In this episode of Rule Breaker Investing, we gather around the campfire for the ninth time to share our best stock stories.
From Meta Platforms' long arc of growth to Warner Bros. Discovery's debt-ridden saga, these stories aren't just tales of companies; they are lessons for life and investing. Motley Fool co-founder David Gardner and his Motley Fool friends Dave Meier, Mary Long, Nathan Alderman, and Tracy Dahl recount their most memorable stock experiences. Join us at the campfire!
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video.
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This video was recorded on Oct. 02, 2024.
David Gardner: Some people like superhero stories, and these days, back in theaters after the pandemic, we'll spend, I don't know, about a billion dollars at a box office to see a movie over a single weekend. Others like sad stories. We can all think of a favorite bedtime story. It's often said of us human beings that we are a storytelling race. The call of the story, the prehistoric campfire, where stories were acted out. Huge industries today have been built up just around celebrity stories. Or how about sports, the news, scores, results, the stories we remember from our own athletic exploits, however scanty they may be, in my case. Stories, stories, stories. Stock stories. Every stock tells a story. As investors, we get to know our company's mission, Maybe know their marketing tag line. That's a story. We followed the share price, we experience highs and lows, sometimes dizzying highs or cavernous lows. Sometimes both.
Our experience as investors gives us the long view, the F Foolish view acquaints us with great prosperity creating stories, especially look across a portfolio. Look up and down your brokerage statement. I bet you see some stories. For the ninth time in this podcasts history, this week, we focus on telling stories. We're a stock market podcast. These are stock stories. Visiting me around the campfire this week are several talented Motley Fool contributors, each of whom has a story to tell. Five stock stories to make you smarter, happier, and richer, only on this week's Rule Breaker Investing.
This week, we're headed back to the campfire. Back to the campfire around which we talk about the stock market. This week, I've asked my friends and fellow analysts here at the Fool to tell the story of some stocks, not story stocks, necessarily, but the linguistic reverse stock stories. It's something we've done on this podcast. This is Volume 9. In fact, all previous volumes in the series are a worthy listen. Anytime you're on, a hike or maybe camping, just Google Rule Breaker Investing stock stories. You should find our previous eight volumes, including the most recent from September 6 of last year. Anyway, this week's podcast stands shoulder to shoulder with all the past ones because every story is new. As I mentioned earlier, I've got those four fellow Fools cued up, looking forward to sharing their stories for some education, amusement, and enrichment. I'll tell a fifth at the end. Now, as we get prepared here, I do have an exciting announcement. Due to the growth of this podcast over the years, we can now afford some new and different sound effects than we could in past years. My talented producer, Des Jones, will be bringing some sound to the stories that you hear, we'll start simple and augment as we go. Des, I'm going to ask you to queue up our single sound effect to set the mood for story Number 1. That helps me start setting the right tone here as we welcome my friend Dave Meier. Dave, welcome to Rule Breaker Investing.
David Meier: Thank you so much, David. I'm so excited to be here.
David Gardner: Under a full moon, I wasn't even planning for this Dave. Do you have a favorite camp fire snack?
David Meier: It's got to be the smores.
David Gardner: Got to be the smores, you're a classicist.
David Meier: With extra marshmallows.
David Gardner: Extra marshmallows, excellent. Dave, what are you doing around the Fool these days?
David Meier: I am working on the trends team trying to uncover the next generation of great growth stocks.
David Gardner: I appreciate that about you, and it's a delight to have you as our leadoff hitter for Stock Stories Volume 9. But we throw away the baseball analogies because we're back under a full moon. Listen, and, Dave, what stock are we going to be talking about?
David Meier: We're going to be talking about Meta Platforms, which was formerly known as Facebook.
David Gardner: Ticker symbol META. Dave Meier, take it away.
David Meier: Once upon a time, back in 2012, a company now known as Meta Platforms, came to the public markets in the form of an IPO as Facebook. That's when I was first introduced to the company, lots of fanfare. I was like, hey, there's got to be something interesting here.
David Gardner: The Facebook.
David Meier: Absolutely. This could be a very important year in investing, given what this tech company has gone on to do. Fast forward to 2013. The stock is around $25. Some of the hype maybe has gone away a little bit. I'm in the meeting with Tom Gardner, and he asks me, are you bullish? I say, yes. Look, digital advertising is just getting started. The entire market is going to be moving in that direction over time. Facebook has the most users on its social platform. It's growing quickly. It has the best analytics. It has the best distribution model. What could go wrong? This is a great company in the making. Of course, Tom asks me, what's your five year price target? I'm a little taken aback by the question. I wasn't expecting it, but I thought for a moment, and I said, $200. If Tom had had a mouthful of milk, he would have spit it out on me. [laughs] I definitely caught him a little off guard with $200 given the price was around 25 at the time. But he replied with something, if I remember correctly, like, look, I like the company, and I'm not even that bullish. We moved to 2014. I've moved down from the unregulated side, the publishing side of our business, and I've moved down to Motley Fool Asset Management. Facebook is still one of the most important companies in the universe.
