Finding Rule Breakers, IRL Investing, and Making Mistakes

Rick Munarriz: David Gardner has these six traits of a Rule Breaker, and I won’t dive into all of them, but they’re a lot of the stuff you’d expect from David’s thinking, which is an emerging company in an emerging industry. You want momentum, you want strong leadership, you want all these things. But then again, there’s also the overvalued, the kind of thing you wouldn’t expect someone to say, “Wait, the stock’s overvalued?” That’s one of the six traits. But yeah, there’s some conventional and some rather non-conventional traits to a Rule Breaker, but it’s basically finding a company that’s either a disruptor, or eventually will become a disruptor, or is so dominant that it can’t be disrupted. It’s a lot of the same quality stocks that you find over at the Hidden Gem side, of course. It’s just different ways to get there.

Travis Hoium: When you look back on those companies, what were the things that are consistent between them? Is it that disruption angle? Is it that this was a completely new industry and you were defining what the future is going to look like and you’re just riding that wave? What do you think about when you think back on those big hits?

Rick Munarriz: I think obviously being first is great, but again, history shows us that it’s not. It’s not whoever plants the flag first; it’s whoever plants it the firmest. Before Mark Zuckerberg did Facebook, or I guess The Facebook, you obviously had Friendster and MySpace, and again, eventually they just faded away. You don’t necessarily have to be the first one to think of this great idea that’s never come up before. Timing also helps. Instead of standing on the shoulder of giants, sometimes you have to stand on the shoulders of failed companies, and you just happen to be lucky at the right time, but execute it well enough to the point where it takes off. Then once that momentum is going, once it’s so hard to catch up to you, that is the quintessential Rule Breaker. If you can catch it early, great. If you wait a little while, you didn’t miss too much because the ceiling’s always far higher than the floor sometimes with some of these stocks early in their defined cycles.

Travis Hoium: Lou, that is the thing that over 16 years or so working with The Motley Fool seems to stand out to me, is that it’s more about slugging percentage and hitting those massive home runs, the 10X stock, the 100X stock. Hopefully we all have an Nvidia in our lifetime, but those are going to overwhelm any sort mistakes if you’re building a portfolio in this kind of way.

Lou Whiteman: Hopefully. Yeah, you do have to find them, but if you find them, the old saw, but it’s true. If you would’ve picked Amazon and four other dotcoms in 1999, you might have gone four bankruptcies and a market success. You can do that. The thing is, though, and the hard thing about it is that there are only so many Amazons out there. It’s very rare to find a company that has the ability to outgrow its own market. Most companies are confined to the world that they live in. Amazon’s a special breed. Amazon has just created new worlds and expanded into new worlds, and there’s others like that. I’m not saying it’s unique. But look, you can find great investments in more traditional categories that can work for a long time, but just hits the critical mass of their industry and, I don’t know. If I find a really undervalued aerospace company, I can get a great return on that, but I don’t necessarily want to hold it forever because they’re unlikely to launch a Cloud business.

Travis Hoium: There’s not the optionality of getting into something else.

Lou Whiteman: There is no one size fits all on any of this, but it’s a great way to think about it is at the end of the day, I want my pile to be bigger than it was, and it really doesn’t matter if that means five things went up or one thing went up a whole lot.

Travis Hoium: Rick, as you look at the world today and the potential disruption that’s coming from artificial intelligence, you used the word disruption and I think looking back on what I’ve learned over the last 15-20 years, that is really the thing that is consistent. What is so interesting with the AI build-out, all the AI technology that we see today is it seems very different than it did 20 years ago when the Internet was growing up, when mobile came along, and the big difference is that the big companies are winning. It’s almost like everybody read The Innovator’s Dilemma and said, “We’re not going to let that happen again.” This is a famous business book about why companies get out-innovated and beaten by smaller competitors, and it went through some historical examples. But you look at Alphabet, you look at Meta, Amazon, all these companies are going, “Hey, if we need to bludgeon the competition with cash on our balance sheets, we’re happy to do that. But we’re not going to let somebody disrupt our massive cash flow business.” But how do you think about this AI moment and the potential opportunities investing versus what they looked like in the Internet age or in the smartphone age?

