The State of the Fool
"They're not the best at what they do; they're the only ones that do what they do."
-- Promoter Bill Graham referring to the Grateful Dead
Though David Gardner readily admits he was never a Dead Head, he loves what this quote about Jerry Garcia's famous group captures.
Back in the 1990s, when the Fool was just getting its start, David and Tom Gardner gained traction for The Motley Fool by doing something that no one else was doing: creating an online community for individual investors.
This innovative approach to investing led to a spot on the cover of Fortune magazine, a slew of New York Times best-sellers, and growing and profitable ventures for the Gardners.
"The key to our sustained success," says David, "will be our ability to continue innovating -- to continue doing things that others in the investment community aren't doing."
A series with our chief rule breaker
Recently, I sat down with David Gardner, co-founder of The Motley Fool, to discuss his background and his investing philosophy. In our first article, we took a look at David's background and where his drive for investing greatness comes from. Last week, we covered the beginnings of The Motley Fool. Today, we will close out this series by looking at the state of The Motley Fool now, and where it intends to go in the future.
David believes in results you can measure. "When we wrote our first book, The Motley Fool Investment Guide, we pointed out what we think every investment newsletter should do. One of those things was to keep track of their score."
"To this day, many advice sources continue to ignore or obfuscate their performance claims, necessitating watchdogs like Mark Hulbert," David points out. The Motley Fool, though, has been doing it from day No. 1. In fact, David has been able to track his every pick (over several different services) since 1994 with the help of numbers guru Yervand Khoranian.
Overall, he has absolutely crushed the market, with an average yearly return of 18.7% versus the S&P's average of 7.6% over the same time period. To put this in perspective, $100 earning 18.7% for 17 years turns into more than $1,800, versus less than $350 at a 7.6% annual clip.
But David isn't willing to rest on his laurels. "We know that we've done a great job picking market-beating stocks -- that's great. But now we need to do a better job seeing how much we're actually helping our members."
Starting with 2010's introduction of the "My Scorecard" feature for paying subscribers (and the My Watchlist function for nonpaying members), the Fool wants to measure just how well they're doing by their members.
"We have about half of our members inputting stocks into their scorecard. We think that number will grow, and we think it's a good proxy for how our overall membership is doing."
It should be music to Foolish ears, then, to know that the David and the rest of the Fool leaders won't be measuring their success solely on their own stock picks, but on how well you, dear Fool, are performing. That's something that's very hard to find in the investing newsletter business.
Widening the Foolish net
The Fool will also be widening its sphere of influence -- and continue to do what no one else is doing -- thanks to its recently announced partnership with AOL (NYS: AOL) . Under the partnership, The Motley Fool is providing content for AOL's DailyFinance website.
"We believe that this situation really works out well for both parties involved. AOL will get quality content, and we'll be able to spread our messages and our services to a wider audience," David says.
An analogy for the future
"While there isn't a 25-year blueprint that we're working toward, we are purpose-driven and have succinctly articulated that purpose: 'To help the world invest. Better.'"
To highlight this point, David likes to tell a story he once heard from Pixar's Randy Nelson. According to Nelson, the executives at Disney (NYS: DIS) would sit down at a table and discuss what the next big idea in movies was going to be ... because that would lead to the next big blockbuster.
Nelson stepped up and said that he couldn't disagree more. He said it's all about getting the right people involved in making these decisions, not the right ideas. A movie, Nelson argued, is nothing more than 1,000 decisions about ideas mashed together into a two-hour presentation. Instead of focusing on those 1,000 ideas, get the right people involved and then get out of the way and let them innovate.
"We look for that kind of innovation in the companies we invest in. That's what led us to Netflix (NAS: NFLX) and Whole Foods (NAS: WFM) and Amazon (NAS: AMZN) . They have innovative leaders that have built their companies up by doing things that no one else was doing. In that same vein, that's where we see our continued success to come from: getting the right people on board with us and allowing them to innovate, and shape where we -- as a company -- will continue to grow," David says.
Don't stop now!
I hope you have enjoyed this three-part series. To learn more, visit our pay sites to see several stories with more about David's investing success. Our first week, we covered how David adopted his rule-breaking style of investing in the first place; while the second piece revealed some of David's investing secrets.
To wrap things up this week, we're giving readers an inside look into how David's Stock Advisor and Rule Breaker teams go about picking the stocks that they do, and as an extra treat, they will have access to both teams' brand new Best Buy stock picks for this month. These are stocks David's team has highlighted as excellent buys right now.
At the time this article was published Fool contributor Brian Stoffel owns shares of Whole Foods, Netflix, and Amazon. You can follow him on Twitter at @TMFStoffel. The Motley Fool owns shares of Whole Foods Market. Motley Fool newsletter services have recommended buying shares of Netflix, Walt Disney, Amazon.com, and Whole Foods, as well as buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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