We made it the largest position in the growth portfolios that are serving our Motley Fool Wealth Management clients. The funny thing is, every year through 2020, so six years, clients and advisors, my Foolish colleagues, they constantly asking me, does Facebook still deserve the highest allocation? My answer is always, yes. Look, more ad dollars are moving digital. That's not stopping. Over time, a greater portion of them are moving to Facebook, because, again, they have the best platform. But then I get skeptic. Well, isn't Facebook expensive at 10 times sales, 12 times, 15 times sales. I would retort, look, when sales are growing north of 40% annually, cash flow margins are 50-60%, and there's still a 7-10 year tailwind behind this company? It's probably undervalued. I would get some interesting looks from everybody, but that's the way it is. Let's throw some numbers out here. From 2013-2020, sales increased from about $8 billion to $86 billion. During that time, the cash flow that the company generated increased from about $4 billion to about $39 billion. How did my prediction with Tom fair? Well, in mid 2018, the stock rose to just over $200. For our Motley Fool Wealth Management clients, in mid 2020, it was over $300. It looks like I was able to make a pretty decent prediction.
David Gardner: That's fantastic, Dave, and I remember the IPO early days. It was considered a failed IPO, as you may remember.
David Meier: Absolutely.
David Gardner: You did mention, you came online with the story 25 in 2013. But that was downside. I'm going to make it up. It was around 40 down to 25 or something like that.
David Meier: It almost got cut in half. That's exactly right.
David Gardner: That's always worth remembering is that there was so much skepticism already there. But the growth rates that you've described and just the breathtaking numbers and growth. Some people love Facebook, truly. Some people really don't like Facebook. These days, we don't even call it Facebook anymore. Facebook still exists, but Mark Zuckerberg has renamed his company, as we all know. I realize you dropped the story somewhere around 2020, and I know that you've since transitioned back to our publishing side from the Motley Fool Asset Management side. But, Dave Meier, what is your didactic lesson? We always want a good, solid, morally instructive takeaway for our listeners, so what do you got?
David Meier: I think it's important to go back to the title of the story, which is the long arc. Look, we're all Foolish investors. We can all analyze companies in different ways. Your six signs of a Rule Breaker have served you and so many investors so well. But if you really find a great company in a long story arc, the best thing to do is to tune out all that noise. Tune out the skepticism, just look and see what it's doing and stick with it the best you can based on the analysis you're doing.
David Gardner: Dave Meier, what year did you first come to the Motley Fool as a fellow Fool?
David Meier: I've been here since 2005.
David Gardner: Phenomenal. Just as you have been with us for 19 years, almost 20 now, it's that same approach that we've taken to investing, that loyalty both to an employee or to a company, as well as to the company that we buy, the companies that we proliferate in our portfolios, and it is so rewarding. Both the human relationships over now nearly 20 years, Dave Meier, one Dave to another, but the relationships that we build with our stocks, and truly for listeners, if you haven't got there yet, if you've not held a stock for five years, at least, or 10 years, at least, please know the great pleasures of doing so. Dave, in conclusion, I think it's fair to say, you can sometimes allow a great company to be overvalued, to look, and, in fact, sometimes be overvalued. In fact, if you hold a stock for 10 years, it's probably going to get cut in half a couple of times, especially if it's more of a Rule Breakers style, company, and yet that's not the reason to sell, just like that's not the reason to end relationships after one hard year, most of the time.
David Meier: Absolutely. Business is a long arc process, just because a stock price can change day to day does not mean that a business's fortunes are changing day to day. You have to expand your time horizon and look at it differently.
David Gardner: What a great story to start with, Dave Meier. The long arc, and you've applied it here to Facebook now Meta Platforms. We can think of many other stocks in Motley Fool portfolios, yours and mine, and our members, where there is a long arc operating. There's really no substitute for playing the long game. Dave Meier, keep up the great work around Fooldom. Thanks for joining.
David Meier: Thank you for having me.
David Gardner: On to the stock story Number 2, and oh my gosh, Mary Long, I wasn't expecting. Is this your first appearance on Rule Breaker Investing?
Mary Long: It is, in fact, my first appearance on Rule Breaker Investing, and I am honored to be joining you around the campfire.
David Gardner: I'm delighted under that full moon, to have you here with us, Mary, as you prepare to introduce stock story Number 2. Mary, the wilderness is quiet. I would say maybe too quiet. What's the creepiest sound that you've ever heard out in nature?
Mary Long: I don't know that I've heard this one yet, but the creepiest that I can think of considering that there's a full moon out tonight is the cry of a were wolf.
David Gardner: Mary, what are you doing around Fooldom these days?
Mary Long: I am a producer and one of the co-hosts of Motley Fool Money. That keeps me pretty busy.
David Gardner: While you told me you're relatively new to the stock market game, to the investing game, you've been at the Fool two and a half years. You may not have a ton of your own stories to tell. Although I know you have some. You've helped many others tell stories through our podcasts, and stories are so important, not just to human beings, but especially to Fools. Mary, thank you for setting the stage and the platform so that so many people could tell stock stories in just your first few years of the Fool.
Mary Long: Thanks so much. As you will hear, in the story that I'm about to share, the stories behind companies are what I find to be incredibly compelling, and so even if the story itself is not enough to convince me to buy a stock, [laughs] I get so much joy and fascination from following companies and following their stories.
David Gardner: So well said. What is the company you'll be introducing?
Mary Long: The company that I'll be introducing is Bumble.
David Gardner: Ticker symbol, BMBL.
Mary Long: Bingo.
David Gardner: Mary Long, take it away. What is your title?