Rick Munarriz: It’s definitely very different, obviously because it takes a lot of money. Back in the old days, Jeff Bezos had a million dollars in seed money, a quarter of that came from his parents, and boom, you have the world’s biggest bookstore in the mid-1990s. These things, it takes a lot of money to have this. AI is an arms race, and it does require financing, which is why the largest companies are there, why the largest companies are even making chips, like Amazon and Alphabet are. It is the kind of situation where it’s definitely this environment that you may think, “Oh, the bluest of the blue chips are the way to go for the AI play.” But I think the strongest growth will come from the smaller companies that you didn’t see coming. Again, not that I have a handful of them right now. I’m just saying that based on that question, what you’re asking, I think that’s the way it goes.

I think especially with the disruption process, the history of disruptors is written by the companies that successfully disrupted. Most companies that try to upend an industry will not. This is a case where these are companies, the largest companies, the Mag Seven, all the leaders right now of AI, they were disruptors at one point. They were, 20, 30 years ago, the companies that we bought in as all Rule Breakers and Hidden Gems stocks as, “These are the stocks that some generations don’t get it, but we get it,” back in the ’90s. Now they just emerged to the point where they are this dominant force and so rich that they can fund this AI revolution. It’s definitely real, it’s definitely making life convenient. While there’s certainly a lot of noise and panic for some people, I think it will all work out.

Lou Whiteman: It’s interesting to think about because the defining trait of the late ’90s, in hindsight, I don’t know if we really realized at the time, was that distribution went to zero. That was what held it all together. I’ve used this before, but can you imagine if that guy in the Harvard dorm, after he wrote The Facebook, had to make copies on floppy disks, put them in a cardboard box, shrink-wrap it, and send them to Circuit City?

Travis Hoium: Which, by the way, is how AOL grew up.

Lou Whiteman: Which is how everything grew up. But just the magic of just, you build it once and it’s almost free to just send it out all over the world. That was the core change. That’s what allowed Amazon, everyone to do what they do. I don’t know yet, because it’s always easier in hindsight, but in AI, it does feel like that the core advantage, the core breakthrough, is just having the sheer muscle to build the data center, to build the compute. If so, yeah, I don’t necessarily think that it’s weird that the incumbents are winning, because it might just be that while the 1990s was a way to go around the system or bypass the system, really what AI is doing is upending the system from within. And so I think it’s more dangerous to just say, “Okay, if this happened before, we have to find it again.” Every one of these is different, and it could be that just the core advantage this time around plays better to the incumbents.

Rick Munarriz: You’re going to find some success stories, even in the space that you think is dominated by large players. CoreWeave, a decade ago, it’s just a bunch of traders, friends in the Northeast. They just got together, “Oh, we want to crypt Ethereum. We want to mine Ethereum. That’s what we’re going to do, and then get in the crypto market.” That market falls apart. They go, “Hey, we have all these Nvidia GPUs. What can we do with them? Oh, we can do movie effects, or we can get on AI early.” Here we are, again, a company with one of these 1990 origin stories still making waves today. Obviously, not as big as the biggest players, but definitely some good gains if you got CoreWeave, CRWV, at the right price.

Travis Hoium: When we come back, I want to talk about how this translates into the real world. You’re listening to Motley Fool Hidden Gems Investing.

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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. Rick, when we were prepping for this, you talked about a recent trip that you took to Central Florida and got a pulse of what’s going on in the real world. I thought it was interesting because we talk a lot on this show about what’s going on with artificial intelligence and the AI build-out, what companies are introducing. That’s what the market cares about today. But if we’re looking for opportunities over the next 5-10 years, it might actually be the real world that’s going to be more important. What stuck out to you looking at how busy theme parks are, what people are doing for entertainment, and what they’re spending?

