Yahoo Finance Reviewing the Original Rule Breakers 5-Stock Sampler, and Offering a New One
Every 10 weeks or so, for the past three years, Rule Breaker Investing podcast host and Motley Fool co-founder David Gardner has been picking sets of five stocks he recommends and sharing them with his listeners. There's always a time frame, and usually a clever theme -- World Cup, for example, or "having your cake and eating it too" -- but while those things may change, one point stays absolutely constant. When the anniversary of each sampler rolls around, he tallies up the share prices, talks a bit about what's moved them, and scores the mini portfolio against the S&P 500. Because win or lose, Fools keep honest score.
As this episode drops, we are three years into that very first sampler, which he dubbed simply "Five Stocks for the Next Five Years." The picks were Activision Blizzard (NASDAQ: ATVI), Casey's General Stores (NASDAQ: CASY), FireEye (NASDAQ: FEYE), MercadoLibre (NASDAQ: MELI), and Middleby (NASDAQ: MIDD) -- and we'll tell you up front that at this stage, David's far from batting a thousand on the set. Next, he debuts a new sampler. Now, all the recommendations he makes in such sets come from among the 220 or so stocks he oversees in the actual Motley Fool Stock Advisor and Motley Fool Rule Breakers portfolios, which together we call the Supernova Universe. And as he reviewed that big list, it crossed his mind that he could randomly narrow it down to companies starting with one letter and still pull a solid mini portfolio for his fans. Challenge accepted: Enjoy five stocks that start with M, and let's all hope he was right.
A full transcript follows the video.
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This video was recorded on Aug. 30, 2018.
David Gardner: And welcome back to Rule Breaker Investing! Well, it's a new month, it's a new day, it's a new minute, a new second. Thank you for passing some of your presence with me. I am always honored to think that you would suffer a fool gladly.
And whether you're a longtime listener who heard our very first five-stock sampler back when I did it on September 2nd, 2015, or you're just tuning in for the first time, this moment I'm delighted to have you as a fellow Rule Breaker here along the path of life.
Well, I'm glad that I referenced that very first five-stock sampler September 2nd, 2015 because that's what we're going to be doing today. We're going to be generating our newest five-stock sampler. I'm going to have five new stock ideas -- recommendations for you -- coming from our services; coming from stocks that I picked. A sampler of Motley Fool Rule Breakers and Motley Fool Stock Advisor, the two services that I've managed since we launched them, respectively; Rule Breakers in October 2004 and Stock Advisor in March 2002. Both running with more than a decade's worth of stock picks from me trying to beat the market. Trying to help you beat the market.
And I'm really happy to say both of those services have proved more than their weight in gold. They have whomped the market over these past 15 years, or so. And let's hope that the five-stock sampler that I'm pulling from those services and sharing with you in today's podcast will also be beating the market some years hence.
And, yes, since we've done this from time to time [in fact, every 10 podcasts, or so, I do my next five-stock sampler]. Well, if you're doing the math with me this podcast is now in its fourth year. That's right. We've transitioned into September. We launched in July of 2015, so we're now in our fourth year.
So, yeah, we've done a bunch of these already and I've always made a point of going back and scoring them and seeing how we're doing. So we have the fun, in this week's podcast, of reviewing one of those five-stock samplers before I provide our newest one. And not only that, but we will be reviewing the very first five-stock sampler that I ever did on the show. I mentioned it was September 2nd, 2015, so here we are now, three years later. It was the 11th podcast we'd ever done at the time.
And I was saying in that podcast that the first 10 -- I've just been talking about investing. About how to invest and about stocks. And talk is one thing, but we also at The Motley Fool, every day, we walk the walk. So I said back on that 11th podcast in Rule Breaker Investing history -- I said, "I'm going to pick some stocks for you. I'm going to check in those years later and see how they've done and see if walking the walk is as satisfying as the talk sometimes might sound."
And I'm delighted to be presenting for you a review of that very first five-stock sampler. It was called, Five Stocks for the Next Five Years. So here we are, three years later. The game is not over yet, but we're definitely going to check in as I do on an annual basis with each of these and see how those five have done before going to our new-themed five-stock sampler later in the podcast.
All right, so what five stocks did we talk about three years ago this week?
Well, I'll present them alphabetically as I did on that first podcast, Five Stocks for the Next Five Years. And the very first one, alphabetically, the company name is Activision Blizzard. It is the very successful interactive entertainment company run by CEO Bobby Kotick. It's been one of our favorite long-running stocks in Motley Fool Stock Advisor.
