In the midst of market turmoil, renowned investor David Gardner looks past the near term to 5 stocks he favors as market-beaters over the long term.
Rule Breaker Investing
5 Stocks for the Next 5 Years
It's the Rule Breaker Investing Podcast with Motleyful Co-Founder, David Gardner. Welcome back to Rule Breaker Investing. I'm David Gardner, your host. I'm delighted to have you join us. And by the way, if you're enjoying the podcast, we're very subscribeable on iTunes. So use iTunes. It's a wonderful way to download the podcast, have it there when new ones pop up and be ready when you're jogging or driving around, and you want to listen to RBI or any of our Motleyful podcasts. I think iTunes is a wonderful way to find this, but it's also certainly possible to listen to this on our website. And I know some members, especially Motleyful members, have expressed a desire to be able to listen to this directly on our website, which we're trying to make possible as well. Anyway, here we are. I think this is number 11. I've started to lose count, which means this podcast has been going long enough and working well enough that I don't have to think about that anymore. But we'll call this number 11. And I want to do something different this week because largely in the previous 10, I've been talking about how to invest or how to think about investing. And indeed, that's really what I love doing is thinking globally or right side of the brain or differently about investing and just thinking differently and applying that to investing. And that's going to remain a big part of Rule Breaker Investing. But we also, in some of our initial promo materials for this show, talked about how I'll talk about companies that I like and real game changers. And so I wanted to do that a little bit this week. I have five companies, all of which I favor if you're a long-term investor. That's a tautology. I think you know that by now I didn't actually mean to say long-term investor because investor itself means long-term to me. So if you're an investor, I like these companies for the next three years plus and I'm going to do something special with them right at the end of this week's podcast. So without further ado, alphabetically, let's look through five companies in the supernova universe. Five companies that I like for new money now going forward next three plus years. First one up is Activision Blizzard. The ticker symbol is ATVI. Activision Blizzard is about a $20 billion company today. And why do I like this company a lot? I like this company because it is the leader. It is the forefront of such an important medium for our time. And that is interactive entertainment. Now video games themselves have had different points, bad reputations or good reputations. But one thing's for sure, video games these days are played more than movies are watched. And that trend is only going to further extend itself when we start getting into things like virtual reality. And Activision Blizzard, whether we're talking about Call of Duty, one of the best-selling franchises of all time, or all the Blizzard games, like Hearthstone, a game that I love, or World of Warcraft, certainly many, many people know these games. In fact, in the most recent quarter, the company logged three and a half billion hours of gameplay. So all of us, if you play at any of the games I just mentioned or any Activision Blizzard game, you contributed to three and a half billion hours of play. And this is a company that really understands its business. It has great brands. Some of these brands are going to end up being movies themselves, like World of Warcraft, which will be in theaters in the next two years. So I really like this company. It's about $28 a share today. I'm a shareholder. We've held it for a long time. I'm going to continue holding it for a long time. So Activision Blizzard up first this week. Number two, now for something completely different. Casey's General Stores, C-A-S-Y on the NASDAQ, Casey's General Stores, a $4 billion company today. If you're in the Midwest, you may well recognize this convenience store. You may have stopped over, filled your gas there. You might well have had the pizza, which a lot of people love. In fact, here's a fun fact about Casey's General Stores. Casey's General Stores is the number five seller of pizza nationwide. I'm pretty sure Domino's is up there somewhere and probably Papa John's is there too. Casey's is number five. And this is from a company that is only right now in less than a third of the U.S. states. And it's a very well managed company, fun, down home, tends to target small communities and is an appreciated resource and business when people are driving through any one of 14 states worth of Midwestern towns with a lot of expansion possibility, profitable. So I like this company a lot. It's at about $105 right now. It's a $4 billion company, one fifth the size of Activision Blizzard. Third stock that I'm looking at going forward thinking this is a market beater is FireEye. FireEye, the ticker symbol is F-E-Y-E. FireEye is in our Motleyful Stock Advisor service. By the way, all five of these are from my supernova universe. Let me just pull back for a quick second and explain what that is. So if you're a Motleyful Rule Breakers or Motleyful Stock Advisor member, then you know that I pick stocks every month, two of them in Rule Breakers, one of them in Stock Advisor, and I've done so for 10 years plus, which means since I tend not to sell over the course of more than a decade, I have