Essays From Yesterday, Vol. 8

0:00Psst! I got a secret for you. Actually, it's a secret weapon for you as an investor today. One word for you. And no, it's not plastics. It's history. History. It's secret because most people don't have much of it. They follow financial media outlets, which through TV and social media display and promote such a short memory. Quoting stocks minute to minute, throwing the bells and whistles of our attention at whatever's just happened. As a fool, I love to look back. The lessons we really learn, learn, and earn are a consequence of observing and living through history measured in years, not hours or days.

0:54Well, for years, I wrote short essays to kick off our monthly Motley Fool issues that were mailed back in the day, snail-mailed out to members. Today, The Motley Fool is pretty much fully digital. We don't do paper copies anymore, and we don't do opening essays. But I put a lot of time into those essays, and they occurred over a long narrative arc of history, 2002 to 2017. 15 years worth of investing lessons in Motley Fool Stock Advisor and Motley Fool Rule Breakers. So in this world of now, now, now, I say you and I open up 2026 by getting smarter, happier, and richer today for the lessons learned yesterday.

1:43Only on this week's Rule Breaker Investing. It's the Rule Breaker Investing Podcast with Motley Fool co-founder David Gardner.

1:55And welcome back. Happy New Year. I hope I'm not the first to share that with you. Let me introduce myself at the start of a new year. My name is David Gardner. I helped start the company, The Motley Fool. I also recently wrote a book, my ninth or so, but really my first in a lot of ways, because the book Rule Breaker Investing is the first that I've ever written all by myself. All my previous books have these with my brother Tom, our CEO at The Motley Fool. But Rule Breaker Investing is what I'm all about. That's also the name of this podcast. And by my count, this is the 550th consecutive new weekly podcast for Rule Breaker Investing.

2:36So we're kicking off 2026 with number 550. And yep, I'm the guy who was there from the first one back in July of 2015. I think 549 of them have been hosted by me. One of them was hosted by Chris Hill, longtime fellow Fool who interviewed me, authors in August, last August, about my book Rule Breaker Investing. Well, as I mentioned at the top, it's time for some essays from yesterday. And this is the eighth in the series. We last brought you the previous episode nine months ago. It was the day after April Fool's Day of last year. So a couple of ground rules about how this particular series works First of all, I completely randomize which essay I will be sharing with you So I don't know ahead of time until we plan this podcast what I'll be speaking about And I randomize it Now I wish I could cherry pick my best and favorite essays from the past I mean, I guess I like all of them It's just that some of them were more right than others so you never know how right or wrong I'll be with any of these since it's completely randomized.

3:46And often I'll refer to some stocks, so we get to look them up and we get to see how they've done, and we'll always have some doozies both ways. That's the first ground rule, complete randomization of what I'm sharing with you, whether I want to or not. And the second ground rule is they're in chronological order, from earliest to latest. So, for example, this particular episode, I'll be starting off with an essay from 2006. That's 20 years ago. And then we'll jump forward to 2010, 2012, and 2014. What matters isn't so much what I was saying back then, although that is fun. What matters is what we can learn from it right now, today.

4:33The purpose of The Motley Fool is to make you smarter, happier, and richer. I'm looking to do all three every week, but we're especially focusing on smarter, this one. And so, all right, let's get started. Essays from yesterday, Volume 8, Happy New Year, fellow fool. And Bart, if I could get, please, a little bit of our Way Back music as we go back in time now to the year 2006 way, way back. All right, essay from yesterday, number one, comes from Motley Fool Rule Breakers. The month was July, the year was 2006. The title of the essay, we didn't really title our essays back then, so it's officially entitled Introduction to July 2006 Issue.

5:20And here it is, about 450 words in full. Essay number one starts, Dear Fellow Fool, Nothing that I write can change the pain of the recent market sell-off. But maybe something I write can make it clear how you should proceed. So in the face of a dramatic growth stock sell-off, a little recent history. Longtime subscribers, open up your May 2005 issue of Rule Breakers and take a look at that scorecard. The numbers were not pretty. Our average stock return at the time, the bottom line number of our scorecard was minus 14.53%. The sky was falling a year ago, eh? That was one heck of a time to buy.