Mary Long: My title is Catching Flies With Honey. Once upon a time, I was new to the world of investing, so new that I wasn't even investing yet. I was information gathering. The year was 2021. Early 2021, I was a Mesley few months into my first ever big girl job, and I had a small surplus from a small paycheck. I didn't know what to do with that leftover money, but I did know that investing was one thing I might do with it. Trouble was, I really had no idea where to even begin. I asked my dad at one point how to get started investing, and he told me to open a brokerage account.
David Gardner: Nice.
Mary Long: But I looked back at him, but important detail, David, I looked back at him with wide eyes because I didn't even know what a brokerage account was.
David Gardner: What is that?
Mary Long: That was how little I knew about this world, hence, my serious need for information gathering. I eventually did figure out what a brokerage account was, how to get one set up, move forward with that, and I haphazardly picked some index funds and let things lie. But I had this underlying fascination with and curiosity about individual stocks. I wanted to be able to graduate to the point where I might be picking those stocks for myself. But again, no idea where to begin. I started talking to some friends, just like initiating conversations, asking questions about whether they invested, if they did, what strategies they used, how they evaluated and ultimately chose stocks. One friend, we'll call them Nick. He directed me to a red thread called Wall Street Bets. That's where he got all of his stock ideas. Keep a mind the timeline here. This is early 2021. He told me to buy GameStop about a week before it blew up and was all over the news. I did not. That's a different story. But it is one that we'll come back to in a few moments. A few weeks later, it's mid February 2021 at this point, February 12, to be exact. I'm out to dinner with another friend, we'll call her Chloe. We're having this conversation that at this point, I've become pretty keen to have about investing strategies, how friends pick stocks, and Chloe told me that she had just bought Bumble stock. She'd bought it the day before, just as a IPOed, got in at about $70. She was absolutely thrilled.
She'd used Bumble herself, found it way preferable to other dating apps, was the big fan of the founder CEO, Whitney Wolfe Herd. She loved the idea of putting a little bit of her own money behind the company and its vision. She was so, and even better if doing that, if putting your money behind this company would grow that money in the meantime. I instantly found this so compelling, not necessarily the thesis, but the excitement that Chloe had when talking about it. Whereas Nick, a few months earlier, had directed me to look at GameStop, when he did that, he hadn't really had a reason to do so. Chloe's pitch was totally different. It was fun for me to see how excited she was about the company. Fun to see how invested, not just financially, but emotionally and intellectually, she was in Bumble's business, it's leaders, it's contributions to society and to the future. In that moment, it seemed like, I had two very different paths, very different investing strategies before me. One is random and without reason just because everyone's doing it.
Another was, passion backed and intellectually curious and optimistic. I thought to myself, if these are the two types of investors, I want to be the second type. I want to be the Bumble type. That said, I did not go home and buy Bumble stock at $70 a share, and I wish I could tell you, David, that it's because I went home, I did some homework and came to a conclusion that was smart and sharp and numbers backed. But the truth was I was just still in this information gathering phase. The action part of my investing journey wouldn't come for a few more months. But even today, I think of Bumble stock all the time. That investment has not grown any of Chloe's money. It trades at less than $7 today. Remember she bought in at closer to $70 a share. I reached out to her yesterday, actually, and I asked her if she'd sold her Bumble stock. The answer was no. She said she's grown a lot in her investing journey, feels like stock picking isn't her jam. She's pretty risk averse, and so it's not as interesting to her. But she also told me that she has no plans to sell her Bumble stock. She'd only put in about $150 to start and figured, I might as well stick along for the ride. I don't know that anymore she's like, so committed to the long term vision of the company, but she's ready to just see what happens.
I also have grown in my investing journey, and I still try to be that Chloe investor, that Bumble investor, rather than the.
David Gardner: Sure.
Mary Long: GameStop investor. But I've also learned that while your life itself can be great ground for stock ideas, not all stock ideas are great investments. [laughs] So the fact that I or my friends use a product or a service is not in its own a reason to invest in that product or service. It might be a reason to pay attention to it, but there's got to be another layer to filter your ideas through something more fundamental and quantitative. Chloe's optimism around Bumble has shaped honestly my entire investing ethos, even though I've never bought the stock, and I likely never will. Her perspective on that company made me start to see business and business news as genuinely exciting, which is something that had never occurred to me before because I thought it was a bunch of numbers moving up and down. I came to see through that excitement that she had about this company, that business is about a lot more than just numbers. It's about people and products and emotion and strategy and psychology. It's about the future and taking care to think long and hard about what you want that future to look like. I am a proud Chloe investor because optimism has become the first filter for me when I look at a stock. First and foremost, I want to know, will I be proud to invest in this company?
But what I've learned since February 2021 is that one filter is not enough. I've got a second filter now, too, which is simple, but mightily important, and that is, do I think the company will make me money? Everyone's going to have different filters and different orders for different reasons. Anyone's filters are there as to choose from. But if you're looking for a place to start. After about three years of not being invested in the stock, Bumble has taught me that looking for honey, a sweet and sticky hook, a reason for excitement, a tasty promise. Honey is helpful when you're window shopping when you're in that information-gathering phase, and you're looking for something that catches your eye that peaks your interest. But you've got to be careful not to get caught in the honey alone, that it pays to take a little look at the hive behind that seemingly sweet stuff before you load up on it for yourself.
