10 Years Later: 5 Stocks to Feed the Bear

0:00Ten years ago, February 10th, 2016 to be exact, I launched my third five stock sampler, five stocks to feed the bear. The market had broadly declined from August 2015 to February 2016. Many rule-breaker stocks were down double-digit percentages. And had we started a bear market? Well, early on that week's podcast, I said I thought a lot of the bad stuff had already happened. So it was time to pick some stocks. Five stocks to feed the bear. Today, we fire up the time machine. It's 10 years later to see what actually happened through recessions, pandemics, acquisitions, and all the surprises a decade can deliver.

0:47We'll score our returns against the S &P 500, then ask the only questions that matter, what we got right, what we got wrong. Were we missing anything? Well, I've invited back my sidekick who helped us launch this series, Rick Munares, to bring the goods, numbers, and stories. We're going to talk about the lessons that you can use on your next 10-year journey. So, five stocks to feed the bear, 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.

1:27Welcome back to Rule Breaker Investing. I hope you had fun. I sure did with Wired founder Kevin Kelly last week. I think that's probably a bestie for 2026. So if you didn't get to hear our conversation, I completely recommend Kevin Kelly and his views of the future for your listening pleasure. All right. Every 10 weeks, we open a time capsule on Rule Breaker Investing. A past five-stock sampler hits its 10-year birthday. This very week in 2016, I picked five stocks in the face of a possible bear market. And now here we are doing something you're rarely going to see on financial TV or podcasts or really any medium.

2:10Reviewing the results 10 years later, the very week of. As already foreshadowed this week, we're looking at number three of the 35 stock samplers featured on Rule Breaker Investing over the years. And we're going to score each pick equal weighted from the original air date. We're going to see its return and compare that to the S &P 500 over the same span. And then comes the real work done this week by longtime fellow fool Rick Munarriz, who's joining in this week with his best answer to this question for each of the five stocks. What is the single biggest reason this stock did what it did? We'll discuss together what the decade actually taught us all as investors.

2:56We will finish with the sampler's overall result, all five stocks as a basket. How did we do? We'll probably provide a lesson or two, maybe a quick go-forward view on some of these companies. Now, if you're new here, this is our 10 Years Later Episodic Series, and that's what we're doing this week. Not just keeping score, by the way, though we are. We're here to learn together over the long game, playing stocks the only way that counts, even if so few people seem to do this. All right, the past is prologue. Let's light the stage. And welcome, Rick Munarez. Rick, welcome back. I'm so happy to be here, David.

3:33Thank you for having me again. A delight. I had so much fun kicking off with five stocks for the next five years, 10 years later with you, somewhere around exactly 20 weeks ago. And so let's do it again. This time, Rick, well, the date was February 10th, 2016. You and I are recording this on February 10th, 2026, Tuesday of this week, literally 10 years ago this very day. The sampler was five stocks to feed the bear. By the way, any listener can go right back now and listen to that. Intrepid listeners, you can go right out there on Apple Podcasts or Spotify and pick up what we were talking about, Rick.

4:08The stocks were Carter's, IPG Photonics, Ellie Mae, Planet Fitness, and Mercado Libre. Those are the five stocks you and I are going to talk about. And before we get started, I should point out how the market has done. Rick, it's been a pretty good 10 years. Do you agree? Yes, definitely. Not every 10 years do we get a 274.3 % return for the S &P 500. So, yeah, as we speak, the market has more than tripled over these 10 years. And that's what these five stocks are competing against, a plus 274 in the win column for just the market averages. Now, before we get started, I want to mention that we were looking for two attributes with these five stocks.

4:53And let me just put them forward right now so listeners know what was happening 10 years ago. I was saying there are two attributes that make up this list of five stocks. The first is companies with a very low risk rating. Now, anybody listening to the podcast a few weeks ago, you heard our Calculating Risk Foolishly, Volume 4, where we took you through my 25-point risk rating system, Etsy versus Duolingo. So with that fresh in mind, know that that was the first attribute we were looking for with this five-stock sampler, stocks with very low risk ratings. And the second one was small-cap companies.

