10 Years Later: 5 Low-Risk Stocks for the Next Year

David Gardner (0:00)

10 years ago, September 7, 2016

Do you remember what you were doing that day? We did something we'd never done before, and would never do again among our 30 five-stock samplers. We picked five stocks specifically for the next year.

There was plenty of bearishness around at the time, so I went looking among the very lowest risk companies in my universe for five safer bets to beat the market. One was a railroad. Another was a company whose stock had somehow underperformed the market over the previous five years, despite having one of the world's great brands. The other three, well, we'll get there. Though the picks were made for that year ahead, neither with this sampler nor any of the other 29, did we say or think you should sell at contests. On the contrary, all 150 stocks across my 30 five-stock samplers were already Motley Fool recommendations. In most cases, we continued holding them well beyond the sampler's finish line. So yeah, today, we fire up the time machine 10 years later, and my Rule Breaker sidekick Rick Munarriz returns with the numbers, the stories, and the surprises. Did low-risk so-called actually mean low-risk? Did these five beat the market in the year they were picked to do so?

And what happened when we simply let another nine years roll by? Five low-risk stocks for the next year, 10 years later. Only on this week's Rule Breaker Investing.

SPEAKER_2 (1:38)

It's the Rule Breaker Investing Podcast with Motley Fool co-founder David Gardner.

David Gardner (1:47)

Yep, every 10 weeks, we open a time capsule, a past five-stock sampler, hitting its 10-year birthday. We score each pick equal-weighted from the original air date, see its return, and compare it to the S&P 500 over the same span. And then we do the real work, what we got right, what we got wrong, and what we may have been missing. Well, actually, I have on a Motley Fool friend to help do the real work. And this week, it's long-time Fool Rick Munarriz back to join me and discuss together what the decade actually taught us as investors. We'll finish with the samplers' overall result and whatever key lessons and go-forward views we may want to share out to you. So yeah, if you're new here, that's ten years later. We're not just keeping score, we're learning how and why Rule Breakers win.

Oh, and sometimes lose too. On a side note, before we get started, I want to mention, I have for the next five weeks, this one included Grand Jury Duty in Washington DC. Thus, my Cal Ripken, if you're a baseball fan, my Cal Ripken streak of a brand new podcast every week, now in its 12th year, is severely threatened by the prospect of going nine to five downtown Washington DC to the courthouse day after day. I'll be trying to record all of my podcasts at night, this one included. Rick Munarriz has been part of The Motley Fool since 1995 as contributing Rule Breaker writer, analyst and cheerleader. When not breaking down stocks, Rick is breaking down scenes as part of the management team for Just the Funny, Miami's oldest improv comedy theater.

Rick, welcome back.

Rick Munarriz (3:27)

Thank you. I feel grand, not grand jury grand, but grand, just grand.

David Gardner (3:32)

Do you remember what you were doing this week in 2016?

Rick Munarriz (3:35)

I sure don't. I probably felt younger.

But I know it was not a good time as the climate for investing. It was definitely a time to put out a sampler of low risk stocks, which is exactly what you did.

David Gardner (3:50)

Well, thank you. There were some surprising volatility and drops in 2016, that second half. The key to the sampler, Rick, as you just foreshadowed, was low risk. Even back then, we were using our risk ratings that, Rick, you and I have worked on and published over the years here and there, our 25-point risk rating system. Most recently, by the way, I brought that back on February 7th of this year on this podcast. We ran both Etsy and Duolingo through the 25-point risk rating system to demonstrate that for listeners old and new. So if you're new and you'd like to hear how that 25-point risk rating system works, which you can run on any stock in your portfolio, just listen back to February 7th of this year. But back on September 7, 2016, that is what we were using to search out our lowest risk Rule Breaker stocks. People were getting really bearish in the second half of 2016 And now looking backward, Rick, and knowing how the market performed, it's pleasing to note that the stock market was actually up over that following year. We'll talk about overall performance in a bit. But before we get started, I should mention how the market has done since that day 10 years ago this week to now. And this is pretty impressive because the stock market has more than tripled over these 10 years. The bogey, what we'll be shooting for, the performance of SPY, that would be the S&P 500 ETF, is plus 251.7%.