David Gardner: That was so articulate, Mary. Sometimes I want to jump in and interrupt because I have something funny to say. But first of all, I didn't want to interrupt you. I was spellbound by your, that was, again, so articulate. I know that you're a professional, and I see how well you speak off the cuff. For good reasons, we're happy to have you. I also want to say that I'm going to ask you to underline your top lesson. You might be reunderlining it here, but I at least want to add a supplementary one right now, which is that it's also OK to lose. It's very painful for Chloe to be in near 70 and watch it lose nine-tenths of its value. I've done that before, and it's worth pointing out that the Motley Fool Rule Breaker Service, which I helped start 20 years ago, had a recommendation from 2021 on Bumble, and it was a loser. Let me make it very clear. We have picked many losers in Rule Breaker Investing history. But I love how you start with interest and passion and what you think actually leads to a better world, because while we're going to lose some of the time, and sometimes dramatically, when we win, and we get it right, we really win. That's always been true of Rule Breaker Investing. Mary, thank you. Also, you know this. Index funds are OK. That's Number 1 advice for most Motley Fool investors is start with index funds if you don't already have them. I personally love investing directly in stocks. I think we can do better by not having to buy all the stocks, Mary, which is what index funds do. They buy all the good ones and the bad ones. I like being selective, but would you underline for me what is your top takeaway from the Bumble story?
Mary Long: My top takeaway is, look to your life for stock ideas. But just because you find a good idea in your life doesn't mean that you have to move toward the next step and invest. You can love what a company's doing and love the product, but that doesn't always make it a good investment.
David Gardner: All right. On to Stock Story Number 3. Oh, it's my friend, Nathan Alderman. Walking up to the campfire, Nathan, great to have you for Stock Story Number 3.
Nathan Alderman: Hi, David. I'm not really a camping guy, but when you invited me, and I heard that there would be hot dogs I couldn't refuse.
David Gardner: [laughs] Excellent. Now, you say you're not really a camping guy. What do you really mean about? Let's get underneath that line. What do you say?
Nathan Alderman: This story is not going to make me look great. Every fall, my wife's brother has a charity music festival down in her hometown, and every fall, my wife and my kids love to camp out. I tried camping with them last year. I spent a night in a tent on an air mattress and then decided that I'm not a camping person. So this year, most recently, when we went back, I set up the tent. I inflated the air mattresses. I made sure everything was all arranged and perfect. Then my wife and my kids slept in the tent, [laughs] and I went and slept in a hotel, and it was great. I had no complaints.
David Gardner: Now was this all above board, or did you sneak out once the kids were asleep?
Nathan Alderman: No, this had been previously established, setting up the tent and inflating the air mattresses and everything. That was my penance for not actually sleeping in the tent. I made sure everyone was cool and safe and kosher before I left. I got to enjoy a very cheap, but clean and safe hotel while they got to enjoy air mattresses and bugs.
David Gardner: It sounds like a win for everyone. There are some bugs around this campfire tonight. Well, Nathan, welcome. Just share with our Rule Breaker Investing listeners a line or two about what you do around the Fool these days.
Nathan Alderman: I am the compliance lead for The Ascent, which is our personal finance arm, which basically means that I make sure we toe the line with all of the various regulations that our credit card partners and other financial institution partners have.
David Gardner: Thank you, Nathan. How long have you been at the Fool?
Nathan Alderman: I've been at the Fool. Oh, my gosh, since May 2005. It's been a while.
David Gardner: In 19-plus years, you've had many roles over time. I know, for example, you've instructed many Motley Fool writer, contract writers, perhaps, especially in how to write better stories, better leads, etc, for our site. I'm not going to say you also direct, but you might even also direct, in addition to being a writing coach, and these days, compliance lead for the ascent.
Nathan Alderman: I did make a few videos back during the pandemic.
David Gardner: That, too. A lot of other things besides and teller of Stock Story Number 3, Nathan Alderman, what stock are we going to be talking about?
Nathan Alderman: David, I regret to inform you that this story is about one of your picks Rule Breaker recommendation.
David Gardner: A bad one. Sounds like.
Nathan Alderman: Yeah, I'm sorry. Hang on. There are mitigating circumstances for you. It's down roughly 14% and 51% from where you picked it two different times in 2010. But in your defense, you picked this stock before it hit its peak, and long before its downfall became apparent.
David Gardner: What is that company, Nathan?
Nathan Alderman: That company is Warner Brothers Discovery.
David Gardner: Ticker symbol WBD.
Nathan Alderman: That is correct. We're heading into election season, and a lot of us are probably thinking about the importance of leadership and what good leadership looks like. Today, I'd like to tell a story about a leader who went very wrong and the lessons we can learn from their mistakes. It's a story about a David and a Goliath, but it goes a little differently than you'd expect.
David Gardner: Nathan, the title of your story.
Nathan Alderman: David and Goliath, but not the way you think. So once upon a time, as time goes by, there was a movie studio called Warner Brothers. Founded by Harry, Albert, Sam, and Jack Warner, in 1905 as a single movie theater in New Castle, Pennsylvania. It's now one of the world's most famous producers of movies, television, and music. As befits a movie studio, Warner's is no stranger to drama and disaster. Jack Warner notoriously swindled the company out from under his brothers, a betrayal so dire that it gave Harry a heart attack, and then a stroke.
David Gardner: Oh, my.