Rick Munarriz: I was there for three weeks. Got back over the week, this past weekend. Late September, early October. This is a time of year, just about two decades ago, maybe even a decade ago, where it was basically schools are back in, so the parks are empty, and it’s just conventions. A lot of conventions come down in the October area to the Greater Orlando area, and that’s pretty much it. Very different now. It seems like sometimes the crowds are busier now in the fall than in the summer. Possibly heat induced in the summer, but specifically to the fall, here in the early fall, Disney World was wall-to-wall most the days I was there. Again, there was not a school holiday or anything, it was just a lot of people there now. It’s not that Disney‘s gotten cheap. I was also at Universal Studios, Legoland, SeaWorld, so I patronize all the area parks. While the other smaller parks aren’t doing as well, Disney’s clearly doing well. Again, this is October. They have these great Halloween events where they close the park at 6:00 p.m., so you go into Magic Kingdom, and you have to leave by 6:00 p.m., and in comes a new crowd. You’re basically doubling up on the tickets, just as Universal Studios has done in Orlando and Hollywood, for 35 years. They have this Halloween Horror Nights where it’s more of a very different hardcore experience where there’s 8, 10 haunted houses that are not for the squeamish, that you go and you walk through and stuff like that. They become these massive crowd magnets that you wouldn’t expect in October, but great for the businesses. There is a lot of people still out there, even in this economy that is topsy-turvy, spending big money to experience these in real-life situations, real-life experiences.

Travis Hoium: Lou, it does seem like the IRL events have done extremely well, and it’s almost like that is what’s constrained at this point. There’s only so many people that can get into Disney World, as the example here, or a concert. Another stock that I’ve been looking at with a little bit of intrigue is a company like TKO Group. Holding events, the power that you have with selling rights and things like that. That seems like something, maybe there’s opportunities here for these companies. By the way, there’s also a physical infrastructure piece that you’re not just going to go out and build a new Disney World in the next two years.

Lou Whiteman: No, you’re not. I think this relates to what we’ve seen since the pandemic with just experiences versus stuff. It’s what has carried the bookings of the world. The airlines have done really well. Everybody. People are just going out and doing things. To me, and look, I don’t know this as well, but to me, I can’t believe that this is new. When you have so many assets that are just so much fixed costs. Even my dumb airlines knew that the only way to make money is to run them as hard as you can and as much as you can. I think good that they’re doing this and good, all of these things that yes, I think there is demand for non-virtual events, experiences. But shame on them for not doing this sooner.

Travis Hoium: Rick, the other thing that always strikes me, especially with a company like Disney, I think they’re a great example here, is if you look back through their history, they did not monetize particularly well up until, I think it was Eisner came in in the early ’80s, maybe late ’70s. He really started to increase those ticket prices. But, I was there in the spring, and it’s so interesting to see how they’re able to monetize extremely well, and then somehow not make you feel all that terrible about it. Even though something that you’re buying may be an extra $300, $400 for your family, time and money, I’m willing to pay that to get extra rides and stuff. But they do seem like they have perfected that. Like Lou said with the airlines, and the same thing. It stinks that you have to pay extra money to sit with your kids on an airplane. But it is a cost that people are willing to pay.

Rick Munarriz: Absolutely. You see this happen. Even, again, if you walk into Disney World, just about every attraction has two lines. There’s what they call the standby, which is just everybody, and then there’s the Lightning Lane. Used to be called the FastPass back in the day, and 15 years ago, FastPass was free. You just would go, and you’d show up at a ride, you’d grab a ticket, and then once you used it up, you can get another one. Now it’s a paid experience, which makes the Lightning Lane shorter, which makes the standby line move faster. But again, while people can complain about the standby line, their trip is being subsidized in part by the people paying a premium for it and this understood thing. Again, Disney World, based on their last several quarters of reports, they are not having a decline in attendance, in turnstile clicks, in revenue, and more importantly, all this is working for Disney and its shareholders because the operating profits are growing even faster for their experiences division. So they’re doing things right without angering a lot of people. Obviously I say a lot of people because if you go online, there’ll be people saying, “No, Disney World’s too crowded,” but it’s like the whole Yogi Berra thing. Maybe it’s a good thing to be crowded because people are going there.