6:12Now, open up your May 2006 issue and take a look at that scorecard. Our average stock return was up 28.95%, more than 20 percentage points ahead of the S &P 500's comparable return of 7.01%. One year. From a loss of 15 % to a gain of 29%, same investment approach. Now the pendulum has swung back. As I write, Rule Breakers, since inception, is up just 7.88%. The market is up just 3.16%. The hard work of the past two years has outperformed the S &P 500 by only 4.72 percentage points. Spring 2006 wiped out 25 percentage points of average profit per stock. And for those who initiated new positions, you haven't given away profit.

7:17In many cases, your brand spanking new investments made proudly or with fingers crossed only days or weeks ago are outright losses. It's easy to live in the past. All the numbers I'm talking about have already happened. They say nothing about what's next. But in my experience, anytime you see a sell-off of this severity, it's a great time to buy. We may not be at market bottom, but if you're dollar cost averaging into our picks every month from a salary check, or if you're still waiting to fill out some positions, or if you've just joined our service on a 30-day free trial, get fired up. because when the market inevitably recovers, whether it's next month or next year, it'll be our stocks that will zoom past the averages again, a diversified group of rule breakers held patiently.

8:16Despite the recent zigzag, the market's long-term graph is not a sine wave. It's a linear uptrend, a 10 % gradient that looks steady and smooth when looked at over the long term. Don't quit. Quite the contrary. Most of our picks are at this point 25 % lower than they were at the end of April. You can buy the outstanding growth stocks of the next generation, Intuitive Surgical, Akamai, Blue Nile, PDL Biopharma, and others like a kid in a candy store right now. These summer doldrums are providing you a very attractive entry point into the market's most dynamic growers. I'm where you are. My scorecard and my portfolio have given me the metaphorical bloody nose.

9:14Nothing I say or do can make the past two months disappear. But I can remind you that most of the people who make real money in the stock market, when the tide from time to time inevitably turns against them, don't run. They rally. And that was Introduction to July 2006 issue. And for each of my four essays from yesterday this week, I'm just going to give you a few quick notes or thoughts afterward. word. And let's start off with thought number one here. Who even remembers the 2006 sell-off? We tend to only think of the biggies. 2001, of course. 2008, 9, of course. But there are meaningful downdrafts that don't feel great every few years on the market.

10:07And I have personally no recollection of that brutal spring sell-off in 2006. Do you? Note number two, I'm just going to re-quote a few key lines from that essay. It's easy to live in the past. All the numbers I'm talking about have already happened. They say nothing about what's next. Well, now here in 2026, I want to say that's just as true of up markets, by the way. So don't be surprised when the market gets hit hard at some point this year or next year or the year after. A 15 % drop for the market overall, faster than you might have expected. And or your own favorite stocks all down 25 % in one quarter.

10:58It's going to happen. It's happened before. Oh, and after it happens, please remind yourself that it will happen again. Yep, again and again. If you're a rule breaker investor playing the only game that counts, and that's, of course, the long game. From the first day we launched The Motley Fool, I and my brother Tom were sharing this same language. This is my version of it. Make a whole life commitment to the stock market. Make a whole life commitment to your portfolio and your financial future. Don't jump in and jump out. That's the single biggest mistake most people make. I had the pleasure of briefly appearing on KCAL Los Angeles.

11:43That's CBS Los Angeles TV this week. And they asked here at the start of the year amid financial New Year's resolutions, they said, what is the biggest mistake most people make? And I said in so many words, jumping in and jumping out. But the single biggest mistake most people make is jumping off the train of compounding returns, interrupting that magic of compounding at 9 or 10 percent annualized. I would say as rule breakers, we can and have outperformed that 9 or 10 percent. But anybody who jumps off the train who's worried about the next market drop and reacts accordingly is making a huge mistake, in my opinion, if they are anywhere below the age of, let's say, 65 or so.

12:26Once we get past the age of 65, market drops start mattering more as you approach retirement. Or I hope you're reallocating as an older person, maybe getting away of too much stock market exposure or moving more into dividends. But for those of us younger than those years, you are making a huge mistake if you're not regularly investing, even in those hard, dark times of the spring of 2006. One or two more notes before we move on to essay number two. Speaking of your favorite stocks dropping 25 % in one quarter, which I just challenged you to think might happen in some upcoming quarter. Well, that was exactly what I was observing in this essay.