Nathan Alderman: At the time our story begins, the company has been bruised by a series of ill-fated mergers, first with AOL, and then with AT&T. And that is when David Zaslav shows up. Zaslav joined the TV Network NBC in 1989, four years out of law school. As he rose through the ranks there, he helped to launch cable channels like CNBC and MSNBC. In 2006, he jumped to Discovery Communications, where he led the TV Conglomerates transformation. A very successful transformation from science and nature documentaries to reality TV shows like 90 Day Fiance and Doctor Pimple Popper. Haven't seen it. Not sure I want to, but good for Doctor Pimple Popper. Discovery shares rose from around $8 a share when Zaslav took over to $78.14 on March 15th, 2021, in months after Discovery launched its first streaming service.
But those good times wouldn't last. On April 8th, 2022, discovery closed a $43 billion deal to merge with Warner Brothers buying the company from its former parent, AT&T. Shares traded around $24 down nearly 70% from their peak. Sorry, David. But the bad times for Warner Brothers' discovery were only beginning. So let's talk about the four big warning signs that started flashing as Zaslav took the home. First, Zaslav was a lawyer and then an executive in charge of TV networks. He knew how to launch a new channel, but he was never involved in telling stories or working with creative people, arguably the most crucial aspect of Warner Brothers' business. Gave the impression, at least that to him, one-half hour of things you watched was no different than any other. That led to mistakes like an early investor presentation, where when discussing the new company stat of programming, he had these epic popular stories like Harry Potter, or Game of Thrones or Lord of the Rings displayed alongside the 90-day fiance Universe.
Now, good leaders don't just parachute in from an entirely different line of work and assume that their skills in one business will translate to success across the board. Either they work their way up within the business or like Warren Buffett, they take the time to study up and really understand how it works and why it matters. Second, Zaslav had discovered take on massive debt to purchase Warner Brothers. Its first annual report after the merger in February 2023 showed more than $48 billion in total debt. Trailing 12-month revenues reached $33.8 billion, but costs of 41.1 billion, including $1.7 billion just in interest expense, led to a net loss of $7.3 billion.
David Gardner: Ouch.
Nathan Alderman: Debt can make sense if you're using it to build or create something. But if you're just piling it on without a long-term strategy, it can make you lose focus on what your business actually does well. Instead, you start focusing only on that huge burden hanging over your head and to make up for it. You end up pillaging the very assets that made your business valuable in the first place. So, third, to cut debt, Zaslav started slashing, burning, and angering everyone he needed to please. One of Warner's assets was the news network, CNN. His hand pick new boss for CNN tanked the network's ratings, reputation, and internal morale by attempting to make its news coverage less accurate and more biased. He ditched the valuable HBO branding from the company's streaming service. We're calling it just Max instead of.
It was like he didn't recognize that HBO was this valuable, important brand that was synonymous with great TV. He was like, Well, TV's just TV. The Sopranos, naked and afraid. Same thing. Then he started yanking series from Max's catalog when one of its selling points was, we've got all this stuff just to save on royalty payments. He angered fans and creators alike by refusing to release three essentially completed movies, several of which had earned raves and test screenings, featuring beloved characters like Wiley Coyote, Scooby Doo, and Michael Keaton's Batman. These films went down the memory hole, never to be seen by the public in exchange for a one-time tax break that didn't even equal what they cost to make. David, think about it if you are a creator who's worked on one of these films for months of your life. Then you're told, not only is no one ever going to see what you made, even though people really liked it, but it's being done for a one-time tax break that you're not even going to get any benefit from.
David Gardner: That wouldn't feel great.
Nathan Alderman: No, it wouldn't. This one is personal for me because I'm a movie nerd, but he butchered the budget at small profitable, beloved Network Turner classic movies, which is where I found a lot of my very favorite movies of all time. His decision drew public alarm and condemnation from a few people you may have heard of, Steven Spielberg, Martin Scorsese, and Paul Thomas Anderson, the award-winning, highly lucrative people Warner Brothers might want to make movies with in the future. Not a great way to build trust with the people you depend on to make your money. Then Zaslav joined other CEOs in fighting tooth and nail against writers and actors unions drawing out a painful main to November strike in 2023. Now, to be fair, this wasn't all Zaslav. During the strike, he made a lot of public conciliatory comments about the unions, but he still towed the line with his fellow studios.
One union estimated that Zaslav would have spent about $47 million over the next few years agreeing to what they asked for. Instead, Warner Brothers Discovery said it lost between $300 million and $500 million on the strikes. Zaslav later, to his credit, publicly admitted that the strikers were right, and he was wrong. Good leaders view their assets as more than line items on a budget. They take the time to appreciate what their predecessors have built, and they treat those accomplishments as more than just an opportunity to raise some quick cash. They don't focus on short term gains over long term success, and they respect the roles as custodians of something that likely started before them, and will hopefully continue after them. Fourth and finally. Through all these stumbles, Zaslav got paid. Warner Brothers Discovery's 2023 proxy statement shows Zaslav pulling down $3 million a year in salary, another $22 million a year in bonuses, and $23 million in stock awards for total compensation of $49.7 million up from 39.2 million the previous year. This is the same year, they had a massive strike that devastated their business, but his pay went up. In fiscal 2023, his company reported a nearly $10 billion net loss on just $9.7 billion in revenue. Remember, that's compared to like $33 billion just a few years prior when he'd taken over.