a couple hundred companies that are actively recommended by me and in my services. And we're beating the market with those companies. The supernova universe, which simply takes all 200 of those companies together, has been a wonderful place to be an investor over the last 10 years. And I think it's going to be a great place to be an investor over the next 10 years. So all five of these companies are drawn from the supernova universe. And if you're watching me on Periscope this week and experiment, we're having a little bit of fun with, you can even see behind me a Motleyful supernova banner, where you're going to see just a mention a little bit more of this service, a service that we open a couple times a year. In fact, later this month, Motleyful One, which is kind of the all you can eat top drawer service at the Motleyful, which includes all of our services, supernova is one of those services. So if you're interested in Motleyful One later this month, you can join us in supernova as well. Anyway, FireEye is a cybersecurity company. And it's a leader in cybersecurity. It's a company that presently is not profitable, which causes a lot of investors to stay away. The reason it's not profitable is because they keep spending money to hire more and more programmers, and they can attract some of the top talent in the world in the United States of America today. FireEye has a visionary leader. And even though the company is not presently profitable and won't be for a few years, I believe the space of cybersecurity, the more I think about how the internet is a part of your life and mine across almost every dimension from the social to the business. We can just see the incredible importance of all the data that we're constantly creating through all of our online interactions. And so I love this space in this area, and I love the companies that are fighting the good fight. And I think the good news is the good guys are always going to outnumber the bad guys. So FireEye is definitely part of the good guys, and its effort to protect and make this medium work globally is really important. So each of these five businesses, completely different company, but each of them doing good things in the world. And FireEye is a $6 billion company today. The stock is about $37 a share. Number four this week, let's keep going alphabetically, let's go down to letter M, but let's leave the United States of America, let's go to South and Latin America, and let's go to Mercado Libre, the ticker symbol is M-E-L-I. And this is a company that is essentially the dominant player for e-commerce in South and Central America. And increasingly other Hispanic speaking areas of the world, Mercado Libre is basically building out a digital ecosystem where goods are flowing through from merchants to customers like you and me. And Mercado Libre is the leader. So if you think about that important and growing area of the world, Latin America, and ask yourself, if you could have been around in the 1990s, as many of us were, and you could have owned Amazon.com or eBay from that point forward, you would have done pretty well, by the way. That's kind of where I think we are right now with South America and Latin America. So I think you have an opportunity to own the primary dominant platform of e-commerce in an important segment of the world. Not only that, but this is a company that has many different features. It kind of is Amazon, and then it sells goods, and it is eBay, and that it serves as a marketplace for buyers and sellers to meet each other. They also have their own PayPal-like payment system, Mercado Pago. You got all of that for a company that today is only worth $5 billion. In other words, write about the same size as Casey's General Stores. So I like Mercado Libre. I've liked it for a long time. It's been a great rule-breaker stock. I like it going forward. And finally this week, let's stay with M, let's stay in the rule-breaker service, and let's go with middle B, middle B corporation, which is an incredible beneficiary of the growth of eating out. Fast casual in the United States, but pretty much pizzas, anybody who has or needs a cooking oven probably has one or more middle B products. Middle B, a brand name that many people wouldn't recognize. Most of us have never heard of middle B, but within its segment, selling to restaurants, it is the top brand. It also owns some other top brands like Viking, if you're familiar with those kitchen ovens and other implements. It's a recent acquisition by middle B. Why do I like middle B? In addition to the growth of fast casual anyway, I like middle B primarily for two reasons. It has one of the best CEOs in America, Salim Basool, somebody that if you're a Motley Fool member, you've no doubt heard about Salim, Salim is in fact spoken at at least one or two Motley Fool member events in years past. He's a brilliant CEO, and what he really does is he goes and he's an acquisitive guy. So middle B has largely grown through acquisition. It has acquired numerous smaller companies, and when middle B meets with you, usually pretend you are a successful maker. We'll have fun here of kitchen oven mitts, and middle B decides it wants to add kitchen oven mitts to its business. It's going to tell you two things. It's going to say first of all, great company, we like you, but we can do two things for you if you let us buy you. We can extend you globally because right now you might just be a regional kitchen oven mitt company, and so we as middle B work globally. So we can