National has underperformed. Yeah. And again, this goes almost for the whole railroad industry, the whole railway industry. It was the first few years, basically in 2016, it was a great time to like the stock. CNI and other railroad companies were benefiting from several factors. They had their own to raise prices. There was cost cutting. Trains were getting longer. And again, these are cargo trains. It's not the kind of trains that you and I can ride on, go to, to, go conductor. But, you know, it was conducive to everything that was happening.

15:29There was better asset utilization and they were getting better technology wise to make sure everything was happening and they were buying back their stock. So everything was going really well for the first five years and I guess the first four years. And then the pandemic happened. And initially, the pandemic was a mixed blessing for them. Because, again, when the pandemic happened, there were supply chain, supply chain disruptions to actually get truckers to go around was hard to find. so that issue there was a commodity, there was demand people needed things to be shipped around especially with people staying at home so there was all these factors that you gave them the pricing power but then it all started to fall apart almost like revenge travel when people really wanted to go out and travel coming out of the pandemic then it reversed the same thing happened to the railway industry and in this case all the benefits that they had of pricing power and all that went away the trucking industry bounced back the supply chain disruptions sort of fixed themselves so there wasn't this whole thing we need to get this on a train, we'll pay whatever you need to ship it.

16:26We saw this also with boats, with the maritime shipment. So it was a reversal of it. But specifically to them, I think we can't end this discussion without talking about the Kansas City Southern flirtation, let's call it. So another company, Canadian Pacific Railway, no relation except for Canada. They're both based out of Canada, made an offer to buy Kansas City Southern. And Canadian Nationals Railway said, hmm, I could do better. And they came in and they came in with a higher offer, a substantially higher offer. But again, it started a bidding war. But eventually, even though they had the better offer, there were antitrust regulatory things that sort of got in the way.

17:03And then CNI, Canadian National said, all right, you can have it, Canadian Pacific. And Canadian Pacific actually had to pay a higher price than it was going to initially because of this whole disruption. And the worst thing for Canadian National Railway, which is our stock, was that it just sort of lost momentum after that. Once it was like heartbroken and you love and you lose, it really did sort of struggle. And then that sort of came right after that was 2023 when its actual revenue declined. This is a company that is pretty steady grower. Revenue declined in 2020 because of the pandemic. It was lower volume, even though it was making more per shipment.

17:37And in 2016, when you recommended the stock because it was out of favor at the time. And then 2023 was the other year that it went negative. So you did have a situation where things just weren't going its way. and then just trying to just spice things up by saying, if I buy this company and get more of a presence in the U.S. market, which they already had, they would be able to do more. And just falling apart was just a reputational hit for the company. And it has sort of struggled to get back. The stock has had a pretty good year so far, 2026, but the last four years before that were dreadful negative return.

18:06Well, a reminder that Motley Fool Stock Advisor, our original cost is back from 2008. It's been a pretty good 18-year investment overall. and I continue to like railroads. So I'm glad it's doing better this year, Rick, and I like them going forward. I will say also, though, before we move on to stock number three, that when you're in an oligopoly situation, when an industry is dominated by just a few players, it makes additional acquisitions increasingly dicey with the regulators and it creates additional complexity and unpredictability, I think. When you have a big, wide-open, rampant industry like AI might be today, hey, making acquisitions is usually a lot faster and easier.

18:47There's no real big dog, although maybe I shouldn't give AI as an example today because there are some very big dogs there, but I hope you get the overall point. Acquisitions become more complex to justify to regulators when there are only a few companies still playing. So something else to think about. Rick, thank you for that analysis. We spend a lot of time thinking about how to grow and protect our money, But one convincing text, email, or fake website can put all of that at risk. Today's scams can look completely legitimate, even like your bank. And by the time an alert arrives, the money may already be gone.

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20:16You may like railroads, Rick Munars, but I know you love the next company we're going to talk about. Now, neither of us, I'm sorry to say, is going to love the performance of the stock. But of all the people I know in the world, I think my friend Rick may know Disney the best. Stock number three, ticker symbol DIS, the Walt Disney Company. Do I need to say any more? It's Disney. Well, by September 2016, this company had already bought Marvel, had already bought Lucasfilm, and The Force Awakens had become the biggest domestic box office draw ever. And anyone who hadn't bought the stock could maybe understandably feel maybe a little late.

