David Gardner - Finding Companies That Break the Rules

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
The investment strategy discussed in this week's episode is diametrically opposed to my own value tendencies, but it is still one that has done exceptionally well. My guest is David Gardner, co-founder of The Motley Fool. He is unique in that he is both a pure investor, a true stock junkie and an entrepreneur. His energy is remarkable. His positive vibes are really something to behold. You'll hear it over audio, but it's even more palpable in person.
Our conversation is about finding companies which are breaking rules in the right way and reshaping industries. David's goal is to find these companies early and hold them forever. If you love investing, you're going to love this conversation regardless of your prior beliefs. Please enjoy my talk with David Gardner on Rule Breakers.
The experiments, I'll call them, that you've run in your podcast, sort of things that you keep returning to, themes across the episodes, which of those has been the most surprising to the upside? What's the one that you've enjoyed the most?

**David Gardner** (2:14)
Well, the one that I've enjoyed the most has got to be when I pick stocks. So, Patrick, that's something that I try to do every 10 weeks or so, so two and a half months. And what it is, ultimately, is it's a sampler of what I'm doing on our services, because for Motley Fool Stock Advisor, which is our largest service that's been going on since 2002, and then for Motley Fool Rule Breakers, which is a big service for us since 2004, and I've just been the same person getting the batter's box every single month over those years and I pick one stock for Stock Advisor and two for Rule Breakers. If you put that together, that's three stocks a month times 12 is 36 stock picks a year times 15 or so is roughly how many stocks that I have picked and I tend not to sell. This creates a large universe of picks and what I try to do that I really enjoy doing on my podcast is pick five as a sampler and just put it out there and score it.
Then I come back a year or two, three letter and say, what do we learn? That's been the most fun.

**Patrick O'Shaughnessy** (3:09)
How much overlap is there when you're talking about a stock? Is it ever the same stock or are those always distinct new picks?

**David Gardner** (3:15)
It might be the same stock. In the services that I let off with, those are our premium services, which is really the main way we butter our bread of the Motley Fool business is a subscription based relationship that we have with members over, we hope, a long period of time. For those, I will typically pick a new stock, but maybe out of those 36 picks a year, maybe eight or nine of them will be a re-recommendation of a previous pick.

**Patrick O'Shaughnessy** (3:38)
You're kind enough to send me an advance copy of the third edition, I believe, of the book, which lays out in some very interesting detail, this rule breaker mentality strategy mindset that you have for kind of pouring through the stock universe and I want to explore that in some detail. I was struck by the, I just love rules-based frameworks and structures, things that you consistently look for where obviously the individual stories are going to be very different, but you're looking for sort of a DNA as you pour through stocks. I'm assuming that's how you deal with the podcast as well.