5:31I was looking specifically for companies with a$1 to$5 billion market cap. I was saying, yeah, we love great big companies like Apple, Amazon, and Disney. This is what I was saying 10 years ago this week. But each of those three had declined more than 20 % in the previous three months leading up to that podcast. So yeah, things were pretty bad in February 2016. It's not every quarter that Apple and Amazon and Disney have all lost more than a fifth of their value in three months. But rather than go for the big obvious dogs, we were looking for smaller cap companies. All right. And as we are sometimes want to do, Rick, please strap yourself in because, yeah, we're going back in time this week into the Rule Breaker Investing time machine.

6:18Let's strap in.

6:25So, stock number one, Carters, ticker symbol CRI. Carters, of course, a long-established apparel company focused on baby, toddler, and young children's clothing, including the well-known Carters and Oshkosh B 'Gosh brands. It operates as a consumer brand with decades of trust, selling through retail, wholesale, increasingly through direct-to-consumer e-commerce. At the time, Rick, it was also beginning to expand internationally, including early moves into China. And I liked Carter's as a multi-generation consumer brand doing something timeless, you know, clothing babies, while quietly compounding through e-commerce and global expansion.

7:07Rick Munars, any initial reactions of yours to Carter's either back then or now? Yeah. So, David, raising a kid isn't easy, but the same can be said about raising a kid apparel retail chain. So you and I, we became parents around the same time in sort of the mid-1990s, which was a great time to be a parent, I think. And when I revisit the malls that I used to go to as a young parent, I can tell you where the Jim Brie store used to be. I can tell you where the Disney store was. I even remember even the chains that survived, like Carter's and like the children's place. Well, there are a lot less of them now than there used to be.

7:38And I think just in general, the environment was sort of tenuous then and it's tenuous now. Yeah, I saw Eddie Bauer announcing bankruptcy potentially unless he gets bought this week. So I agree with that statement, Rick Minars. Well, let's go right to the numbers, and then I'm going to ask you the big question. Here are the numbers. The stock on that day 10 years ago was at$85.04. Today, Carter's, ticker symbol CRI, has gone from$85.04 to$38.07. I regret to say my pick is down 55%. Again, the market up 274%. So the delta there, Rick, a shocking and very disappointing minus 329 to start this sampler review 10 years later.

8:26Rick Minors, in your mind, what is the single biggest reason this stock did what it did? All right. So I'm going to cheat and go with a terrible twos theme as a toddler to justify giving you two reasons instead of one. I'll be quick on the first one. It's just a general there's a macro level. The U.S. birth rate has been on a steady decline for years. Folks are waiting longer to have babies, and that usually means having fewer babies than their parents did. There was a surprising, not refreshing spike in 2024, but generally speaking, fewer babies today mean fewer toddlers and kids tomorrow. So there's a real demand problem here.

8:57The second problem, the second of the terrible twos, and I think the real big problem here, is the state of being a U.S. apparel retailer. You're talking about Eddie Bauer. Saks is also in bankruptcy filing. There's a lot of companies that are struggling at the retail level. Textiles are sourced a lot cheaper overseas. And 75 % of Carter's clothing is made in Vietnam, Cambodia, Bangladesh, and India. It used to have a little more in China, pulled back from there a little bit. But still, it's still a case where back in October, Carter's pointed out that new tariffs and import duties have increased costs by$200 million to$250 million on an annualized basis.

9:30And Carter's did not want to push all those costs through. So obviously, that's hurting margins. And this is also coming at a time when the company's sales are declining slightly in each of the past four years. So now it's just experiencing a bigger pinch in margins with these new costs to absorb. So it announced in October that it's going to be closing 150 stores in the next three years. So not only is Carter's already starting to shrink a little bit from where it was 10, 20 years ago, it's happening. It's also it has a substantially higher wholesale business, which has a higher margins for the company.