13:10I wrote the essay in July of 2006. And if you just heard me read it, I'll read it again. Most of our picks are at this point 25 % lower than they were at the end of April. Yep, April. That would be three months before July. And then finally, I tagged some of our top picks back then, now 20 years ago, as, and I called them in the essay, the outstanding growth stocks of the next generation. By the way, growth stock is not a phrase I use anymore. Just like I don't like the phrase value stock. I don't actually think those phrases mean anything. And so it's nice to see, I think I've matured a little bit and become a little smarter in the 20 years since.

13:51You won't hear me use the phrase growth stock or value stock anymore. But anyway, back to the four stocks I mentioned. You're probably curious what the performance has been. I mentioned Akamai, Blue Mile, PDL Biopharma, and Intuitive Surgical. Well, in that order, Akamai, we had recommended at$12 a share in 2005. We would eventually sell it at$24 a share in 2011. So not bad, a double, even through the Great Financial Recession, but not a fantastic stock. Blue Nile would end up getting bought out as a loser for us, and PDL Biopharma kind of disappeared. It was a biopharma that never really worked and just kind of fell apart over the years.

14:35Wasn't worth much as it bought itself out of the market. But the fourth company I mentioned was Intuitive Surgical, which we'd recommended a year before in March of 2005. It's now up 120 times in value for Rule Breaker members. Just from that position, July 2006, it's a 53 bagger from there. It's reminding me to remind you that Rule Breaker Investing, at its heart, often has a few big winners wiping out all of your losers and leaving a lot of money on the table after that. And here we go. It's kind of like some of my five-stock samplers. Here we are with just one stock blowing away the losers and making us forget all about them as we hoot and holler to market-crushing gains.

15:21Venture capitalists call this the power law, where a few of their big winners in each of those venture capital funds are surrounded often by a lot of also-rans and some outright losers. But venture capital works and rule-breaker investing works because we have a knack for finding gigantic winners. And I'm happy that I called out Intuitive Surgical in July 2006 in our first essay from yesterday. Let's move on now. Essay from yesterday, number two.

15:54The month was October, the year 2010. The title of this essay is The Tim Byers Issue. And here's what I wrote at the start of Rule Breakers, October 2010. And I quote, You have in your hands an historic and commemorative issue for at least four different reasons. First, this issue kicks off the seventh year of our service. Lucky seven. Second, we celebrate here another all-time high for the performance of stocks in our service. The 144 recommendations we have made over the past six years average a gain of 28%. That's versus a directly comparable loss for the S &P 500 index of minus 5%. That's another way of saying that an average person picking an average stock at random from our service over the past six years would have beaten the market by 33 percentage points.

16:58For perspective, a year ago, that gap was 16 percentage points. Third, the size and scope of our Rule Breakers membership and community are also at all-time highs. So take that, market jitters. And the fourth reason this is an historic issue is also the focus of my introduction. This is the first Rule Breakers issue containing two stocks picked by a single member of my team who is not me. That's right. New selections, Acme Packet and ClickTech are both the recommendations of Tim Byers. That's why I'm calling this our Tim Byers issue. Rule Breakers from the outset has been a team-based service where each month our two new selections come from a posse of stock pickers a team I've built over the years The performance numbers listed earlier are my Exhibit A testimony to the excellence of our Rule Breakers team Signs of this began to appear early Go back and re-read the November 2006 issue when you'll see me celebrating a telling achievement.

18:10Two years into our service, we had just watched three different stocks rise 200 % or more, and all three of those triples had been picked by a different member of my team. Tim had a hand in one of those, Akamai. Back then, it was a triple. Today, it is a quadruple. Since then, Tim has brought another four-bagger to our community. Salesforce.com, selected in early 2009. And a few months after that, he tapped Rackspace Hosting, which has more than doubled our money since. Tim's had his losers too, haven't we all? Why did I listen to him on Alvarion and Secure Computing? But as we've demonstrated again and again in Rule Breakers Investing, our winners' gains far outweigh our losers' losses.

