'Motley Fool' Weighs In on Investment Strategies In our monthly visit with The Motley Fool, co-founder David Gardner gives advice on market and investment strategies. He also checks in on Neal Conan's fantasy portfolio: $10,000 dollars in Talk of the Nation's imaginary stock portfolio.
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'Motley Fool' Weighs In on Investment Strategies

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NEAL CONAN, host:

This is TALK OF THE NATION. I'm Neal Conan in Washington.

And now, it's time to talk money with the Motley Fool. If we had to pick a theme for today, it's probably liquid investments, and by that I mean oil and beer. Both are boosting my fantasy portfolio at the moment. And I'll knock on wood as I say this.

(Soundbite of knocking on wood)

CONAN: Tomorrow is the 20th anniversary of Black Monday. What have we learned since the bottom fell out of the market? And, I need your advice. There's still a thousand bucks in play money to invest. Where should I put it? 800-989-8255. E-mail us: talk@npr.org. And of course, if you have questions for David Gardner on market trends, investment philosophies or just how to get started with a portfolio, we'll take those as well.

David Gardner joins us from Fool HQ in Alexandria, Virginia. David, nice to have you on the program again.

Mr. DAVID GARDNER (Co-founder, Motley Fool): Neal, it's good to talk to you and happy pre-Halloween. We may not get to spend time together that day, so what are you dressing up at?

CONAN: I'm dressing up as a radio host.

(Soundbite of laughter)

CONAN: Okay, sounds wonderful. I'll be a bull.

Mr. GARDNER: You'll be a bull? Oh, how about that? That's appropriate. But speaking of my fantasy portfolio and being bullish, overall, it's up 20 percent right now, that initial - $9,000 is worth about $10,840. Not bad.

Mr. GARDNER: Well, I think you have me on, occasionally, to talk, Neal. But this is really your time and our time together because I think you should self-reflect here.

CONAN: Well, self-reflect? Boy, Apple was a good investment.

Mr. GARDNER: And it really has been. It's just tremendous. It's, these days, it's worth $150 billion, and that's a company that was worth less than half that about a year ago. So it's just amazing to think of the value creation that has happened at Apple over the last year, and I'm so glad that you've benefited from it because you picked a stock that you know and that you - a company you like, right?

CONAN: Yes, and that you pooh-poohed at the time, so I was very happy about that.

Mr. GARDNER: And, you know, I'm wrong all the time. If I can just be right 51 percent of the time, I'll feel pretty good about myself.

CONAN: Now, it's up more than 94 percent since January, nearly doubled my money. It's too bad, it's not real cash. We're waiting for another big launch next week, October 26, of Leopard, Apple's new operating system.

Mr. GARDNER: Yeah, and it's one that will make it possible for people who own an Apple to make really easy use of Windows, and I think it's a smart move for Apple overall. I just think Apple's incredibly smart. And the reason that I haven't liked the stock as much in the past is just because once the company gets worth more than a hundred billion dollars, I've always said it kind of goes dead to me a little bit because the opportunity for it to double or triple again, usually, you're talking about something that's a lot harder to do than to double or triple when let's say you are worth just one or maybe even just $10 billion.

So, you know, once something gets really big, it starts to get less interesting to me. But I think Apple has very clearly defied that past trend that I have seen and I really wish Apple the best. I've always so much admired the brand and I did - I have written some very positive things about Steve Jobs over the years.

CONAN: Well, let's talk about another of the big performers in my portfolio. Conoco-Phillips, it's up more than 40 percent this year as the sort of reflection of high cost of oil?

Mr. GARDNER: It really is. I mean, Conoco-Phillips is a tremendously well-managed company and, you know, Warren Buffett is a backer and you've got all the right dynamics in place. It's very unlikely that the oil price, the price of gas is going to decline meaningfully going forward. So, you have the primary business of this company and of an industry being a very important relevant commodity that appears as if it will grow in value and price - trend that way over the years, not just a great dynamic.

Conoco-Phillips has been a great performer, you know? Among the Motley Fool community, we have thousands of people who rate stocks, and it's one of the highest rated stocks even today at these prices, $87.50 or so. This is another mega-cap, Neal. You're loading up on large companies. Conoco-Phillips is worth about a $130 billion, so we're talking about, again, a very strong and now stable company.