In fact, when I was talking about it three years ago on the podcast, I was talking about the prospect of a movie that would be made based on World of Warcraft. And at the time I was saying that's a couple of years hence, and in the meantime that movie has come out. It didn't do particularly well. I still haven't seen it. I wasn't motivated, even though I'm a former World of Warcraft player myself.
I'm really happy to know, by the way, World of Warcraft keeps showing its staying power. A lot of times people think, "Well, finally that whole massively multiplayer online role-playing game clearly will end at some point," and yet, here this month the latest expansion for World of Warcraft has just launched and it's doing great guns for the business. So even though the movie didn't do too well, in the meantime [Warcraft, I think it was called], the business is doing quite well, thank you very much.
So how has [ATVI], Activision Blizzard, done? Well, three years ago we picked it at $28.37 at the end of that podcast, market close, September 2nd. Today it is at $73.96 this year; so from $28.00 to basically $74.00. As you can imagine, it's been a wonderful three years for Activision Blizzard shareholders. We have many in The Motley Fool community. I hope you're one of them.
The stock's up 160.7%. The S&P 500 -- the bogey we are competing against throughout this review -- is up 49.1% over these three years. An outstanding three-year performance for the market overall, but that means 160.7 minus 49.1; my schoolboy math and the spreadsheet I'm looking at tell me that's a difference of 111.6 points. We'll round to 112 points ahead of the market with that first pick.
Now, remember. Every one of my five-stock samplers has this positive -- that we are going to try to beat -- we think we can beat the stock market average with this group of five stocks. We'll have some winners, we'll have some losers, but take it as a little five-stock group which, by the way, is much smaller than I hope your portfolio is. I hope your portfolio is at least three times that size. I love to think that all my fellow Fools are diversified and have at least 15 stocks in your portfolio. You may well have funds and you might have a house or real estate outside of that, but when we just talk about the stock portion of your nest egg, I hope you have or are working toward having 15 or so stocks.
That's why when I say five-stock samplers, this is all a little bit of a game. I mean, I sure hope we're going to beat the market each time, but this isn't really a full portfolio. I'm giving you my best shot, though, so we're off to a great start with that first stock. And yet, things are about to get a little bit worse, so let's go to stock No. 2.
Stock No. 2 that I pitched you three years ago, this week, was Casey's General Stores, an extreme contrast with Activision Blizzard's business. If you live in the Middle West in the United States of America, you probably know Casey's General Stores. Or if you're passing through, you might have filled up your gas tank there.
When I was talking about this stock three years ago, a Stock Advisor pick at the time and still is, I was talking about how this is also the fifth-largest pizza company in the United States of America. That's right! Casey's General Stores -- for those in the Middle West -- a lot of you love the pizza and Casey's sells a heck of a lot of pizza and gasoline. It's kind of a convenience store business, but friendly and kind of more rural.
You're really happy to come across one because there aren't that many as you're driving through, let's say, Iowa. You love your Casey's. A lot of people love Casey's, but unfortunately the market hasn't loved this stock very much. Three years ago this week, Casey's was at $104.80 a share. Today it's at $112.76 a share. So, I mean, it hasn't been horrible. The stock is up 8%. The problem is the stock market is up 49% over the same time, so Casey's General Stores has been a serious laggard.
That first year -- from 2015 to 2016 -- Casey's was on fire and was off to a great start, but things kind of slowed down. In a lot of ways, fast casual dining hasn't been a great place, and to the extent that Casey's General Stores with its pizza business plays into this a little bit, companies like Chipotle have faltered in recent years. Well, that isn't the whole story for Casey's. It's part of the story.
I will say this going forward. Just like Activision Blizzard, I like this stock today. I would buy it right here going forward. Let's hope it will beat the market in the next couple of years before this particular five-stock sampler game ends -- Five Stocks for the Next Five Years -- so this will end in September 2020. Let's hope that Casey's performs a little bit better.
So doing the math, then, the first one was a +112. This one's a -42, so we're up 70% as we get to Stock No. 3 where things are about to get much, much worse.
So, yup, I was taking a shine three years ago this week to FireEye, the cybersecurity company. The ticker symbol is [FEYE]. I recommended it in Motley Fool Stock Advisor and then, in fact, it had a good month or two, and as I am wont to do I then rerecommended it because I like to add to my winners and I felt really good about this business, as I still do today, because I think that cybersecurity is going to be around for the rest of our collective lifetime.