David Gardner: There are so many things to react to that we won't even have time around this campfire. Nathan, but I thank you very much, especially for underlining the importance of leadership or sometimes poor leadership. It's funny because Zaslav, at least from the days I first recommended it as Discovery Communications back in 2010 was a winner for a while. As you mentioned, stock did do well for a while, and I obviously should have sold, but these days, it is a pale shadow of what it once was. The market cap down to $20 billion stock having lost a lot of value over the last 10 years, just the last two years, two-thirds of its value. It's a sadly ironic note that I have it on my Stock Advisor Scorecard. I tend to buy to hold. It doesn't always work. My brother, Tom also has it on his side of Stock Advisor because Scripts Networks was one of the companies he once picked, and it got merged into Discovery, which then became Warner Brothers Discovery, WBD, as I mentioned earlier, One of our really, not great picks of the last 10 years. Nathan, I know that you're emphasizing leadership. I don't want to name your own didactic lesson for you. I'm guessing it's in this area. What's the takeaway?
Nathan Alderman: Well, there are two takeaways. First of all, like you said, on September 30th, 2024, Warner Brothers Discovery share is traded just above $8. That's essentially the same as when Zaslav joined Discovery in 2006. Adjusted for inflation. That is a 36% loss. Now, David, you did something wonderful that leaders should do right now just now. You took accountability. Executives whose pay doesn't align with their performance, who don't face meaningful accountability when they make dire decisions are bad news for employees, customers, and shareholders alike. So if I have a big didactic lesson here, it's this. Fools, when you're sizing up an investment, remember that leadership always matters. Creating something good and lasting requires a lot of talent, cooperation, and decades of hard work. But the wrong boss and the wrong decisions can wreck those efforts in a surprisingly short time.
David Gardner: It's true. Indeed, I think it's worth pointing out, and it probably isn't pointed out enough that beyond the products, beyond the services, beyond the film library, in this case, beyond the profit and loss statement or the increasingly debt-ridden balance sheet. Beyond all of those things, what I think matters most for our investments over time are the people that we're investing in. It's truly always going to be the case, I think, unless AI takes over all of our companies, and if so, I guess that's because it makes better decisions, but up until then, We are heavily reliant on the so-called human capital, the visionaries, the dreamers, and doers that actually drive from one day to the next, the businesses that we're invested in. That works out great when it's Jeff Bezos, who creates untold value over his lifetime.
That works out very poorly when almost 20 years later, we're where we were with the stock price, and the market, meantime, has gone up four times in value. Nathan Alderman, a dark story story number 3, but, you know, it is dark out here tonight. I'm just glad we have a full moon.
Nathan Alderman: Those ominous wolf howls in the distance are probably pretty in keeping with this story. [laughs] But speaking of ominous distant rumblings, I'd like to make sure that our listeners have all visited the nonpartisan site vote.org to check their voter registration, 'cause, like I said, leadership matters.
David Gardner: All right, well, thank you, Nathan. It is that coming up to be that time of year here in the United States of America. Nathan Alderman, thank you for joining us with Stock Story Number 3. David and Goliath, but not the way you think. Nathan, Fool on.
Nathan Alderman: My pleasure, David. Now, if someone could just point me to the hot dogs, I'd be very happy.
David Gardner: Oh my gosh. It's my longtime friend, Tracy Dahl. Tracy. Welcome to the campfire.
Tracy Dahl: Thank you, David. It smells great.
David Gardner: It does. Who doesn't like a good hot dog under a full moon with arguably a werewolf nearby howling?
Tracy Dahl: I actually don't like hot dogs, David.
David Gardner: We've got other options. You can go dessert first with S'mores
Tracy Dahl: Sign me up.
David Gardner: Tracy, what are you doing around Fooldom these days?
Tracy Dahl: I am currently the managing editor for our website in Canada. We do have a website in the Great White North.
David Gardner: You betcha, and there's a lot of camping that goes on in the Great White North. Maybe during more of the greener months than the white ones, do you enjoy camping?
Tracy Dahl: I do, as long as my son is not with me.
David Gardner: Your son roughly?
Tracy Dahl: Six.
David Gardner: Six. So maybe a higher maintenance camping trip than you're looking for right now?
Tracy Dahl: Yeah. When you get dirty, it's really hard to get clean. [laughs] You're camping, especially if you have a little one with you.
David Gardner: Well, let's move on to Stock Number 4. Tracy, what stock are you going to underline here with Story Number 4.
Tracy Dahl: Motley Fool classic stock, Berkshire Hathaway.
David Gardner: Excellent. Ticker symbol BRK. There's BRK.A.B. There are different ways of expressing this dots or dashes. Berkshire Hathaway. Tracy, what is the title of Stock Story Number 4?
Tracy Dahl: David, it's called You Have More Than You Think, which you may recognize as a title from a book I believe you co-authored with your brother.
David Gardner: You know I appreciate that title. I didn't know you were going to do that. Thanks.
Tracy Dahl: Once upon a time, there was a Fool who invited herself on vacation with Bill Mann. That Fool is me. If you don't know Bill Mann, he is one of our globe trotting analysts here at the Motley Fool.
David Gardner: I think a lot of listeners will know Bill by now. He's made some great appearances on market cap game shows.
