A spiffy pop is a beautiful thing. David Gardner explains the roots of this very Foolish term – and why only long-term investors usually experience them.
Rule Breaker Investing
The Tale of Spiffy Pop: Baidu and Netflix
It's the Rule Breaker Investing Podcast with Motley Fool Co-Founder, David Gardner. And welcome back to the Rule Breaker Investing Podcast. My name is David Gardner and thanks for joining me. This one is number 14. Hope you've enjoyed the previous 13. This one is going to be like all the others, I hope, in that my goal is to do what the Motley Fool has been trying to do for 22 years now and that's to educate, to amuse and to enrich. Exactly the phrase printed on the front page of Keyword Fool on AOL back in the day, August 4th of 1994 when we debuted to educate, to amuse and to enrich and today I want to start by defining a term, a term that isn't used casually in many conversations these days but it's a beautiful word and it's reification. Raise your hand if you know already what the word reification means. I do see a few hands up but I think a lot of us don't exactly know what reification means so let's go over briefly the definition as you might find it in Webster's to convert into or regard as a concrete thing, reification. What are some examples? How about IQ? Intelligence quotient. Now, that's a measure of intelligence. It's not the measure of intelligence. There are many forms of intelligence as we now know but as soon as somebody invented a test and said, "Take this test. Your score is 113. That is your intelligence." The intelligence quotient kind of reified the concept of intelligence. Probably not quite fairly. It probably had a good aim overall but that's an example of reification. What's another one? Here's an even sillier one. The Super Bowl effect. This is a documented effect, at least this was popular some years ago. I don't know if people still talk about this anymore but the idea was that in years in which in American football when an NFC team, a national football conference team wins the Super Bowl, the stock market would rise more often than not and so that was what I would call mere coincidence was reified, became a reification when it was started being referred to as the Super Bowl effect. Is the Super Bowl effect real? Is it something that you could expect to occur? I don't think so but that's another example of reification. How about one more quick example? The Velveteen Rabbit, I admit I have not read this story to my children in a long time. I don't think they would appreciate at college age me sitting them down and giving them the Velveteen Rabbit one more time but the idea was we loved the Velveteen Rabbit into existence. It was that love that caused the Velveteen Rabbit to be reified, reification. I decided eight years ago that there needed to be a thing that hadn't been before. In fact that phrase these days we often hear someone's like, "Is that a thing?" That's kind of like has that been reified in a much more geeky way of putting it. I decided there needed to be a thing for investors because so much of the market coverage and focus is so short term, very trader oriented, trader the opposite of the word investor as I hope you know from Rule Breaker Investing podcast lore, there had to be a term or concept to really get across to the world at large on behalf of us investors and so first I had the concept but then we needed a word so here's the concept. By the way we're going over Spiffy Pop. This is the Spiffy Pop podcast for those who know what Spiffy Pops are. Here was the concept. I had seen it happen in other investors portfolios and I had caused it to happen in my own portfolio a number of times and it's a beautiful thing. It's when you make more money in a single day than you paid for that stock whenever you purchased it way back when. You make more money in a single day than you paid for that stock when you bought it. It is a beautiful thing when that happens and many people don't even know it can happen. For many people they don't even realize that the stock market could be full of such riches and others who are often unwilling to be patient enough to actually let that happen. But I had seen it happen in my grandfather's portfolio, I had seen it happen in my father's portfolio and I had seen it happen in my portfolio and I decided that we needed to have a term for this so that we could talk about it with the world at large and so eight years ago it was May of 2007. We launched a contest at Motley Fool Rule Breakers, my premium service that I hope you're subscribed to. I said it out loud to the world at large, our membership, "Hey, submit a term. What should this be called?" We got over 300 different terms nominated, some crazy funny, some very good terms and it all came down to a few and I got, I reserved for myself the final pick and I just decided I loved the phrase spiffy pops, spiffy hyphen pop. Why because people talk all the time about this stock popped, this or that, it's very much a one-day thing, "Hey, do you think that stock might pop?" But when a stock pops in this way, when let's say you paid $15.37 a share back in 2004 for a stock that just today went up $16 a share, that's a very special pop. And for us at the Motley Fool, that's a spiffy pop. I'm happy to say that the day after we announced the official term to Rule Breaker members on a Thursday, that very Friday, the very next day, a stock in the Rule Breaker service spiffy popped. It was like magic, it was a quantitative and a quantitative was bought out by Microsoft. Just to put some clothes on it, we had purchased shares of a quantitative for Motley Fool Rule Breakers, we recommended the stock back on December 20th of 2006, at $25.14 a share. And as it turns out, just six months later on May 18th, 2007, a quantitative went from $35.87 to $63.79, it went up 78% in a single day. That was quite a pop by any measure, thanks to Microsoft's generosity paying a huge premium for a quant of the advertising data company. But since we'd only paid $25 a share, for that stock to go up $27 a share in a single day was a spiffy pop. So just a little bit of Rule Breaker's lore there for you, a day that those of us who are around