Lou Whiteman: Disney figured out how to monetize time, how to get you to pay for time, which is genius, and it makes all the sense in the world to just be that guy. This is why I just don’t understand why they don’t just double down on experiences and figure out how to do it without all of the streaming and all of even those headaches. But as a business, as an investor, because look, a lot of this has been true for a while, and what’s Disney’s stock been doing for the last decade?

Travis Hoium: Nothing.

Lou Whiteman: Absolutely nothing. I think we need to acknowledge that for all that they’re doing right in these parks, it doesn’t seem to have paid off for investors. I want creative destruction and radical destruction. Maybe, though, figuring out how to fill the parks in October and November. Are they going to do hayrides, Rick? Can we go all the way through? I don’t know.

Rick Munarriz: They did. They did in the ’70s. We went to Fort Wilderness and got on a hayride and had a campfire with Chip and Dale, and you’d do s’mores out there. But yeah, I think that’s still there at that campground. You can still ride horses out in the campground, too, in Disney World. But yeah, you can’t go back, Lou, as much as your retro heart desires that.

Lou Whiteman: I wish they could figure out how to make the business completely center around all of this great work they’re doing at parks and with the cruises and all that, and still somehow retain the IP. Because to me, the only reason to be in the studio or streaming business is just the ability to use the IP they have and create new for the parks. I would love to try and sit down with some bankers and figure out a way to get the best of both worlds and to free them from all of those costs while holding on to the IP. I think that is the plot twist that gets the stock back, but it’s hard.

Travis Hoium: What do you think, Rick? You were early in Netflix. Do you think that’s a compelling argument for Disney?

Rick Munarriz: I think it is. If content creation can be your loss leader, wow. It would be amazing if it gets to that point. But again, you need it. Again, the reason that you pay premium for Disney Cruise, and I’ve done it plenty of times, I love my Disney Cruise, is you’re paying for the experience where you’re getting all these characters you know, the experiences you know in an environment that you know. I think it all has to happen, and while you may not be happy with every part of Disney’s business, it works, not as an investor the last decade, as Lou points out, but the business itself does work that way.

Lou Whiteman: You say it works. Again, I don’t know. Like, 10 years begins to feel relevant, so I don’t know. Does it work?

Travis Hoium: It is one of those stocks where if the stock goes up 200%, everybody’s going to have a completely different story and say I told you so. Even if the numbers are exactly the same, and I will say on the streaming side, I have gotten my notices from Disney that prices are going up at the end of October, so they are going to have a little bit better margins on the streaming side in the future. When we come back, we’re going to look back on some history of investing. You’re listening to Motley Fool Hidden Gem Investing.

Welcome back to Motley Fool Hidden Gems Investing. We like to have a little bit of fun with investing in this segment, and I want to test Rick and Lou’s knowledge and memory of markets. I have a series of questions for you that I want you to answer, give your best guess, and will hopefully teach people a little bit about investing history. I’m going to start easy here. Rick, I think you know this one. Costco CEO threatened to off the incoming CEO when he took over for him. If you raise the price of the hot dog combo, what is the price of that combo to this day?

Rick Munarriz: I do know it is $1.50. It’s been that way from the beginning. You get a hot dog and a soda, and the key trick, again, for fellow Costco members, get it before you start shopping. Then you just take the soda with you and then come back and fill it in on the way out so use that refill option. I like eating as you come into the store, too. Because then you’re a little less hungry.

Travis Hoium: You shop less hungry. That’s a good way to shop. You don’t want to shop hungry.

Rick Munarriz: You’re probably saving yourself a lot of money by spending $1.50 on a hot dog.

Travis Hoium: Nintendo‘s first product. Lou, you seem like a gamer. What was Nintendo’s first product out the door? It was not gaming systems.

Lou Whiteman: It was like a Dungeons & Dragons type thing, wasn’t it? I honestly don’t know exactly, but it wasn’t electric. It was like a role playing game or something like that.

Travis Hoium: Rick, you got this?