Tracy Dahl: I hope so. Big Fool, big personality. If Bill invites you on vacation, you say, yes. I was in the office about a-year-and-a-half ago, and I'd overheard that Bill was going to be attending the Berkshire Hathaway shareholders meeting just for fun. I said, that sounds great. When you see Jim Gillies there, be sure to rase him for me. He said, well, I have extra credentials. You want to come? I surprised myself by saying, yes.
David Gardner: Wow. Had you been to Omaha, Nebraska before for a Berkshire conference?
Tracy Dahl: I had not. In fact, at the time, I did not even own any Berkshire stock.
David Gardner: Don't you need to own some to get in?
Tracy Dahl: You can be a guest of a shareholder, which is how Bill was planning to spring me into the convention center. However, I decided that if I were going to this conference, I needed to make it official, and I did buy some shares before attending. At the time, the stock price was about $309, and I'm a happy shareholder, it's up to 458 today.
David Gardner: Wow. That is a big time winner. Now, we're talking about, is it the Berkshire Bs? Because there are various versions of the stock, and there's a very, very expensive share you could have bought.
Tracy Dahl: You don't pay me enough to own the A shares.
David Gardner: [laughs] But what a fantastic investment in just the year-and-a-half or so that you've held it?
Tracy Dahl: That's right. Yes, I was pleasantly surprised when I was looking up the numbers today to see how well it had been performing. I was at this conference in Omaha. There's about 40,000 people. They're all investors in Berkshire Hathaway or friends of or related to. It's pretty mind boggling to sit in that stadium arena and see all these people who are excited about investing. I was also aware at the time that it was very self-selecting and a selective group. It was on my mind that everyone there was wealthy in one way or another. We were all there. We all had tickets to be there because we had excess cash that we were able to invest, and we chose to invest it in this wonderful company. My stock story takes place a bit after the conference that day. Some Fools had gathered for an impromptu happy hour. No host. We were not expecting the turnout that we got. All I had done was make the reservation at the restaurant, but several dozen people ended up showing up.
David Gardner: As Fools are want to do, F.
Tracy Dahl: We love to party. There was quite a big crowd, and we needed to clear out of the restaurant space at a certain time because somebody else was responsible and actually had sit down dining reservations. The waitress had been so kind to all of us. I know that we were more than she had bargained for. When everyone left, I decided to give her a really sizable tip.
David Gardner: Love it.
Tracy Dahl: It was not as much as the share of Berkshire at the time. [laughs] But it was not an insignificant amount for the few drinks that were left on the tab. I told her that I was leaving this tip, and she started crying. She gave me a huge hug, and she said, I am a student. I'm really struggling. This has been such a hard month for me, and I really needed this. Thank you so much. In that moment, I realized that I have wealth. I think so much of investing you can get caught up in, did I beat the market? What was my cost basis? Am I beating the other guy at the bridge table? But sometimes it's enough to just know that you have money to invest. In that moment, I realized, I'm an investor, and I have wealth, and I can share it. That was very powerful for me to think about investing in a human and not socking some more away in my savings account.
David Gardner: Appreciate that. It's a reminder that invest itself is a beautiful word. You're right, it can be thought of as synonymous with trading, which is really, I think it's the opposite of trading, but it can be all about the numbers. I certainly spend a lot of time trying to beat the market. I do so without any reservation. I think that's a major goal or the fun of the game of investing. Yet, why do we invest? Even the etymology of the word invest is a reminder that it's about more than money, because it goes right back to the Latin [FOREIGN] which means to put on the clothes to wear the clothes. I think about those 40,000 fans in the stadium. In a way, maybe some of them actually had a football Jersey, that people go on Sundays or Saturdays to the park, they're wearing the home team Jersey. Maybe it's said Berkshire. Or there were probably some Berkshire T-shirts in the stadium.
But in a lot of ways, part of the Berkshire lesson is that it's about putting on the Jersey and keeping the Jersey on. So much of the world, Tracy, is jumping in, jumping out of the market, chasing quick dollars. But people who A, understand it's about the long game, and then B, understand that the whole purpose of investing is to do something good with the money that we have. Some of us hope one day to retire, whatever that means in different contexts. Others hope to put a child through school, or especially college, which is quite expensive. There's probably no substitute for the good feeling that's generated by being generous, especially when you do so spontaneously for another human being. I know that's not the only time you've experienced that in your life, but that's a beautiful stock story, especially to tell this time of year, because it's a reminder of why we invest in the first place. Human flourishing is one of my favorite phrases, and that's how I heard your story. Tracy, did you take us to the end of the story, or was there anything more there? Postscript?
Tracy Dahl: Only that I think that brings us beautifully full circle to Warren Buffett himself. He has a giving pledge where he has promised to give away 99% of his personal fortune during his lifetime or after he passes. And what a force of philanthropy he is.
David Gardner: It is true. And by extension, so many people who are Berkshire Hathaway shareholders. So much good is being done, and not just obviously by Berkshire people, although, yes, and at quite a scale. But through so many others, private philanthropy is, maybe especially in the United States of America is something that is a beautiful and very recognizable thing. As the stock market continues to go higher, some years down, but I'm talking about that long game, you can see how things should get better and better, especially if it's in our hearts to do so. Tracy, well, I'm asking each of my guests around the camp fire to underline their didactic lesson. I think you may have already done so, but would you give us a final double underline?
Tracy Dahl: I would say double underline, you have more than you think and please share.