19:03I like to think of Rule Breakers as our most motley service. Motley was, of course, the many-colored garment worn by court jesters. In the same way, this beautiful patchwork quilt of a scorecard we're building up here has been a truly collaborative effort. Different colored ideas from several foolish sources. The team is diverse, but our focus is singular. We pick exciting and dynamic companies that are building the world of tomorrow. And in contrast to so many professional money managers and analysts, we show these stocks patience. Turns out that's been a pretty profitable way to invest, even in sleepy markets.

19:49All right. So a few thoughts now after the Tim Byers issue essay from yesterday. The first one is I'm remarking there in October 2010 that we were at all-time highs. Now, whenever I talk about all-time highs, it always sounds like some remarkable moment in time and something that we've all worked hard to get to and something that feels rare, like climbing a mountain and finally getting to an all-time high. But anybody who's invested for any meaningful amount of time will recognize that all-time highs are actually kind of normal. Typically, the market going up over time, two years out of every three, and on average, nine to 10 % a year, but some years up 38%, other years down 18%.

20:34But all-time highs are frequent. And so you should not be afraid of them. When a great stock hits an all-time high, that doesn't mean you should stop buying it. It means, in my experience, especially if it's a rule breaker, a classic true blue rule breaker, you should probably be buying it right then, and you should expect to hit more all-time highs over time. After all, the only way we ever get graphs to go from lower left to upper right is constantly hitting all-time highs, and it's not continuous, of course. It's continual. The big difference between the words continuous and continual are continuous means constant, whereas continual means recurring.

21:14And of course, all-time highs are not constant. They never will be for investors. Otherwise, it would be a very easy game to play, wouldn't it? But they are continual. And let's remind ourselves of that looking back now 16 years ago at 2010, where I'm just calling it out. I'm not crowing about it because it's something you should expect. And here we are again in 2026 looking at all-time highs. That's not weird. That doesn't mean everything's about to fall apart. That's just, if you take a whole life approach to the market, that's just kind of what happens recurringly. note number two about this essay the directly comparable s &p 500 for rule breakers members there in october 2010 keep in mind we we launched the service in october 2004 that's why i'm calling out the sixth year anniversary of the start of the service the directly comparable s &p 500 at that point was negative that is quite remarkable that doesn't happen over many six-year periods and especially when I think about our for-profit business, The Motley Fool, which we started in July of 1993, so now some 32 or 33 years ago.

22:24It's incredible for me to think that we were getting people to pay for our advice during a period of time where the S &P 500 was actually negative. On average, it was down over that six-year period. So I'm not making any big point about it other than to call that out. I'm glad to say it hasn't been negative for most of the years since. And overall, of course, playing the long game, it's going to be wildly positive. But it's really interesting for me to get back in those shoes, to put on that lens again, and to think about where we were in October 2010, six years into our service with a stock market that overall was down.

23:02A third thought reacting to that essay, I'm mentioning in that essay that we'd made 144 recommendations thus far in the history of the service. And that just makes me think in some ways of my 35 stock samplers that I've done with you on this podcast over several years, where if you do the math with me, 35 stock samplers means I picked 150 stocks. Again, pretty big volume, very comparable to the 144 I'd picked at that point for Motley Fool Rule Breakers. And by the way, for our new episodic series, 10 years later, where we let 10 years pass and we look back at each of those five stock samplers, the next one I will be recording on February 10th.

23:49That will be exactly 10 years to the day after my third five stock sampler, which was entitled Five Stocks to Feed the Bear. So again, just about a month from now, in February's second week, we'll be doing 10 years later, Five Stocks to Feed the Bear. Now, for this essay, back then I could only review six years of results because that's how old Rule Breakers was. For my five stock samplers, of course, we initially only looked at about three years of results. it is an eye-opener how badly you can crush the market by simply holding stocks and reviewing results from 10 years later. We hadn't had the good fortune yet in October of 2010 to have been running that service for 10 years, but it's been well more than 10 years since.

24:41I also want to mention the two stocks that I called out that Tim had picked in that particular issue. And as I read those company names again with 2026 eyes. Are you like me? Going, I'm sorry, what? Who? Acme Packet and ClickTech were the two new picks in October of 2010. You're probably curious what happened to them. Where'd they go? Well, ClickTech was bought out six years later in 2016. It was bought out at $30 a share. Our two positions in Rule Breakers from the six years before were both at cost basis of about$23 a share. So there we were six years later in the Rule Breaker service seeing ClickTech, by the way, that's spelled with a Q.