Rule Breakers back in 2007, we'll always remember the day after we revealed our reification, spiffy pop, we had a stock spiffy pop. We'll fast forward to 2015, and we've just had our 21st spiffy pop among all Motley Fool services, 21 spiffy pops in a single year, I'll speak about that in a second. Let me just mention what the stock was, it was Baidu, Baidu, which has been a wonderful top performing Rule Breaker stock, the Chinese Search Company, Chinese stocks much maligned and often controversial, and certainly in the midst of a downdraft in the past couple of months, but what a tremendous stock it's been for those of us who've just bought and held Baidu for about 10 years now. And when Baidu did spiffy pop on September 16th last week, that was the 13th time that it had done it for Motley Fool Rule Breakers. And that triggers a new term that I want to introduce, and that's the Forget Me Pop. So if you're still hanging with me, you're still willing to play silly language with me, we're having fun. When a stock starts spiffy popping, it sometimes gets contagious. After all, if it's gotten to a lofty number, sometimes a small percentage change in that stock will trigger another spiffy pop. And at a certain point, admittedly, it gets boring counting them. It's a beautiful kind of boring, but it does get boring counting it when, for example, these days if Netflix rises a dollar a share for us in Motley Fool's stock advisor, that's just about a spiffy pop. No one's really interested in that anymore, and having a big celebration doesn't make a lot of sense. So when a stock hits that baker's dozen, that 13th spiffy pop for us in our services, we formally call that the Forget Me Pop, and we no longer count spiffy pops. So by do you are a wonderful stock, but over the course of 2015, 21 spiffy pops, and in fact, Netflix, speaking of that, was the 100th historical spiffy pop when it spiffy popped on July 15th of this year. So geeking out a little bit this week on spiffy pop lore, but I hope you understand underneath this what's really going on. And that is that you as an investor are finding a great company. The only way you'll get a company to go up that much over time is if it's a great company. That's number one. Number two, you're buying the stock. A lot of us hear about great companies, or we might admire a company, but we think the stock's high, or we want to wait, and we don't buy the great companies of our time. A lot of people don't do that. They kind of sit on the sidelines and wait for a dip, and as I've often said, and we'll say in the future, dips buy on dips. So number two, you bought the stock, and then of course number three, you held the stock, and often you had to hold through a lot of misery. By do, once lost two thirds of its value as we continued holding it back five or six years ago, so it takes a lot often to ride these stocks to the point that they spiffy pop. I mentioned a quantitative earlier. That was a very unusual spiffy pop. We had held the stock for six months. It went up over 75% in a single day when it had already done pretty well in those six months. So that was a unique case. And of course, it never spiffy popped again because it was bought out and disappeared into Microsoft. So by and large, that's the tale of spiffy pop. I hope you'll join our services if you haven't already on Motley Fool Rule Breakers. If you see me on our discussion boards or stock advisor or supernova, my screen name is TMF spiffy pop. That's me. In fact, I changed it the day before Shakespeare's birthday five years ago, April 22nd, 2010. I decided, you know, I've been doing this spiffy pop thing for three years now. I think I'm going to become TMF spiffy pop. So emblematic of me. I hope you see the beauty of this. I hope you wish for a world where more people spiffy popped where people understood the value of these. We sometimes use synonymous with spiffy pop day baggers, stocks that double your original cost basis in a single day. I hope you see the beauty of this form of investing. It's a lot of fun. You just have to be patient and let it happen over time. And I want to close by reading a paraphrased post I once wrote about seeking advice and looking for advice. I hope this, I hope this speaks to you. I wrote for any investors who've ever made a true spiffy pop, a real life investment decision with real money that plays into real consequences, really positive consequences for you and your family and in the market. I encourage you to ask any source of financial advice for you, any source, have they ever actually made made one? Has your financial advisor, has your television commentator, has your favorite journalist? Have they ever made a spiffy pop? Do they understand that concept? I think we have to recognize as spiffy pop investors ourselves that at different points, we thought our stock did look overvalued, but we kept holding at other points. We watched our stock cave in and we kept holding, but it truly takes patience, patience driven by an insistence on looking past the next quarter's earnings, sometimes the next year or two's earnings to see a place where the company you've bought finds market dominance, finds leadership and high margin success in these are the spiffy pops. Well that's been it for Rule Breaker Investing this week. I hope you've enjoyed our new terms. Really, I said there was just one new term reification, but we introduced several. This podcast and I'll probably have caused a return back to this phrase, spiffy pop from time to time. So I hope we now have achieved a lingua franca together. We have a common understanding. Let me mention as I go that Motley Fool 1, our premium service at the Motley Fool, our top service is open this month and I hope you'll take a look, especially if you're a super Nova member or a Motley Fool stock advisor or Rule Breaker's member, Motley Fool 1 is our most fully featured and I think most wonderful service at the Motley Fool's to take a look. I'm David Garten and thanks for joining me this week, talk to you next week, Fool on. As always, people on this 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. Learn more about Rule Breaker Investing at rbi.fool.com. [music] [BLANK_AUDIO]