As long as there is an internet and the technology that we have today, somebody's going to be trying to mess with people. And as I said three years ago, I think the good guys are always going to outnumber the bad guys, but bad-guy hackers [a lot of hackers are really good guys], but some bad-guy hackers are always going to be trying to steal things, or jam a site so people can't use it, or who knows one day? Take control of your self-driving car. There are all of those security concerns. There always will be as dependent as we are on technology, and so FireEye for me was a smaller-cap company and one I liked at the time.
The stock was at $37.47. Today FireEye is at $16.38 -- from $37.00 down to $16.00 -- which really hurts. So doing the math, this stock is down 56% over these three years. Five Stocks for the Next Years. Not this one. This was a horrible pick on my part. The stock market, of course, is up 49%. So doing the math, that's a -105% in the loss column. So we were up +70 going into Stock No. 3. We just gave all of that back and more. We are in the hole 35% behind the market looking at these three stocks together. I've got a little bit of good news for you. These weren't the only three. There are two others we'll be talking about, but FireEye, alphabetically, has put us deeply in the hole.
You know, the company wasn't profitable back when I recommended it. It's had a management change. It's had some problems. Some of its technology is not necessarily keeping up with state of the art. It is not the world-class leader in cybersecurity. Companies like Palo Alto Networks are bigger, more successful companies. That's a Rule Breakers pick.
In retrospect, I sure wish I'd picked Palo Alto for the next five years when I did that three years ago. But, again, I think cybersecurity is going to be around forever. I think that FireEye is going to come back. It has bounced from its lows, here, at $16.00 so I wouldn't be surprised if we end up, two years from now, saying, "This stock's done quite well." In the meantime, we'll see.
Speaking of quite well in the meantime, in the interest of never thinking that if you believe in a trend you should just buy one company within it, frustrated by the performance of FireEye that I've generated for my fellow Fools in Motley Fool Stock Advisor, in the last few years I was casting about for more cybersecurity companies to invest in. I already mentioned we have Palo Alto Networks in Rule Breakers.
But I added Fortinet to Motley Fool Stock Advisor in April of 2017. So about a year and a half ago really happy to say that if you'd bought some FireEye and you were taking it on the chin, well maybe you decided to add some Fortinet too, and Fortinet's up from basically $40.00 to $82.00 since April of 2017. So I may have picked the wrong horse, initially, but staying in the race and seeing other horses, we've saddled up. We have some bets on some of the other jockeys out there, too. So Fortinet is another of those companies that I think are worth looking at. So let's keep moving to Stock No. 4.
Well, Stock No. 3 may have given it all back, but guess what? Stock No. 4 is about to gain it all back and then some, because Stock No. 4, picked three years ago this week on this podcast, was MercadoLibre.
MercadoLibre, the dominant e-commerce platform in Latin America. The stock three years ago was at $109.00 a share [$109.94, basically $110.00]. Today it's at $340.65 as I do this podcast. By the way, I should mention that I'm going out of the country. I've been out of the country in the past week, so this podcast you're hearing today was, in fact, taped on Thursday, August 30th. So some of these numbers will look a little off by the time you hear the podcast, but we'll assume they all kind of average out.
So MercadoLibre has gone from $110.00 to basically $340.00 in the three years since we picked it on this podcast. That's a gain of 210%. The stock market up 49% over the same time and so yup, that's a +161% in the win column. Netting that out we're now back up 126% for this four-stock sampler before we get to Stock No. 5.
I just want to say about MercadoLibre that it is in such a powerful position. Even though it's in a volatile area of the world with some very poorly performing economies, this is a company that functions like Amazon. That is it does deliveries of its stuff and other people's stuff. It also is eBay, so you can sell stuff over its platform. And it's also like PayPal with MercadoPago. So it's really got it all going on. Firing on all cylinders. And yes, this is a stock I like just as much today as I did when I first picked it in 2009. I really like MercadoLibre and hint, hint, we might be talking about it a little bit more, a little bit later in this podcast.
Finally, concluding our review with Stock No. 5. Stock No. 5 has been unfortunately an underperformer. It's a very fine company, Middleby Corporation, and its ticker symbol is [MIDD]. And the stock is up 11% since I picked it three years ago. It's gone from $107.00 to $119.00 basically. The problem is, as you already know, the stock market's gone up 49% over that time, so Middleby is an underperformer by 38%.
And in the same way that fast casual hasn't really been performing very well, this is a company that really feeds that with its commercial oven business. Middleby is really powering the kitchens of so many different eateries -- not just fast casual -- but some more serious restaurants. Hotel restaurants and [the like]. This is a leading company in its space. Three years ago I was saying about this stock that it has one of the best CEOs in America in Selim Bassoul.