take you globally and further, this doesn't really work with kitchen oven mitts, but we understand technology. Technology keeps growing, and you probably can't invest as much to improve to put chips into your kitchen oven mitts as we can to make it so that people never lose their kitchen oven mitts because now you can have the find my kitchen oven mitt technology, I'm making this up, but this is what middle B does. It basically improves the technology of the companies that it buys and extends them to a global market, and so I think this is again another very promising stock. It has, like my others here, been a good stock already, it's been a very fine investment over the last decade, there have been few better stocks. The ticker symbol is m-i-d-d and middle B is today about a $6 billion company, priced at about $105 a share as we tape this week's podcast on Tuesday, it happens to be the first day of September, not a great day for the market, by the way. In fact, as I close, the market is actually down about eight or nine percent of the last three months, which is the first time that's happened in quite a while, so it's kind of fun to talk about companies in the midst of a lot of turmoil, companies that I think will certainly live out this present turmoil and probably be very successful, I hope all five of them over the next ten years and reward us as shareholders, let me officially close by drawing a few points overall about this mix of companies. First, it's a very motley mix, this is a completely, each of these companies is a completely different business, and I really like that when you're building a portfolio or thinking about investing, I really like to have a real array, we have everything from the dominant e-commerce player in Latin America right through to gas station convenience stores in the middle west, and the best video game company of our time, so that's motley. Number two, I like all five of these pretty equally, I'm not here to say load up on this one or take less of that one, when I invest, I don't typically begin to pick favorites very much, I tend to make equal investments in things and I let them play out over time so that my biggest holdings aren't because I bought the most of them at the beginning, my biggest holdings end up being the ones that prosper the most, so today one of my biggest holdings for example is Netflix, and the reason that I personally own a fair amount of Netflix is because I've just sat there and let it grow brilliantly over the course of more than 10 years, and that's the way I think you should invest, I think you should find good companies, make good equal investments in them, and let them grow. So there are my five stocks, five, five ideas for the next five years, let's call it, let's call it that, and I mentioned earlier that I was going to do something special with them, here's what I'm going to do, I'm going to type them in to motley full caps, so at caps.fool.com we have had a platform for 10 plus years here at the full where members can come in and score themselves for the calls that they're making, and I think this is a really important aspect of the motley full, something from day one, August 4th, 1994, when we first debuted online we said part of trying to beat the market is learning, and part of learning is scoring yourself, and part of scoring yourself is being accountable, and in a world in which many financial commentators and many firms don't really actively score themselves and they may not want you to score them, I think it's really great to self score, so I've learned a tremendous amount by, well, whether it's stock advisor or rule breakers or caps, all of these I'm being scored for every pick that I make as I always have been, and so I think it's only right then that I take these five stocks and enter them in here, now as I look over my caps page of these five stocks I already have two selected long term positions there on caps, so what you'll see on my page is you'll see the three that I had not selected Casey's, FireEye and Middleby will all be new picks on my caps page, but Activision and Marcata Libre have been in place for quite a while, and probably will stay in place quite a while longer. You can check out caps.full.com, my screen name is TMF Spiffypop, you can see my page right there if you like. Now in conjunction with my doing this, hey I encourage you to do this too, in fact with any stock that you ever have a hunch about, whether you think it's going to outperform or underperform the market, caps is a free site, so you can just register and join us caps.full.com and pick stocks right along with me, and by the way, one of the things we do is we score you and we rate you, and so if you're somebody with some ambition you think you're kind of good at this, we would love for you to join our platform and show just how good you are, so I think you'll encounter all that and more at caps.full.com. And that's about all I want to say this week, I hope you've enjoyed this edition of Rule Breaker Investing, if you want me to look back through the supernova universe from time to time, just let me know in your comments on our site or on Twitter, or we can talk about it on Periscope a little bit after the show this week, anyway, thanks a lot for tuning in this week, I look forward to checking in next week with you, till then, vlog. As always, people on this program may have interest in the stocks they talk about, and the Miley 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.full.com [Music] [BLANK_AUDIO]