CONAN: Well, of course, we want to get your recommendations for that last bit of money I want to fantasy invest, but I have to give up a lawyer clause. This is a fantasy portfolio with imaginary money. Neither David nor I will offer advice in whether to buy or sell any particular stock. Most important, I am a beginner at this. Keep in mind, it's all for fun. This is not meant to be financial advice and will not be a recommendation for or against any investment. And by moving right along to some of my dogs, the biggest one of which was a company I know and love dearly: Marvel, Marvel Comics.

Mr. GARDNER: Yeah. And Marvel is a company that I really do believe will be a good performer for you. I think that - I know you earlier reference were coming up in the 20th anniversary of Black Monday. And, you know, I think a reminder for us 20 years later is that, while you did watch your stocks sell off a lot that day - and we will see bare markets from time to time, we had one this summer, by the way.

You know, General Electric, for example, declined 17 percent back on Black Monday. But if you're still around and just held the 20 years since, you've made - quick calculation, you've made 15 times your money by just buying and holding over that 20-year period since. So I think that it is, in general, a reminder that if you have a good company that is profitable as Marvel is and has a relevant business - and Marvel is very relevant both with their movies and the increasing numbers of T.V. shows featuring "Spiderman" and others and of course just their toy business - I think you're going to do okay.

I think 2008 will be a really interesting year for Marvel because for the first time, it becomes the backer of its own movies. When "Ironman" hits the screen with Robert Downey Jr., Gwyneth Paltrow and a pretty good cast, Marvel, for the first time, will not have Sony pictures or another large company footing most of the bill. Marvel will be 100 percent the beneficiary - will sink or swim -based on the performance of those kinds of movies. That's a big ship for Marvel to be an interesting 2008.

CONAN: That sinking part scares me.

(Soundbite of laughter)

CONAN: Let me also ask you, 20 years after Black Monday, what lessons do we learn from this other than to hang on and not be too depressed by gyrations in the market?

Mr. GARDNER: Well, I think - and we always have to keep pinching ourselves to remind ourselves of this especially in our communications, media technology heavy world today, I really think you have to get away from the day to day if you want to make good decisions about your money. We've often made a joke at the Motley Fool over the years that nobody is quoting you the value of your house, changing on a daily or weekly basis, or God forbid, a minute to minute basis, which is what happens on the stock market all the time. And so because that does happen on the stock market, the media tends to cover it in such a short-term fashion.

And even the average mutual fund today, Neal, trades 100 percent of its stocks a year. In other words, on average, it fully sells out and buys something else across its whole portfolio. And so we have a world that's - I would describe as awash, in short-term thinking, whether it's the professionals or the media. And I truly believe that if you start indulging that way yourself, you will end up making poor decisions, you'll keep looking backwards of what has already happened and you'll get too caught up and you'll end up, you know, buying high and selling low.

So I really believe that the number one lesson that we all should learn is to take a step back and to ensure that we're thinking in terms of the real investment horizons we have. If you're 50 years old today, I think you're investing for the next four, maybe even five decades. I really don't think we should be getting too caught up in whether or not the company hit its earnings at the end of today and ends up trading up or down 10 percent because of what it did based on this quarter's earnings. And that's certainly a lot of, that's very (unintelligible) right now because October is a big earning's month and lots of reporting going on.

CONAN: On the next four or five decades, I'd like to put you in touch with my actuary. Anyway…

(Soundbite of laughter)

CONAN: …let's see if we can get some callers on the line. 800-989-8255. Our guest, of course, is David Gardner of the Motley Fool.

And let's talk to a caller from Union County, Iowa. And are you Marcia(ph) or a Marcia?

MARCIA (Caller): Marcia.

CONAN: Marcia. Go ahead, please.

MARCIA: I would - I had wanted to do this for five months. I suggest you take your $10,000 - your $1,000 and invest it in a socially conscious fund.

CONAN: Mm-hmm.

MARCIA: There are some very good companies that have funds that are made up of companies that focus on socially conscious stocks.

CONAN: Like…

MARCIA: Mines at 10 percent since June.