9:57So it's just that Carter's has been more bagosh than Oshkosh lately, David. Well, it's regrettable. You know, Rick, as I mentioned, I was looking for companies that were smaller cap companies. This company, speaking of market cap, the market cap game show, of course, it's March Madness coming in just a few weeks for this podcast as we'll play the market cap game show with some world champions. But this company's market cap down to$1.39 billion, Rick. We're talking about a micro cap company at this point. Of course, I was looking for one to five back then. So since it's down 55%, it was somewhere around$3 billion then.

10:33And wow, this company has lost a lot of value and it's lost a lot of relevance. Yeah, a lot of teething pain. Well, that's what we have for Carter's. Rick, maybe at the end you and I will give maybe which is our favorite stock of these five today going forward. So just flagging that. Let's move on to stock number two, IPG Photonics, ticker symbol IPGP. Now, IPG Photonics designs and manufactures fiber laser systems used across industries like manufacturing, medical devices, telecom, and battery production. And its fiber lasers were displacing older laser technologies by being more efficient, more reliable, and lower cost.

11:16The company was founder-led by Valentin Goponcev and had built a dominant position in a highly technical niche. My recollection, Rick Munar, is this company was a multiple times pick for Motley Fool Rule Breakers. And I liked IPG because it was founder driven. It was a category leading technology company benefiting from a long term shift towards superior technology. Fiber lasers across many industries. Rick, any initial reactions from you to IPG photonics then or now? Lasers always sound cool. And you think it's Star Wars or like laser cats. But again, so these are sort of these cool, cool lasers that are used to weld and cut industrial materials.

11:58And IPG Photonics, even though they have increased their presence and they're growing faster in like medical innovations and a lot of emerging industries, materials process, you know, basically old industry, industrial, commercial work in factories and whatnot, still account for 88 percent of the revenue mix. So still a company stuck on a business that is steady, but not as exciting as its glitzier side projects. All right. Well, thank you for that. And let's now look at the numerical performance before I ask Rick the question. So stock was at$81.59 10 years ago today, 81.5. Today, it's$113.26.

12:35All of my market prices are somewhere around 230 Eastern, Tuesday, February 10th. So yeah, 81.5 to 113, up 39%. Now that's, you know, sounds okay. It's a lot better than Carter's. But again, the market was up 274%. So Rick, I regret to say stock number two, a minus 235 in the loss column when we're counting up alpha. Let me put it to you this way, Rick Munar. If you had to explain what happened to IPG Photonics to a smart 25-year-old in one sentence, what would you say? Four out of five years of declining revenue can't be good. Does that work? That doesn't work for me. Yeah. I also regret to say, and I'm quite serious about this, God rest his soul, Valentin Kapansev, the founder, is no longer with us.

13:27He was a phenomenal American entrepreneur, Russian born. And really, this is his company. He's not around anymore, but I'm still cheering him on, Rick. And the company stock is up, but declining revenue, not a good thing. Yeah, and this is a company five years ago, well, back in 2021, so four and a half years ago, wherever it is you call the year, annual sales were$1.5 billion, almost$1.5 billion. Trailing revenue now is less than a billion. So it's four out of five years of declines, and you do get pinched. And there's some competitive threats in China. Europe in general has been weak for a while for its products.

14:03And I always like to find the blue sky and the red ink, so I want to be at least a little more positive here on the IPG Photonic story. And that's that after 12 consecutive quarters of year-over-year declining revenue, IPG's top line moved 8 % higher in the third quarter of 2025, the one it just announced a couple months ago. And when it reports its fourth quarter results on February 12th, which will be the day after this podcast goes out, hopefully, its earlier guidance suggests another uptick in revenue. So it's going to hopefully continue this positive movement. But again, when you've been declining for so long, investors want to see a more pronounced recovery.

14:37But it's definitely seems like it's at least starting to turn the corner. Definitely in Asia and in the U.S. markets, Europe is still lagging, but it's still making a bit of a comeback. But again, that explains why the stock's been out of favor. It's industrial materials processing. It's been a rough place to be the last few years. You know, I'm not a short term player. And obviously, 10 years later is all about the long term. But I will note, and I'm not keeping up with IPGP on a regular basis right now, Rick. But I will note this stock started the year in the low to mid 70s, and it has been unbelievable.