Rick Munarriz: When I was like in the 70s, I got the game and watch things. Like when I went to China and Japan, my parents took me out there. But obviously, that’s not it. The company’s been around for more than 100 years playing cards, so I guess Lou is right. I know it’s play, I don’t even know what the cards were about what even this game was, but I know covering Nintendo, I know that they first got into cards, so they’ve always been about games. It just evolved over time.

Travis Hoium: In the late 1800s, that is what’s wild, as this company goes back to the late 1800s.

Lou Whiteman: They struggled to source memory back then, too, by the way.

Travis Hoium: Very true. This is the fun one. Rick, this is up your alley. What successful partnership related to those products eventually led to the company’s IPO. I believe that was in 1962. There was a company that they licensed their IP and made cards out of it. What was that company?

Rick Munarriz: I have no idea, and you said the playing cards, 1962.

Travis Hoium: This is still video games. This is pre-video games.

Rick Munarriz: Pre-video, so we’re not talking about the Atari, this before that. I would have to think maybe Hasbro or Mattel these are the toy companies I know were around back then, but I may be off. Lou?

Lou Whiteman: I have no idea.

Travis Hoium: Disney.

Lou Whiteman: Disney.

Travis Hoium: Disney. This was back when Disney figured out that it was free money to basically license their stuff to sell T-shirts and playing cards and sell in Japan, Nintendo said, “Hey, we can make some stuff for you.” That’s what eventually led to the IPO. Fascinating company history. Another one, somewhat related because it’s also a Japanese company. Sony‘s first major product was what?

Rick Munarriz: There had to be something before the TV, but I know TV was part of it. I know Motorola was car radio. Sony. Lou, I’m lost here.

Lou Whiteman: I’m going to guess it’s in the kitchen, but I don’t know.

Travis Hoium: It’s in the kitchen or refrigerator. A rice cooker. That makes even more sense. Again, the history of Japanese companies is absolutely fantastic because they often start completely opposite of what they end up making. The other one I have around here is Toyota is known for building cars, but they made automatic looms in textile machinery early in their history.

Lou Whiteman: Because they still make the rice cooker.

Travis Hoium: I don’t believe they do. But if they don’t should. I don’t know.

Rick Munarriz: Mark of the video game console. That’s what I want to know. It goes both ways on the rice makers, I want in on that.

Travis Hoium: We like to talk about big home run stocks. One of the top performing stocks in the 2000, over the last 25 years or so, although it hasn’t done particularly well lately, is Altria originally known as Philip Morris? Maybe now also known as Philip Morris. It’s gone through some machinations over the years. Lou, I want you to start here. What was Altria’s price two earnings multiple in 2002?

Lou Whiteman: I do not follow this closely price to earnings.

Travis Hoium: I will give you a hint. They were buying back a significant amount of stock in the early 2000s.

Lou Whiteman: 2002 was right after the case was the late 90s, wasn’t it?

Travis Hoium: Correct.

Lou Whiteman: Low I’ll say under ten, eight. I don’t know.

Travis Hoium: Rick.

Rick Munarriz: I’ll go lower. Again, I’m thinking that was like, post dotcom bubbles, so there were a lot of stocks that Coca-Cola was trading at 50, so values were high. 2002 was already that was the bubble pop. Even I think, again, with all the legal obligations and back then investors didn’t have the vision and to just the access to the information to know that everything’s going to be okay in the future, I would say maybe three or four times multiple.

Travis Hoium: It was under two in 2002. For that, I look back in 2000 to 2005. It was under five almost that entire period of time. This is one of those crazy ones to look back because I always remember, Morgan Housel would write these articles about the best-performing stocks or sometimes these ones that are hiding in plain sight, and Altria was always an example. But the crazy thing was how low that valuation was, how unloved the company was, and it die, and that was what it was priced for. If you can find those companies that are trading extremely low multiples that actually have a little bit of legs, it can actually do pretty well. This one, I don’t know that either of you were around for this, but in 1896 when the Dow Jones Industrial Average launched, there were 12 companies on the industrial average. Can you name between the two of you, can you name three of them?