CONAN: That's good.

Mr. GARDNER: What's yours, Marcia?

MARCIA: Pardon?

Mr. GARDNER: What is the fund that you on, the one that's done well for you?

MARCIA: I did mine through TIAA-CREF.

CONAN: Mm-hmm.

Mr. GARDNER: Mm-hmm. Well, I think that's it's a very valid suggestion, Neal. I would also recommend you take it under advisement and weigh it against some other considerations. For us at the Motley Fool, we often teach people to invest directly into stocks that they like. Usually, the companies that you buy from represent your view of the socially conscious world. And so, often, if you allow your dollars, your investment dollars to follow your consumer dollars, you'll be pretty confident with yourself. And assuming you're a socially conscious individual, that's a great way to do it now. With that said, Marcia and…

MARCIA: And I only did - and I only did 8 percent.

Mr. GARDNER: Well, and I totally understand that. I mean, for a lot of us, we have to ask ourselves, how much of a fan am I of investing overall? Am I going to be spending much time looking at this? Do I even want to buy stocks directly or do I just want to buy mutual funds? And if I buy mutual funds, maybe at the very least, I should know two things. First, what is the goal of that fund, and you know, how are they measuring that?

For example, what is socially conscious and what is not and what are their actual criteria underneath that label? And then second, you always want to know how much is my fund charging me one year after another. That's the great hidden question for most investors.

Whenever my brother and I go out and speak in public, we ask people to raise their hands if they know the expense ratio of their mutual fund, their biggest holding often in their 401K plan. Most of the people don't raise their hands in that room because most people don't realize that a portion of your holding is being siphoned off every year to pay the fund's cost, whether it's marketing the Super Bowl or paying its managers.

And - so you want to be knowledgeable about what that percentage is. And usually, you want that percentage - I would suggest to be a half percent or less per year of the expense ratio of the fund. So there are a couple of fund considerations for you.

CONAN: Okay.

MARCIA: Absolutely.

CONAN: Marcia, thanks very much for the call and for the advice. We appreciate it.

MARCIA: Yeah.

CONAN: Marcia calling us from Iowa. If you'd like to join our conversation, give us a call at 800-989-8255, 800-989-TALK. E-mail is talk@npr.org.

Again, our guest is David Gardner, co-founder of the Motley Fool, with us from Fool Global Headquarters in Alexandria, Virginia. I'm Neal Conan. You're listening to TALK OF THE NATION, which is coming to you from NPR News.

CONAN: And let's see if we can get another caller on the line. This is Jiles(ph), Jiles with us from Wilmington, North Carolina.

JILES (Caller): Hi. I wanted to suggest for your last thousand dollars, a rollover CD.

CONAN: Hmm.

JILES: And that's a way to keep your money liquid so you can take advantage of, as they say, straw hats in January or even strawberries in January. If there's a stock that's really good that falls for, I don't know, say, it's quarterly earnings that you know that is a really good stock, then you'll be able to buy it. So staying liquid, a rollover CD is a 30-day CD and if you don't take it out a the end of the month, they pay you the interest and it just goes for another month. I mean, if you set it up for one month, you can do it…

CONAN: I understand. So, David Gardner, is this a good way to park - a good place to park your money while you're waiting to make a decision?

MARCIA: Right.

Mr. GARDNER: Well, I think in general, it's a good advice for life. I think it's nice to think that the money that you don't have, that you're maybe waiting to invest is garnering some kind of a return, and it's safe. In a sense, Neal, I think w can think of your portfolio experiment is already having done that, you could maybe mentally, at least, think back and think that thousand dollars has been sitting in that rollover CD and in effect, you're willing now to take advantage of anything that you or our community out there see out there in the markets. So that's my reflection.

CONAN: Thanks for the advice, Jiles.

JILES: You're welcome. Thank you.

CONAN: Here's Scott in Portland, Oregon, e-mails us said, (unintelligible) low-tech play the Dry Shippers are red hot forecasting earnings increases out for the next few years. I've done very well with Excel Maritime Carriers. Dry Shippers, these are people presumably who send materials across the oceans.