15:07In the first 40 days or so of this year, it's gone from the low 70s to 112. This has to be one of the best technology performers, at least in its industry, I'll say, in the world today. So I want to pin down on one thing you said just a minute or two ago, Rick, because I want to understand why. I share it too, but I want you to make it explicit. You said you want to look at the positive. You want to find something that's positive that you can say about this company. I'm just curious, why do you say that? Why do you even have that orientation? I think, again, as an investor, it's okay to be a Pollyanna, which I can be sometimes.

15:41And you sort of tend to be that way when there's stocks you pick and believe in. And while that could be sometimes sort of a curse because, hey, you missed something obvious and you get through this case where this company's had 12 consecutive quarters of bad results year over year, and I find this one positive thing and I stick to it. But it's always good to have hope as an investor. as long as you're learning from the steps down. And I think every IPG photonics investor has learned painfully the lessons on the way down. But I think it's important to always grasp the fact that things could always be worse, things could always be better in life as well as in investing.

16:12I so appreciate that point. In fact, in my book, Rule Breaker Investing, I explain why, and Rick knows this very well, having worked alongside me for 20 plus years, why we have five green flags that we're looking for when we flag the things that we're researching a company for, I say, look for five good things going forward and three red flags. And some people are like, why are you looking for five good things and three bad things? And I think it's because you're looking for winning stocks. I mean, we're looking for what's going to win and work out there. So I don't find balanced view particularly helpful.

16:49I think we should lean toward optimism, especially as rule breaker investors. And I'm joined this week by somebody who knows that as well as anybody else that I've ever worked with. So thank you for that comment.

17:28Find it at twit.tv slash www or wherever you get your podcasts. Let's move on to stock number three and see if we can get, I don't know, a little bit better. Because so far we are hundreds of points of alpha in the hole. Stock number three is Ellie Mae. Ticker symbol, well, this is a past ticker symbol. It doesn't exist anymore, but ticker symbol E-L-L-I. Ellie Mae was a software as a service company providing platforms that process and manage mortgage applications. And they were doing that for the lenders, for the brokers out there. It had a roughly quarter of the U.S. mortgage market using its system, making it a quiet but critical infrastructure provider.

18:12The business operated behind the scenes. Not a brand most people would recognize at all, but certainly essential within the mortgage industry. And I'm going to say a sentence as to why I like it, But the reality is I picked this stock because my pal Rick Munarez was the one who'd taken a shine to it and brought it to Motley Fool Rule Breakers. I'll just say, Rick, I liked Ellie Mae as a picks and shovel software company selling essential tools to an enduring industry rather than betting on the housing cycle itself. What else do you want to reflect on about Ellie Mae, a company that is no longer traded?

18:47I know the story has a bittersweet ending. we'll be getting to shortly. But I know we initially found this stock in one of my favorite places. And I think it's one of your favorite places to find an industry that's ripe for disruption and find the company shaking things up. And Ellie Mae, beyond this beautiful southern bell of a name it has, was breathing new life into this stodgy industry of mortgage financing. And this cloud-based software platform was used by a growing number of mortgage financing professionals with every passing year. And it had a lot of potential before its early exit. Really well said.

19:18And it was an early exit. Let's go to the numbers now for Ellie Mae. Our cost basis was$59.78. I'm happy to say it was even better than that for Rule Breaker members. Of course, all of my five stock samplers were picking stocks we'd already picked in Motley Fool services. And some of them were up, some were down. But this one was always a good performer, Rick. So it had about three years to perform. We couldn't have known back then when we picked it on February 10th, 2016 on this podcast. but it went from$59.78, we'll round that to 60. It got bought out on April 17th, 2019 at 99. So the stock was up 65%.

19:58Now we're only going to market against the market for the time that it was trading. And over those three years, the market was up 56%. Pretty strong market over those three years. So Ellie Mae beat the market. It beat the market by nine percentage points, 65 to 56. Rick, you called it bittersweet, makes sense to me. What happened? Yeah, so, I mean, we're here talking, it's like our 10-year high school reunion, but Ellie Mae is like that yearbook page where someone didn't show up for the class photo, so you have sort of like just their name and nothing else. We don't know what would have been. But I think what made this not just the fact that you're buying this disruptive growth company and it gets taken away from you is that we visibly saw this time what we missed out on.