Rick Munarriz: Dow Chemical would have to be one, Dow Chemical? Was that not even a company back then?

Lou Whiteman: There is a guy named Dow who came up with it.

Travis Hoium: If had nothing to do with Dow Chemical?

Lou Whiteman: I do believe one of them is GE, because they were one of them is GO.

Travis Hoium: I will give you a hint. Three of them start with the word American.

Lou Whiteman: Of course. American Tobacco, maybe.

Travis Hoium: Yes. American Tobacco. You guys are already doing better than that.

Lou Whiteman: Will AT&T work? For American telephone, and I don’t even know what the AT&T stand for, but I guess not.

Travis Hoium: Telegraph, but I doubt.

Lou Whiteman: Yes, maybe. I don’t know.

Travis Hoium: We have the American Cotton Oil Company.

Lou Whiteman: Of course.

Travis Hoium: American Sugar Refining Company, American Tobacco. Chicago Gas Company, distilling and cattle feeding company.

Lou Whiteman: I’d never heard of that one later called Millennial Chemicals. GE. There’s a gas light company Laclede now known as Spire, National led company, North American company, which dissolved in the 1940s, Tennessee Coal, iron and Railway, U.S. leather and U.S. rubber. Some of those still exist I believe U.S. rubber U.S.

Travis Hoium: U.S. rubber is Uniroyal. U.S. Steel is now the Tennessee Coal company.

Lou Whiteman: American sugar is Domino’s, I think. Domino sugar.

Rick Munarriz: I’m just impressed that the names are exactly what they do that was back then. They were just imagination, at least Corning, which I know was around back in the 1800s. I had a different name. Corning Glass worked or something, but yeah. I’d love to see the 23 new report, the DNA of these companies to see whatever happened to them.

Travis Hoium: They didn’t break up and put back together of all the telecom companies like AT&T those banking is another one to see those infographics.

Lou Whiteman: Bring you’re right, they hadn’t invented brand consultants yet.

Travis Hoium: Final question for you too, this goes back to the end of the days of Jack Welch as CEO of GE. Arguably, one of the better CEOs when he left, GE, there was a big fight for who was going to take over for him as the CEO and his other predecessors, there were three people who were potentially vying for that job. But I want to know who those successors were, the companies they took over, and then the returns of each of those companies over the next let’s see. Let’s do ten years, so, Lou.

Lou Whiteman: I think so how many names I can think of three names.

Travis Hoium: There’s three names.

Lou Whiteman: It’s Bob Nardelli, Jim McNerney, and Emily, obviously.

Travis Hoium: Yes. Emily took over as CEO of GM. Yes.

Lou Whiteman: McNerney went to Boeing, but no, he was with them before Boeing.

Travis Hoium: Would do the returns for 3M.

Lou Whiteman: Geez, that’s where I’m going together struck. Not great. I don’t know, Rick. Do you have any idea?

Rick Munarriz: TM’s from when? From 2001 at the beginning of 2001. Yes, he was only there for four or five years. But let’s do the whole. He made a big impact on the company. I actually started at 3M, right about the time that he did, and I was there for about seven years. Did Travis ruin the shareholder value of 3M is the real question here.

Travis Hoium: It was either me or McNerney. I don’t know. One or the other.

Rick Munarriz: I know TM was a great stock in the 1900s.

Lou Whiteman: It was an original DL stock, it would have been a keeper.

Travis Hoium: Which one of those three performed the best over the next 10 years?

Lou Whiteman: Of the three? Because our deli went to Home Depot. I’m going to sit in our deli with Home Depot, but not.

Travis Hoium: Under his reign, which was very sure.

Lou Whiteman: I didn’t really let’s take McNerney. Ended up at Boeing, and that was before Boeing’s biggest problems. Maybe it’s been there. I don’t know. I honestly don’t.

Rick Munarriz: I think it’s Home Depot, too, but GE went through I know it’s GE Aerospace now, but I mean, didn’t it spin stuff off? Lou, GE the value of all those parts may have been worth something in the last.