Mr. GARDNER: Yeah, dry bulk shipping companies. And over the last year, the stocks of - I mean, there's - there are not a large number of them so we're not talking about something like technology where you could identify more than a thousand companies that fit that bill. But of the ones that are out there, and there are maybe a dozen or so out on the market today, they're up about 300 percent.

CONAN: Wow.

Mr. GARDNER: I mean, they closed about - they've almost quadrupled as a group over the last year, a few of them polling that average way of having done even better. But, I mean, certainly, it has already been a big move. In fact, they're up almost 40 percent or so in just the last month alone. So you have somebody there who's playing momentum. And I'm not here to talk that down at all. I would suggest with your money, Neal, you end up investing in something that you - if you don't feel like you understand it well as a consumer, a hobbyist or a professional, at the vey least, I'd want you to feel somewhat passionate about following it and learning more about it. That's what we often say.

You know, Peter (unintelligible) the great investment manager and author wrote, we should buy what we know. And we generally agree with Peter there, but if you're not going to buy what you know, at least buy what you will enjoy following and will learn from over the course of time. So you if feel that way about dry bulk shipping, let's take a look.

CONAN: Mr. Excitement. Speaking about something I enjoy, one of my stocks is beer. We mentioned that early. I have Anheuser-Busch in the fantasy portfolio. It's up about five percent, but the whole industry seems to be shrinking and indeed, new companies combining now to combat Anheuser-Busch.

Mr. GARDNER: Yeah. And you know that often happens when there is a such a strong and dominant company out there, if competitors feel like they need to band together. And we saw that dynamic with Microsoft and Linux or that - the Microsoft Justice Department investigation, where you had a whole bunch of people that all wanted to - almost like an Agatha Christie novel - everybody murdered the person on the Orient Express because everybody wanted a stab at it. And I think that that can happen with single, dominant players and industries.

So Anheuser-Busch is such a company, although, compared - just in relative terms, I always enjoyed this little game, Neal. If you had to put a quick number on what percentage the size of Apple Anheuser-Busch represents today in terms of its stock market value, why don't you just guess? It's not fair to you to do it all, but why would I be fair to you?

CONAN: Why would you be fair? I would say that Anheuser-Busch - Apple's a pretty bug company, but I would say Anheuser-Busch is a bigger company.

Mr. GARDNER: And amazingly, Anheuser-Busch is worth about a quarter of what Apple computer is worth today.

CONAN: Really?

Mr. GARDNER: It's worth about $40 billion. I would not have gotten that right myself, but because I'm looking at it on the screen right now because we're talking about it, I see that. And so sometimes, it's helpful for us investors to look at the big picture. And the stat I love is market capitalization, which is just the prize tag on these companies. You multiply that share prize times the number of shares gives you the market cap. And, wow, just $37 billion when Apple is $150 billion. So, you know, room to run there, probably.

CONAN: Room to run there, probably. Yeah, indeed. And Apple is what, now the third biggest computer company? I think it just moved into third place. So clearly, one industry is a lot bigger than the other, but boy, you'd think beer, what a bottomless pit of profit that must be.

Mr. GARDNER: You would. And there are other interesting companies out there. Fosters Group Limited, that's an ADR. You can buy Fosters, you know? That's been a great one. Boston Beer Company, ticker symbol is SAM. You may be familiar with that one.

CONAN: I may be, yes.

MR. GARDNER: And there are some other international players. I'm not great at Spanish because I took French in high school, but Companhia de Bebidas das Americas, which is an ADR as well, the ticker symbol, ABV. That company is in Brazil and elsewhere in the Americas, very well-liked stock in the industry, too. So there are always good ideas around other good ideas.

CONAN: David, thanks so much. We have to leave it there.

Mr. GARDNER: Full on.

CONAN: David Gardner, co-founder of the Motley Fool. He joined us as always from Fool Headquarters in Alexandria, Virginia. We'll talk with him next month, at least we hope to.

In the meantime, anyone could follow along with that fantasy portfolio of mine. There's a link at npr.org/blogofthenation. Ira Flatow is here tomorrow. I'll see you Tuesday. Lynn Neary is here Monday.

It's the TALK OF THE NATION from NPR News. I'm Neal Conan in Washington.

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