I'm really happy to say in the meantime [in the past year] I've had Selim on this podcast. I hope that you enjoyed Selim Bassoul on this podcast a few months ago. In fact, if you didn't I'm just going to flag the May 9th episode of Rule Breaker Investing where you can hear me interview Selim and give his perspective on the world and his amazing personal story, as well.
So unfortunately Middleby's stock over the last three years has not been an amazing story. It's been an underperformer. It is up, and I do hope and want more things and will expect more things from him these next couple of years. And this is definitely another one of those companies, really like all of these five, that I'd be very comfortable buying today to beat the market going forward.
So Middleby underperforming by 38%, and that brings us to a final total for this review. When you sum it all up, we're ahead of the market by 88% with these five stocks. So Five Stocks for the Next Five Years, and one of them a real dog. FireEye down more than 50%. But good news -- all the rest were up -- and a couple of them were up substantially. Activision Blizzard up 161% and MercadoLibre up 210%. So an outstanding performance. The market, again, up 49% over the last three years. This group of stocks basically up, on average, 67%. And so that was a great start.
Now looking back at our very first five-stock sampler, we do have a good record. I know my longtime listeners will recognize that we've been on fire, in general, with these five-stock samplers with at least one recent notable loss; although none of these games is over yet.
Actually, of the 15 stock samplers that I've presented on this podcast, only one of them has ended so far. It was a one-year call that I made with safety stocks, and that was a winner, but none of the others has officially closed out yet, including this one, so we're not going to pound our chest too hard here, even though these stocks are 18% ahead of the market because we have two years to go and we're all in it for the long term, as you well know.
So again, to conclude, Activision Blizzard, Casey's General Stores, FireEye, MercadoLibre, and the Middleby Corporation. Five Stocks for the Next Five Years due ultimately September 2nd-ish, 2020.
Now for every five-stock sampler that I've ever done on this podcast, as I've mentioned before, these are stocks pulled directly from our services. Active recommendations of mine in Motley Fool Rule Breakers and Motley Fool Stock Advisor. And I would be remiss if I didn't mention that those services are available for you to join. I know a lot of you already have. A lot of you have both Stock Advisor and Rule Breakers.
But I also know I'm sure I have a lot of new listeners who may not already be subscribed to these wonderful services, and I have a special code for you to use to join us, and it's pretty simple to remember. So if you're driving right now, or jogging, once you get back to your computer, tap this URL in. It's JoinRB.Fool.com. JoinRB.Fool.com. That's a wonderful way to get started. Let's call it the first step on this very next day of your investing life. JoinRB.Fool.com. Join us.
[...]
That was 2015. That was then. This is now. Yup, this is my September 5th, 2018 podcast and it's time to pick five new stocks.
Now occasionally I have fun with these lists. They're not always themed in an entirely thoughtful way. For example, I remember picking five stocks for April the giraffe. That was the one where I picked five stocks and then asked what united them, and as it turned out the first letter of each of the company names spelled out the word April. It was done in the month of April and let's hope April the giraffe is happy whenever we next review them.
So, yeah, we're having fun from time to time. And that's what I'm going to go with today. This might sound a little cocky and if it is, then that will probably come back to haunt me some years later when I look back and say, "Why was I so cocky to do that particular podcast?"
But I've decided that you can pick almost any letter out of the alphabet and look up and down the 220 or so stocks that I oversee in Motley Fool Stock Advisor and Motley Fool Rule Breakers. You can look over all of 220 or so, group them by the letter that starts their name, and probably for any given letter [probably], find five winners over the next three-plus years.
At least, I hope so, since I've just picked, somewhat arbitrarily, the letter "M." And if you put five "M's" together, it starts looking like a little bit to me. I started thinking, "Mm! Mm!" Let's hope this is good. "Mm! Mm! Good!" So we're going to go with five companies that each start with the letter "M" for this stock sampler.
I'd be remiss if I didn't mention, again, that you can gain access to all 220 of those stocks and our opinions, our latest opinions on which are Best Buys Now, etc., if you were to join our services. And I think it always makes sense for me to advertise Stock Advisor and Rule Breakers, which I don't spend many weeks doing on this podcast, but for these five-stock samplers, this is where these stocks live.
So I mentioned the URL earlier, but JoinRB.Fool.com. Sure hope you will, and when you do, you're going to find a lot of other "M" stocks besides the five I'm showing off this week. So, "Mm! Mm! Good!" and I'm going to be presenting these in alphabetical order.