25:26This is really bad. Q-L-I-K was how they spelled their company name, but it ended up not being a great stock pick, unfortunately. Bought out at$30 when we recommended it at$23 six years before. The other stock, I'm sorry to say, did even a little bit worse. Acme Packet, which was an internet telephony company, was bought out by Oracle three years after we recommended it in that episode. It was bought out at a lower price than our cost. So here we have two stocks that were picked that issue for Motley Fool Rule Breakers. Both of them were bought out within three to six years. Both of them underperformed Neither was as awesome as some of Tim's other picks Like Salesforce, which I called out as a four-bagger in that essay Today it's now up 38 times in value Tim also would go on around the same time to recommend Alphabet Of course, it was Google back then when it came public And today Alphabet is a 28-bagger for Rule Breakers members Not to be forgotten, by the way, as we get ready for essay from yesterday Number three is that that team that I called out, of course, highlighting Tim for understandable reasons in that essay.

26:42But Rick Munarez and Carl Thiel, team members back then and all of them are still on the Rule Breakers team today. And they're not even that old, by the way. I'm a little bit older than any of them and I'm 59. But I'm absolutely delighted to note that our Rule Breakers team that we were building two decades ago is right there picking stocks today at Motley Fool Rule Breakers. And the last thing I want to highlight is maybe just a pull-up quote from that essay. I'm just going to read it again because it's so profoundly true of Rule Breaker investing. If you're a regular listener, if you've read my book, you already know this lesson.

27:20But there I was writing it in October 2010, and I quote, Our winners' gains far outweigh our losers' losses.

27:53Make a close with your old tax. Save you until the 17th of February. Your deal is on Spasim.de.

28:02Alright, on to essay from yesterday, number three. We're going to fast forward in time again.

28:12This time a lighting upon February 2012, the calendar page says. And the title of my February 2012 essay for Motley Fool Rule Breakers was greatest issue ever. And here we go. I picked up our greatest issue ever recently. Greatness here refers to the performance of the two picks made in any given issue. Our greatest issue ever was March 2009. Before I mention the stocks, I want you to remember where you were in March 2009. For me, that's easy. On March 1, 2009, I went to sleep at 2.50 a.m. I woke up at 8.15 a.m. Yes, I meticulously keep my iCal calendar, even noting my sleep and wake times. I said goodbye to my wife, who was flying to North Carolina that day.

29:10And, but never mind, as they say in movie Airplane, that's not important right now. More important is where we were, where our heads were as investors. I'm pretty sure mine was nearly buried underground at the time. Things were so ugly. As I wrote early that year, quote, Not only did 2008 feature the worst drop in 70, that's seven zero years, but our average stock is down 33 and a half percent, end quote. Do you have any idea how dispiriting it is to run a stock picking advisory service, call yourself a professional, and five years later to have your average pick having lost one third of its value?

30:03But the discipline of running Rule Breakers as a steady, long-term, buy-to-hold service forces us, in the best way, to keep making picks, keep up the act of investing. And so the March 2009 issue featured the debuts of Green Mountain Coffee Roasters and Mercado Libre. And from that fateful day, Green Mountain has risen 426 % a five-bagger. From that fateful day, Mercado Libre has risen 497 % a five-bagger. That was one magical issue. Four reflections on our greatest issue ever. One, what a great month to be picking stocks. The March 2009 issue was the single best month to be picking stocks since Rule Breakers debuted in October 2004.

31:02As you can see at our recommendations tab, the S &P 500 from there has gained, as of this writing, 73.9%. Two, it felt like the worst month to be picking stocks. already covered, but please note the bullish implications for 2012 through 2014, especially for rule breakers like me, who had a really difficult 2011. Most rule breaker stocks caved in from July to December 2011. In just those six months, our scorecard lost half its all-time gains. By December, once again, it felt really hard to pick stocks. 3. Relative performance counts. Though the market is up 74 % since March 2009, our two picks are up hundreds of percentage points higher.