20:40In this case, so private equity firm Tomo Bravo paid$3.7 billion for it in 2019, which you were talking about. That was the$99 buyout offer. And just a year and a half later, Bravo flipped it to Intercontinental Exchange for$11 billion. So this was basically triple in 18 months. Unbelievable. I totally did not remember that. That is a shocker. Yeah, that's not just pocket change left on the table. That's an inheritance. And I just regret that as investors in the stock, as Rule Breaker subscribers at the time that may have played the long and actually gotten a piece of the company, missed out on that because they gave up too soon.

21:14Now, I mean, I'm not going to cry foul on this one. Presumably, Tomo Bravo had some value to add. That's what it's trying to do when it acquires companies and then spins them back out. But wow, a three bagger in one year and early investors like us in Ellie Mae just did not get to benefit from that. And so today it's all part of the, well, the same company that owns the New York Stock Exchange, for example, Intercontinental Exchange. It's all part of that? Yes. All right. Well, thank you for that. So unfortunately, our gains in LA were cut short. So again, for the purposes of 10 years later, this podcast and our scorecard, it gets a plus nine.

21:53Now, that's not a lot of points when we're already down hundreds of alpha points on those first two picks of Carter's and IPG Photonics. Let's see if things can get better as we go to stock number four. And it's Planet Fitness, ticker symbol PLNT. Planet Fitness operates and franchises low-cost fitness clubs aimed at a casual gym-goer, you know, someone like me maybe, rather than the hardcore athletes. Its model emphasizes simplicity, affordability, and I would say a non-intimidating environment, summarized, of course, by its no-lunks branding. That's what it was back then, Rick. You can tell me in a minute whether they're still going with that.

22:35Revenue was driven by recurring membership subscriptions rather than high margin premium services. And I like Planet Fitness for two reasons. First, it was a disruptive subscription business. It was using low prices and mass appeal to build predictable recurring revenue at scale. And the second reason I liked it is because Rick Minares liked it. And I'm glad I have Rick back on this week because, Rick, this had been your pick for Motley Fool Rule Breakers just weeks before. And I thought, you know, Rick just picked it. I like this company, too. I'm going to add it to this sampler. Rick, how were you feeling about it back then and then today?

23:16I love great origin stories and Planet Fitness. So in 1993, this college student by the name of Chris Rondau gets a job at the front desk as a front desk associate at the very first Planet Fitness gym. This is when they only had like one or two gyms open. He's checking people in. He's working out when he's not. 20 years later, he's CEO. And 10 years after that, in 2023, which I'll get to shortly, the board asked him to step down. And you mentioned about the no-lugs. Yes, the new CEO, Colleen Keating, she's still going by that, changing up a few things, but still generally still believes that, hey, this is a fitness center.

23:49It is not a place just to grunt and just throw weights down on the floor heavily. All right. Well, I'm happy to say we have some better news with this stock pick. Let's review the numbers. On February 10th, 2016, Planet Fitness traded at$13.86. That's how I recorded our cost basis. $13.86 today,$92.72. As we look at the live market numbers Tuesday afternoon, Rick, stocks up 569%. That feels a lot better than any of the previous three to me. Of course, again, the market up 274%. So we're going to give ourselves a plus 295. Let's go back to that 25-year-old again, if you will, Rick Munariz. And can you please explain this outcome to our smart 25-year-old in one sentence?

24:40I'll do it in gym terms. Reps matter. I could probably elaborate on that. I think I will in saying that this is a company that had delivered positive revenue growth, double-digit revenue growth in 12 of the last 13 years. And the only exception, David, was 2020, and this was understandably so. Gyms were closed. Folks with money bought Pelotons or personal traders. Folks like us who don't have Pelotons or personal traders wore out our walking shoes or running shoes around the neighborhood during the early days of the pandemic. And that pretty much worked out at that point. So they eventually came back to the camaraderie, the cost effectiveness, and the network consistency of Planet Fitness.