And I used to do this by ticker symbols, but then one of my many Foolish listeners said, "Hey, Dave, aren't you the first guy who says it's not about the tickers and let's not talk about ticker symbols? Really, it about the companies, themselves, and shouldn't we honor them with company names?"
And I said, "Yes, I certainly try to use more company names than ticker symbols on this podcast, so I'm definitely going to organize A to Z not by ticker symbol, but by company name." And so let's kick it off with Company No. 1, and that's Masimo Corporation (NASDAQ: MASI). The ticker symbol is [MASI].
Now Masimo is the purveyor of non-invasive monitoring products for healthcare. A quick, easy example. If recently you found yourself in the lab or the hospital and somebody put around your index finger something that was a small clamp [it didn't hurt, particularly, but they put a little clamp on your index finger], that's known as a pulse oximeter.
And what that's doing is monitoring the oxygen level in your blood. And if you're having a fairly simple non-invasive routine done on you, it's probably not a big threat to your blood oxygen but, on the other hand, if you're having serious surgery, if surgeons aren't aware of potentially declining blood oxygen rates, you can actually lose patients and sadly thousands of people, worldwide, every year are lost because of the failure to monitor blood oxygen rates.
That's the pulse oximeter, and Masimo is really the worldwide leader in that technology. Now, the good news is the company has many other products besides that, so it's definitely not a one-trick pony.
Now for each of the companies I'm going to present a little bit about the business. I'm going to give you the market cap when we first picked it and two things that I like about each of these.
What's the market cap of Masimo Corporation? The answer is $6 billion today. When was it first picked? It was picked in Motley Fool Stock Advisor. I selected it on December 16th, 2016. It was at $66.55 back then. Here we are not quite two years later. I'm happy to say it's gone from about $66.00 to $118.00. Remember, I'm taping this last Thursday, August 30th; so when we actually review these stocks some years hence we'll be picking our prices at market close today, September 5th. But as of now, anyway, it's about $118.00.
And now what are two things that I like about Masimo Corporation that I think you should like, too?
Well the first is results, baby. Results, results, results. I'm going to read a little bit. This is from Jason Moser. I know many of you will know Jason from Market Foolery. But if you're a Stock Advisor member, you could go to the Masimo page and see his latest update looking at its earnings from last month.
I quote: "Masimo's second quarter," Jason writes, "was another good one with total revenue of $212 million. Product revenue of $202 million grew 11% excluding currency effects with non-GAAP earnings per share up 33% to $0.73 per share. Shipments of 58,700 grew 18% from a year ago, giving the company an installed base of 1.683 million worldwide vs. just under one million in 2011. Product gross margin..."
By the way, this isn't the most fun thing to listen to, probably numbers, but I hope you're able to follow along mostly with this. It's almost over. But the main point, here, is look at these results.
"Product gross margin grew 170 basis points to 65.8% and operating margin of 24.6% was up 160 basis points as the company continues to leverage its growing installed base with sales of consumables and its attractive razor and blade business model. Masimo continues," Jason concludes, "to maintain an excellent balance sheet with cash and equivalents now at $430 million and zero debt."
So, yeah, there you have it. I like the results. The financials. Everything is looking up at this company and it's across a diversified base of products worldwide. And the second thing I like about Masimo Corporation is its risk rating. This is something I talk about periodically on Rule Breaker Investing. We rate every stock under coverage from 0 to 25 on our risk rating scale. The lower the number, the lower the risk.
One of my favorite things to find in the world [and yup, they're out there] is to find low-risk companies that can offer superior returns. One of the old saws of investing, I think, is often wrong, and that is "risk equals reward." I don't believe that. I think part of the magic of Rule Breaker Investing is that we find situations where there's not a lot of risk and sometimes substantial reward. And I think Masimo Corporation kind of represents one of those companies.
So its risk rating is just 6, which puts its risk closer to something like Apple than to something like FireEye. So Masimo Corporation, a very safe bet, but one that I think can substantially outperform. It has in the past and I expect that in the future. After all, I'm picking it fresh, here, for this five-stock sampler to kick off "Mm! Mm! Good!"
Stock No. 2 is Match Group (NASDAQ: MTCH). The ticker symbol is MTCH. Match Group. What does the business do? Well, I bet you've heard of it. I've certainly talked about it before on Rule Breaker Investing and this has been a wonderful Stock Advisor performer for many of our members.