Lou Whiteman: Remember, we did have the financial crisis in there. It is now. I’ll say Home Depot just because I know, at least the first decade of that was probably pretty good.

Travis Hoium: You were both wildly wrong here. But Lou you said but, so he was going to change vote before this.

Lou Whiteman: No, I was just going to say that, these three gentlemen get no credit for whatever happened at any of the companies. That’s my take here, but go ahead.

Travis Hoium: Them was actually the best performer.

Lou Whiteman: Sure.

Travis Hoium: Stock was there at 45%. Almost all of that happened in the first couple of years. He did a bunch of cost-cutting measures, improved profitability, and then growth essentially died. That was the legacy of [OVERLAPPING]

Lou Whiteman: Cut it to the bone, and that was Home Depot, too. I’m surprised Home Depot didn’t get a boost from Nardelli. But over time, it didn’t age well.

Travis Hoium: Home Depot did horribly. The stock was down 23% over the next decade, and GE was actually the worst performer down 58%. Part of that was because of the financial crisis. Turns out they were much more of a financial company than they were an industrial company at that point. But just the interesting history of phenomenal leadership, I think, in the late ’90s turned into a success plan that was a disaster for everybody involved, despite the fact that those CEOs were very highly sought after over that period of time.

Lou Whiteman: Even I think in hindsight, knowing what we know now, I don’t know. maybe maybe we want to revisit Jack, as well.

Travis Hoium: I think that’s probably fair. When we come back, we’re going to get to the Stock Center Radar, you’re listening to Motley Fool Hidden Germs Investing.

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Travis Hoium: As always, people on the program may have interest in the stocks they talk about in The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. All Personal Finance content follows The Motley Fool’s editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes.

This week is FoolFest. This is where a bunch of Fools are getting together and talking about investing, celebrating maybe some of the good investments that we’ve had over the past decade or so. I wanted to get an idea, though, learn a little bit more about your investing mistakes. Rick, when you look back on your history of investing, a few decades, maybe now. What do you think about for your investing mistakes?

Rick Munarriz: I think it’s easy. All the stocks that you didn’t buy, there’ll always be regret. But I think always the biggest regret is when you have a stock and you sold too soon because there you the receipts. It’s not a matter of was I going to buy it or not, and this happened to me. I was fortunate enough to have bought Netflix in October of 2002 when it was a broken IPO. The stock was, like, at five, $6 and change at the point. After a bunch of splits, the cost basis would be about $0.40 or so, 40, $0.50 or so a share. Within three months, I sold 80% of my shares. This is like a $5,000 investment. It wasn’t like a big investment at the time, but I sold a chunk of it. Then I waited about a decade until a decade ago from now, so taking 15 years later. I said, “It’s just too large, my partner portfolio. I cut it down from 80%, I sold 90% of my total stocks. I sold another 10% from my original shares, and just over time, I whittled it down to now I’m just down to 1% of my original stake. It’s my largest holding right now, which is a testament to the fact that I don’t like to keep a lot of big positions in my portfolio. But that other 99% would have been millions of dollars, and I work the math every once in a while, and it’s always cruel. It was like $89 million that I would have left on the table.

Travis Hoium: Was it in 2001 or 2002?

Rick Munarriz: 2002, 2000.

Travis Hoium: 2002. From November 1st, 2002, I have a $10,000 growth that would now be $10.5 million. Rick, I’m sure, has done extremely well. But selling your winners, this is what I always go back through too. Lou, do you have anything quick for us?

Lou Whiteman: Real quick, and this was more arrogance than anything else, but in a different world when I was part of a group, and we thought eToys back in the 1990s was going to zero, but we thought it would do it after the Christmas season, and we thought that we were smarter than everyone else. We’ll just get in now and dump it when everybody else runs in. They didn’t even make it to the holidays, so that’s pure arrogance, and it got what we deserved. A humbug.

Travis Hoium: We’d like to end the show with the Stock Center Radar. Dan Boyd is out today, so I’m going to be filling Dan’s role as the foil behind the glass. Rick, what do you have for us this week?