20:53But I didn't. My attention was on December's release of Rogue One, which was the first Star Wars film stepping outside the main saga. Reports of rewrites and reshoots had created uncertainty Disney had already produced at least four$900 million plus movies that year So, well, why did I pick it? Ten years ago this week, I saw Rogue One is potentially doing for Star Wars What Marvel had demonstrated with superheroes Could it maybe turn a universe into an expandable collection of interconnected stories? I remember saying on the podcast, it kind of feels like a new superhero hero to me if disney could make audiences care about characters beyond the central stage i thought it opens the possibility to more and more of this universe hitting television and movie screens and rick we'll talk about whether that happened or not in a second where the stock is but any top of mind reaction here to disney either then or now yeah again this is again looking at disney and you're absolutely right again this is a kept stock that's really not gone anywhere, unfortunately, over the last 10 years.

21:58But the one thing that has gone, it's had four CEO tenures in these last 10 years. So it had Bob Iger, then Bob Chapek took over right February 2020, right when the COVID-19 crisis started to hit. Bob Iger came back two years later, and now Josh DeMauro became the new CEO this year. When you have four CEOs, I know it's three CEOs, but I'm calling it four CEO tenures because Bob Iger, he gets a mulligan, he gets to come back a second time. Usually does not work out well for investors when you have a spinal tap drummer rotation in your CEO office, so to speak. The 10-year performance of the stock.

22:32Well, 10 years ago this week, Disney was at$93.71. Last Friday, it closed at$105.31. That would be up 12%. Now, you know, up, but 12%, the market up 252%. Rick, maybe explain what happened here. Let's pretend we're talking to a smart 25-year-old, maybe somebody who has not gone to business school, but has ridden a Disney ride or two. What would you say? Yeah, so if you've been at Disneyland, if you've been on Mr. Toadwild ride, I think that would be the ride that you could describe Disney the last 10 years. And to be fair, in Disney's defense, if you look at the production, if you think, oh, what makes a good entertainment company?

23:18Disney checks off all those boxes. You need big blockbuster movies. Last year in 2025, they had the only three U.S. movies that made a billion dollars each worldwide. The year before that, same thing. They had the only three movies that topped a billion dollars. This year, a little different. They have Toy Story 5, and then there's a lot of it. Obviously, there's Odyssey, a lot of the movies. Spider-Man, which is the highest grossing movie worldwide, the only one that's topped two billion this year, is their property, so they're making money off it, but it's a Sony release, so they're not really the studio behind it.

23:45So theatrically, they're doing fine. On the legacy media side, which is always the one big thing, oh, people are cutting the cord. They're doing okay because Disney Plus turned profitable two years ago. And now the revenue and operating profit from Disney Plus and Hulu and their other streaming businesses are offsetting the legacy network business. So it's not a total loss. And then you get to the theme parks and the theme parks, they're doing better now than ever. Not as far as turnstile clicks. There's still fewer people going than there were before the pandemic, but because Disney's gotten better about increasing the experience and the upcharges and all the other things they can do, which is not necessarily a good thing as far as people saying it's even more expensive now to go to Disney World.

24:24They have never been as profitable or generating the same kind of revenue at their theme parks that they have. So they're doing all these things right. And you're in a climate where at least two media companies got bought out at very big prices. One of them is still in the process of going through the regulatory channels, but they've sort of been forgotten. And partly is because it's been a slow growth company. And again, when you really don't have a CEO that's just there for, I mean, even when Iger came back, he came in, I'm only going to be here for a couple of years. So investors knew it was going to, not going to be a permanent thing.

24:53It was hard to get excited about the situation, even though, you know, Disney's now trading for a forward PE in the teens, which you really don't see that with Disney very often, but it's just, there's a premium that Disney normally command is just not there right now, despite the fact that, at least in my eyes, I think the company is doing quite well. Yeah, I do too. I'm just astounded, Rick, that it is underperformed by this degree. Of these five companies, this is by far the company that has underperformed the most. This is an iconic brand. This is a beloved company. It provides a wide variety of experiences.

25:28I'm going to just ask you to dig even one dig deeper. I don't know what you're going to find, Rick, but how could this company be essentially flat 10 years later? Yeah, again, the only reason I can say, again, so I think it's the valuation premium that Disney had 10 years ago was just it. I mean, I think it's not that the company's failing in any regard, except if you wanted stronger growth. But again, it's not this dynamic company, but it's still the ecosystem still there. The flywheel's still, you know, vibrant, and it still spins off hits that it becomes theme park properties and everything.

26:00Yeah, it's hard for me to explain it, and I could give you a bearish case for Disney, but it's not what I would feel in my heart, which would be weird. But yeah, investors just do not care for Disney, the investment right now, at a time when content is king as far as based on certain media buyouts that have happened lately. Well, it's fun to note, going back to stock number one, Apple, that it had been an underperformer for the one, two, and five-year periods before I picked it this week, 10 years ago, and went on to become an 11-bagger. So sometimes it's easy to see things in the rearview mirror.