Match Group is, of course, the biggest online dating company in the world. What is its market cap? Today its market cap is $14 billion. Now I first picked this stock in Stock Advisor on April 15th [tax day!] 2016, so here we are just over two years later and the stock, I'm happy to say, has gone from $11.34 to $49.64. It has been a wonderful four-plus-bagger in just two years for Stock Advisor members.
I don't think I have to explain much about Match Group, Match.com, Tinder, OKCupid, and a lot of other dating sites. Different strokes for different folks. Match Group oversees a large number of dating sites on yes, the biggest dating platform in the world.
And what do I like about this? Two things. Well, the first thing I like about it [I hope you were listening carefully to what I said just a minute or two ago] is the biggest online dating company in the world has a market cap of just $14 billion. Think about how important love is and finding a partner. Finding the right person. Finding something that can last you, I hope, your whole life long. Think about how important that is.
A lot of other sites -- even sites like Facebook -- human relations are so important, so love runs through Facebook, but really Match Group is the company that is connecting people and uniting them, and it's the biggest company in the world doing that. And think about how relevant that will be 10 years from now or 35 years from now. Just as relevant as it is today. It's timeless and this company's market cap is only $14 billion.
I was delighted when I found the stock a couple of years ago and I've talked about it on Rule Breaker Investing, the podcast, a number of times since. But it was kind of a sleepy IPO. It came out of the gates and not many people paid attention to it. And we recommended it in Stock Advisor. I'm happy to say I guess the world has started to notice, because the stock has been a four-bagger in the meantime, but still; look how small this company is relative to the size of its opportunity and the likelihood that it will convert on that opportunity in the years to come.
It was great to have Mark Penn of Microtrends Squared on the podcast just a couple of weeks ago and a number of you have said, "Hey, yeah, I went on to buy Mark's book. I'm really enjoying reading the book," and I'm glad you are. And if so, you'll remember our conversation about "internet marrieds."
You know, Mark was talking about that 10 years ago in his first book, Microtrends, but here he was deciding he was going to make that a revisited chapter, so he reincluded it, again, in the same way that I would rerecommend Match Group stock again to you as I have done in Motley Fool Stock Advisor. But he was just pointing out, in our conversation, how common it is, today, to find people over the internet.
And that leads me to the second thing I like about Match Group. There's a little thing -- you may have heard about this little trend that's coming. It's not here, yet. Well, it's out there, but it may not have really changed your life much yet, but that trend is artificial intelligence, AI. Start thinking about the possibilities of what AI might be able to do. AI might, in the next 10 or 20 years, be able to find you the single-best person on the planet that might match up with you.
Now, if you're already married, I certainly hope you've already found that person, but if you're in the market, or if you're young, or if you're one of my Rule Breaker Investing listeners who's a teenager... And by the way, I always love hearing from you. Love hearing your stories. Any Rule Breaker Investing teens, drop me a note. We'll feature you on Mailbag. I always love hearing from people who are learning about investing through this podcast or just getting started investing for the first time.
But think about who Match.com or Tinder -- some years from now once AI is really starting to get effective -- think how fascinating a suggestion that you might meet or visit this person. Because out of all the people using our AI, we think this is the person you should at least talk to. Think how powerful that is. So I believe that an AI-powered dating platform, which is inevitable [going back to Kevin Kelly's wonderful title for his great book and we've talked with Kevin on this show in this past year, as well]. Think how inevitable, and really interesting and powerful AI-powered matchmaking will be in the future. And guess who's going to be the leading progenitor, very likely, of that technology on their platform? Yup, the company we're talking about right now. Stock No. 2 for this five-stock sampler, "Mm! Mm! Good!" Match Group.
And now what's "M" Stock No. 3? Well, the next one, the ticker symbol is MKC. It's not really what you'd expect McCormick & Company's (NYSE: MKC) ticker symbol to be. You'd think it'd be maybe [MCK], but that's been claimed by another of my stock picks, which we can talk about another day, but yup, MKC is the ticker for McCormick. Yeah, it's the spices and seasoning company since 1889.
So not every one of our stocks in my Supernova Universe, as I call it [all combined picks from Stock Advisor and Rule Breakers], not every one of them is some ritzy, new, glam technology company. Nope, this is McCormick, the spices and seasoning company. I first picked it in October of 2014. It was at $62.00 then. Happy to say it's about $123.00 now, so it's been a stellar performer. In fact, I note, as of this taping anyway, McCormick up exactly 99%, so not quite ringing the double gong for Motley Fool Stock Advisor members, but 99% ain't bad when the market's up 67%, from a spices company, about four years ago.