Rick Munarriz: I’m going topiss off a lot of people by saying AMC Entertainment. AMC, yes, the movie theater chain, yes, the meme stock. Yes, the stock is down 99% over the last five years. The first nine months of 2026 it’s more than doubled, so and the reason it’s doubled is because people are going back to the movie theaters. This year, there’ll be at least six movies that globally, taking at least $1 billion in ticket sales. That’s only happened one other year. Again, not only are people coming to the movies theaters again, AMC and its rivals have gotten better. Peers, I don’t want to call them rivals, have gotten better about exploiting the fact that they can have different food concessions, have collectibles tied to the movies, so there’s a lot of high-margin money being made now. AMC has been a mess. It’s been mismanaged, which is why the stock’s doing poorly, and the smaller exhibitors are profitable for years and even paying dividends in some cases.

But I think AMC has this interesting turnaround potential, so I’m going to go with AMC. You talk about turnaround potential, and I like the idea of AMC turning things around. I actually like their subscription which AMC Stubs, what my benefits are. But I ended up paying for that because we go to movies a few times a year. But what’s the argument that the CEO who led this downfall in the mismanagement of the company is also the person who should be running the company on the way out? I do not like it. Again, he embraced the mem stock status. He had the terrible preferred shares that he just said, “American preferred equity because Ape was the whole group behind it.”

Travis Hoium: I forgot about that.

Rick Munarriz: Issuing NFTs, buying a stake in a gold mining company, which now looks not so dumb, but still yeah, I’m not happy with at Amarin, but I think we’re at the point where anyone can run this company right now, the leader with a substantial advantage over the competition at a time when Bill will come back to the theaters. I see it as an opportunity, a risky one. Of course.

Lou Whiteman: Normally, I’m angry people just by bringing trucking companies. But here we go, channeling Old Economy Ron, I’m looking at freight logistics companies, CH Robinson, Ticker CHRW. This is match.com for truckers, but not what you’re thinking, Travis, they are the middleman who connects companies in need of shipping services to the people providing the service. It’s a tough time for the industry, tariffs, trade wars, economic uncertainty, high diesel prices. Earlier this summer, the brokerages were hit when the Supreme Court said that they can be held liable if a truck they booked crashes, which just screws up the economics and the insurance of the industry. Everybody in the brokerage fell 25% or more on the news, including Robinson. On Monday, Robinson took advantage of that fall, announcing plans to buy rival RCO for $6 billion in cash and stock. Huge risk here. The market is uncertain. We don’t know what’s coming out of this insurance thing. Bobson is picking up a good tech stack and some specialty lines on the cheap. Reminds me what Warren Buffett said, Be greedy when others are fearful. There is risk, but I really like this move.

Travis Hoium: Does autonomous trucking impact CH Robinson?

Lou Whiteman: Not unless it’s all taken in house.

Travis Hoium: That’s you make an intriguing case, but in this case, since I get to make the call, I’m not going to go with crocking. I like a good turnaround story. Congratulations, Rick. AMC is going to go on the watch list. I need to take a little bit more. That’s all the time we have for today. Thanks to Rick, Lou, and Kristi Waterworth behind the glass, I’m Travis Hoium. We’ll see you here tomorrow.

Lou Whiteman has positions in RXO. Rick Munarriz has positions in AMC Entertainment, Alphabet, Comcast, Costco Wholesale, Netflix, Nintendo, Nvidia, and Walt Disney. Travis Hoium has positions in Alphabet, Ethereum, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon, Boeing, C.H. Robinson Worldwide, Corning, Costco Wholesale, Ethereum, GE Aerospace, Home Depot, Meta Platforms, Netflix, Nintendo, Nvidia, TKO Group Holdings, Tesla, and Walt Disney. The Motley Fool recommends 3M, Comcast, General Motors, Hasbro, Live Nation Entertainment, Philip Morris International, and RXO. The Motley Fool has a disclosure policy.

Finding Rule Breakers, IRL Investing, and Making Mistakes was originally published by The Motley Fool