Each year at this season, tens of millions of American parents go hunting for presents for the young’uns — hoping to pick something that they’ll like for more than five minutes. It’s a losing battle, of course, but we try. At The Motley Fool, we may not be the best qualified to recommend toys, even though Motley Fool co-founder David Gardner is a games fanatic, but we can make suggestions about investments.
Two years ago, Gardner revealed a five-stock sampler of companies you could put in your children’s portfolios — companies they probably know and would be enthusiastic to follow, too: Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Activision Blizzard (NASDAQ: ATVI), Facebook (NASDAQ: FB) and Netflix (NASDAQ: NFLX). It’s been something of a roller-coaster ride in the market since then, but even so, in the Dec. 19 episode of the Rule Breaker Investing podcast, it’s time to check in and see how those picks are doing.
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A full transcript follows the video.
10 stocks we like better than WalmartWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
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*Stock Advisor returns as of November 14, 2018The author(s) may have a position in any stocks mentioned.
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This video was recorded on Dec. 14, 2018.
David Gardner: Two years ago this month, Five Stocks to Put Under the Tree. We’ve talked about that. You know the game we’re playing here. I say let’s get right into it with stock No. 1.
These are alphabetical, just as I did on the podcast, and as I did with our previous stock sampler. What was up first alphabetically? We like to do it by company name. Let’s kick it off with, yep, Amazon. I picked it with that five-stock sampler two years ago. It was at $770 a share. Today, as I mentioned already, it’s at $1,604. Good news, that stock put under the tree, that made a wonderful gift, the gift that keeps on giving, up 108%.
How’s it doing against the stock market? Well, the stock market over the last two years since that 12/7/16 podcast, the stock market is up 16%. With Amazon up 108, -16, that’s a plus 92 in the win column. Let’s go to stock No. 2.
Stock No. 2, one of those companies that puts a lot of products underneath people’s trees this time of year. That’s Apple. Apple two years ago was at $111 a share. Today, it’s at $167. By the way, I should mention, since it’s kind of a theme this podcast, Apple was at $230 in October. It’s gone from $230 down to $167. I’m really happy to say, we’re still up 50%. Vs. 16% for the market, that’s a plus 34 in the win column for Apple. 92 plus 34, we’re up 126% over the market so far.
Spoiler alert: it’s about to get better.
Stock No. 3: Activision Blizzard, the video game and entertainment company. Another one of those companies whose gifts I appreciate receiving this time of year. Activision Blizzard two years ago was at $37.50. Today, it’s at $48. That’s a 28% gain. That gives us a plus 12 in the win column. That brings us up to plus 126.
Do I sound like a broken record? My golly, this stock was at $85 in October. It’s dropped from $85 to $48 in two months. And yet, we’re still pretty happy with our longer-term returns, beating the market.
I know a lot of people say the market is going to get hit at some point, or 2019 is going to be a bad year after all these great years. Have we been looking at the last couple of months? I did say a few months ago on this podcast, I think we’re already in a bear market. And a lot of times, the pain really happens upfront. When I’m seeing companies like Nvidia cut in half in two months, and Activision Blizzard nearly cut it in half in two months, and Amazon and Apple 20%, 30% down from their recent highs, I feel like we’ve already felt a lot of the pain. Things might get surprisingly better from here. We’ll see in 2019. I think the market’s going up!
Alright, stock No. 4 is maybe a particularly interesting one, because this company, it is often said, has had about as bad a year as any big company could have. Stock No. 4 that we put under the tree two years ago this month was Facebook. Facebook was at $118 a share that day. Today, it tips the scales at $146. It’s up 24%. We’re four for four on the stocks we’re putting under the tree. It’s not been a great investment. Up 24%, that’s 8% ahead of the market.
Facebook in July was at $218. We’re printing our results here when it’s at $146. This is another company that has lost a huge amount of value. And yet, I don’t even think as much as you’d expect from the headlines that we read. Some people, it seems to me, are leaving Facebook nearly for dead at this point, thinking their problems run so deep, everything from questionable executive decisions right through to betraying the trust of their customers, or security leaks, bad decisions, bad outcomes, and results. It certainly hasn’t been a good time. I know a lot of you are probably not very happy with Facebook right now. As an investor, I’m not very happy with Facebook dropping from $218 to $146 in just a few months. That said, doesn’t it sound like a lot of the other companies we’re talking about? I don’t think Facebook really deserves to be singled out in quite the way that headlines are naturally doing. I’m not excusing any of the bad behavior and bad performance at Facebook. I sure would like to see things get better. And yet, my horse sense, the Fool in me, thinks that things are probably going to get better than people think.
We’ll take our little plus eight and we’ll add that in the win column. That takes us from 138 to 146.
What was the fifth and final stock we put under the tree two years ago? By the way, what a two years it has been for these stocks! I mean, the market’s been good, a 16% gain over two years. Not bad. It’s about the historical average. But I’m really happy to say Netflix, stock No. 5, has had a really good two years. This is another one, if you put this stock under the tree — for example, if you bought shares for a child instead of giving them another gadget, or another hunk of plastic, I mean, I like those things, too. I sure did when I was a kid. But, you can also give stock. And it’s not just to kids. You can give it to brothers, uncles. Of course, it’s easier to give stocks to somebody who has a brokerage account already. But, if you’re thinking about somebody who hasn’t started investing yet, here’s what you can do. You can give them money. Just give them cold cash and they can then open an account and buy stocks with your monetary gift. I think stock makes a wonderful gift. As we’re discovering in this podcast, it’s hard for me to think of more rewarding gifts, frankly, as I think about the hardware under many trees, than what we’re describing and discussing in this podcast.
Netflix, two years ago, $126 a share. Today, $272. The stock is up 116%. Subtracting 16, that’s an even plus 100 for this fifth stock, we put it under the tree. You total it all up, we’re at plus 246 for this group. That’s right, take these five stocks together, add up their percentage points by which they have beaten the market, and that’s a plus 246.
By the way, to finish out the math, the average gain of these five companies was plus 65% against the stock market, which over the last two years was up 16%. So, 49% per stock ahead of the market averages for one of my better five-stock samplers. This is one of those rare ones where I got all five of them right so far. But, I do want to put an asterisk. I don’t want to gloat or celebrate here. This is only two years later. If 2019 is a bad year, maybe these stocks decline further. We’ll see whether you wanted them under the tree in retrospect. But right now, I’m going to predict you were really happy to either give or receive these stocks. And remember, the greatest gift is the gift of giving. I hope you’ll think about giving some of your favorite companies, some of your favorite stocks if you’re a stock market investor, so many of you are, think about giving a stock to somebody else.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Activision Blizzard, Amazon, Apple, Facebook, and Netflix. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, Apple, Facebook, Netflix, and Nvidia. 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 has a disclosure policy.