So why does McCormick show up in this podcast and why is McCormick one of the stocks that I picked? And what do I like about McCormick that I would make it one of our five "Mm! Mm! Good!" stocks over the next few years?
Well, first of all, as I was saying of another stock earlier, this one has a surprisingly low risk rating. Maybe it's not that surprising because, after all, this is a spices and seasoning company. It's not like they're experimenting with some crazy new business model or taking risks with their product set. Nope, it's McCormick, the spices and seasoning that we all know.
But that's part of what I love about this particular company. It is a branded, known player. Many of its spices and seasonings you know. You know their names. You know the company name, McCormick. Many of you do. And that's something to celebrate, because this is a company that is pretty dominant within its field. There aren't a lot of players that can mount meaningful competition to McCormick, and so its risk rating is just six, which is very low; an almost Google-like low risk rating.
And that's right. Google [or Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG)] is a low-risk stock. A lot of people would think, "That's really risky, isn't it? The whole Google thing?" No, not really. Not over any meaningful period of time. These are strong, substantial businesses. Of course, McCormick is a lot smaller than Alphabet, but within its field, it is a meaningful leader and a player. So that's the No. 1 thing that I like.
And the No. 2 thing that I like about McCormick is its dividend. It's one of those Dividend Aristocrat companies. One of those companies that pays a good dividend and raises it from one year to the next. And so that's why I like it in this mix of companies because yes, we definitely have some high tech in here. We have already talked about a medical products company and the world's No. 1 dating site company, so I like to mix in some spice. A little bit of seasoning in this group of five companies, and McCormick provides that.
Well, that brings us to Stock No. 4. And as we stay on the alphabetical train, we're next going to move from Mc to Me, MercadoLibre, one of my favorite long-term companies and yes, one you've already heard a little bit about earlier this podcast, because it was in my very first five-stock sampler that we talked about earlier. MercadoLibre makes a comeback, and yes, I like it just as much today as I did three years ago or 10 years ago.
MercadoLibre with its market cap of $15 billion. That sounds like a lot when you consider that we were talking about this stock three years ago on this podcast when it was at $5 billion. But when you think about the whole sector of Latin America globally, and you think about owning the equivalent of the eBay, the Amazon, and the PayPal of that area of the world, I feel really good about this company going forward.
It was first picked in Rule Breakers in February of 2009, just a few days after Valentine's Day that year, so now nine years later happy to say it's gone from $14.00 to $327.00. Yup, it's been one of our monster winners in Motley Fool Rule Breakers. That service -- a lot of love for MercadoLibre -- but here we are picking the stock freshly, right now, going forward over the next several years, and that speaks to my confidence in the company's ability to maximize value of electronic commerce for a whole area of the world that a lot of us love and care about.
You know, it's fun to note two things that I like about MercadoLibre. One is I've now picked it once in 2009, then 2012, then 2014 [this is all in Rule Breakers], and then 2017. So this is a four-time pick. But what I'm underlining about that is often when you find a great thing, you should be adding to it over time. You shouldn't just say, "Well, I paid X for it and I'm never going to buy it again. I got a great price in 2009." No, you should be adding in 2012, 2014, and 2017. Here I am in 2018, September, saying, "I like this stock over the next three-plus years." And so, yeah, MercadoLibre fits shoulder to shoulder with any other company I could think of today for what I expect with confidence from its future.
A second thing I like about MercadoLibre; well, as I do this podcast it's down about 9% on this particular day. There's some concern about the Argentine peso. There's also concern about Amazon launching food and drink sales in Mexico. So you're seeing potential competition from Amazon. That's been a story for several years, now. That's not new to MercadoLibre shareholders. But you're also hearing about the weakness of an important country, Argentina, in its Latin American bloc.
But with all that said, over the last nine years in which this stock has multiplied many times over, I'd like to point out that it's doing so with still an unstable aspect of Latin America. Certainly there are several prominent countries that are not necessarily the best players or the most reliable players; and yet, the inevitable [for me the inevitable] growth of electronic commerce in Latin America. It's been a great 10-year story up until now and I love the next 10 years for electronic commerce, so I love the company that is the active leader in e-commerce across that important bloc of the world.
So, yeah, you betcha. If we're going to talk about "M" stocks which, while picking a random letter out of the alphabet we are [we're talking about "M" stocks this particular five-stock sampler], I'm definitely going to include MercadoLibre.
And that brings us to our final "M" stock. We're going to go down to the letters "MO" and we're going to say "MO" twice because the company name is Momo (NASDAQ: MOMO) and the ticker symbol is, in fact, MOMO. Now, this is a company that operates in China. It started as a Chinese dating app, so you've already heard a little bit of other dating earlier this episode talking about Match Group.
Well, think about dating in China. Match Group not as much of a player in that area of the world; but since I like dating businesses, how could I not like Momo which entered Motley Fool Rule Breakers in May of 2017. It's gone from about $39.00 then to about $45.00 now, so it's been a nice 20% gainer, about in line with the market. The market cap of this company is $9 billion, so we're not talking about some fly by-night small cap, here. This is a fairly substantial, small, emerging midcap company.
And while it's often called "the Tinder of China," [Tinder, of course, one of Match Group's properties], and while it's often thought of that way; in recent years Momo has added a live video-streaming component to make it a very compelling platform. In fact, you can see it in the company's growth, which is amazing.
Get ready for these numbers. Sales in 2014 were about $45 million. By 2016, sales were $553 million or $0.5 billion. That said, the company in the most recent quarter finished sales for the quarter [at] $494 million; so we're now talking about a multibillion dollar sales company and that's something I really like about it, the extreme growth that we're seeing from Momo.
The second thing I like about it is it's a relative unknown. I mean, had you ever heard of it before this podcast? Well, good news. If you're a Rule Breakers member you certainly would have, because it's a recommendation of ours. And certainly if you're in China looking for a date you might well have used or know Momo. But much of the rest of the world doesn't know about Momo. You might know something like Periscope, which is a site, Periscope.TV, where you can see live video streaming of different places around the world. Well, imagine that in this context for Momo in China. That's a substantial part of its business.
So, yeah, this one is a little bit less certain, let's say, than something like McCormick, which is probably a slower and steadier paced, and maybe a more dependable pick, but this also could be a spectacular stock. That's why I wanted to have it in our motley mix of the "Mm! Mm! Good!" companies.
So there you have it, my five "Mm! Mm! Good!" companies. Masimo Corporation. Match Group. Next came McCormick. Then MercadoLibre. And finally, Momo. A truly motley group of companies with geographical diversity worldwide, as well. A fun group of five stocks. I'm going to look forward to reviewing the results of how these stocks have done over the coming years.
In fact, we're just going to make it official that this is a three-year game we're playing with these five companies and with this stock sampler. We're always thinking three-plus, but just the game that I like to play on this podcast; let's make this a three-year game.
So there you have it. I believe this is our 15th five-stock sampler in the history of this podcast. Very happy about our first 14. Very pleased to bring you this 15th. You know, without being cocky, I think that [with] almost any letter, A to Z, you [could] go up and down the Supernova Universe [that's the group of my companies from Motley Fool Stock Advisor and Motley Fool Rule Breakers].
I know many of you might be Supernova members, Motley Fool Supernova which brings them all together in one service. I almost think [without being cocky here] that any letter, A to Z, as long as I can find at least five within that letter, I think we've got some market beaters. And while it's almost guaranteed that not all five of these will have a good next several years, I would expect that at least a couple of them will do well enough, like our other five-stock samplers, to pull us up to victory.
And that's a way for me to say in conclusion that I'm confident, and I always have been as a Rule Breaker investor, as your fellow Rule Breaker and your host, that you and I can beat the market. I think we've demonstrated it in all of our services. My life's work over the last 25 years has been beating the market. Many people don't think you can beat the market dependably. I beg to differ, and I try to prove that every day with my work.
And this five-stock sampler is just another way for me to have fun and try to show you, if you're skeptical, or help you, if you're interested, beat the market. And that, at the end of the day, is for me what investing is all about.
[...]
All right, well, next week we're going to continue the fun and games because next week it's time go back to my friend Matthew Argersinger and our Market Cap Game Show. That's right. Get ready to know your market caps. You'll be quizzed throughout. I'll be playing along with Matt presenting companies and asking you what the market caps are. What is the total value of that company within 20% either way? I believe it will be the fifth episode, so in preparation you could go back and listen to a previous Market Cap Game Show with me and Matt. But Matt will be back. We play on a quarterly basis, so it's time for our Q3 Market Cap Game Show next week.
In the meantime, 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.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. David Gardner owns shares of Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, FireEye, Masimo, Match Group, MercadoLibre, and Middleby. The Motley Fool owns shares of and recommends Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Casey's General Stores, Facebook, Masimo, MercadoLibre, Middleby, and PayPal Holdings. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends eBay, FireEye, Fortinet, Match Group, McCormick, Momo, and Palo Alto Networks. The Motley Fool has a disclosure policy.