David Gardner: Well, Tracy, it's starting to get a little colder here as the camp fire tamps down. We're still in the green months mostly, but I wish you the best as we hit the whitter months in the Great White North, and thanks for what you're doing for Fool Canada.
Tracy Dahl: You're welcome, David. Fool On.
David Gardner: On to Stock Story Number 5. As I wave goodbye to Tracy and, oh my gosh, all my other fellow Fools have either taken off or fallen asleep [NOISE] themselves. I'm by myself here under the full moon for Stock Story Number 5. I don't think I need to intro myself or give a line of what I do around the Fool these days, but I do need to give the title of the story. For Stock Number 5, I'm going to go with, That's the Last Time I'm Ever Going to Do That. The stock I'm going to be talking about is no longer publicly traded on the markets.
Many long time hands, long time listeners will know the ticker symbol YHOO stands for Yahoo, which was once a public company back in the 1990s, and going forward isn't today anymore. The title of story again, That's the Last Time I'm Ever Going to Do That. Once upon a time, I invested a lot more on paper than I do today. It was more of a math problem. As an older investor, as a longtime picker for Motley Fool Rule Breakers and Stock Advisor, in time I learned to unlearn this reliance on math on taking your price target out to the second decimal. But in the early days of the Fool, back when we first launched, August 4th of 1994, was when we launched on AOL. We launched one year before that as a paper newsletter. But back in those days, as a young investor in my 20s, I was much more mathy than I am today, and I got looking at this exciting new company. It looked like it might be a Rule Breaker. In fact, this is early enough, 1995, that I hadn't actually come up with the phrase Rule Breaker yet. We were already picking stocks in front of people clicking into our website or back then, especially our AOL site keyword Fool. We were picking stocks publicly from the first day in 1994, but I hadn't yet thought of what are the six traits I'm looking for in Rule Breakers stocks.
I hadn't come up with the phrase Rule Breakers or that you want to find companies that break the rules, and then you want to keep holding those stocks until they become companies that make the rules. As Rule Breakers Become Rule Makers, a book we wrote after You Have More Than You Think. Thank you again, Tracy Dahl. I think it was 1998 when Rule Breakers, Rule Makers came out. Somewhere there was a transition from the pre-Rule Breaker me to the Rule Breaker me, and I think it might be this stock story; That's the Last Time I'm Ever Going to Do That. Because as I started thinking forward, Google wasn't going to be showing up for some years. Yahoo was the big game in town. If you were trying to search for things online, even the phrase the World Wide Web was relatively new. People weren't necessarily talking about the Internet. We were talking about online services. We were using our computers to dial up other computers. There was that scratchy sound as your computer used the phone to dial another computer.
Remember [NOISE] and then something like [NOISE] That was the sound as you connected your computer to another online. Back in those days, Yahoo was the dominant search leader. I thought, that's a stock I might want to recommend. I went through my math exercise, and I ended up concluding that the stock was worth roughly $26.5 a share, which became the price at which I would recommend. I would buy Yahoo for our Motley Fool members at the time, 26.5. There was a little problem. Yahoo was trading at 29, which means I sat there going, well, it's overvalued right now. Younger me said, maybe if it drops below 27, I would recommend it, because at that time, it would be undervalued or properly valued, and I would feel more comfortable recommending Yahoo if it gets down below 27. It was at 29. When I'm asked a rather typical question, I'm sure, dear listener, you've been asked this question before, people will say, what's a mistake that you made and what you learned from it? Or what's one of your worst stock picks or stock stories and what did you learn from it? This is my case study Number 1 stock to answer that question.
Because unfortunately, for me, and for Rule Breaker fans who never bought Yahoo, it never did drop from 29 down below 27 to make me feel comfortable recommending it. It went from 29 to the equivalent split adjusted of $1,000 per share. It went up more than 30 times in value over the succeeding years, and I never bought it. I always thought I had it. I missed it. Within months from that point, I would start to realize, actually, stocks that look overvalued are often great buys. Stocks that are doing really well some people are waiting for the dip, but I decided dips wait for dips. Somewhere post my Yahoo mistake, a mistake of opportunity cost, I simply never bought a great stock. Post that, I started to realize there are some Rule Breaker traits. I'm going to start laying down from this experience because that's the last time I'm ever going to do that. That's the last time I'm ever going to find a potential world beater, a potential Rule Breaker, and decide I'm not going to buy it today. I need it to go down below a certain number for me to buy it.
That lesson is maybe the most valuable that I've learned in my 58 years on this Earth as an investor and a stock picker. For many of you, perhaps over the years, as a fellow Rule Breaker, I decided I would never again, allow a stock that I really believed in, a company that I thought could break the rules and add huge value to the world, which Yahoo did, not permanently, by the way. Google showed up and disrupted it later on. But for a good five year run, Yahoo ruled the roost, and we passed up a 30 plus bagger because I decided it was a dollar or two too expensive, relative to the price I was willing to pay. Since then, most of my great stocks, and intuitive surgical from our Rule Breakers service is the reason to become a 100 bagger for me. It just crossed into 100 bag territory in the past couple of weeks. I think I've had seven now for Motley Fool members and services like Stock Advisor and Rule Breakers over there. I would have been happy with any one of them.
But each of those seven has looked overvalued when I first recommended it. Most of the way up, people always felt Amazon, people still feel this way today, it's too expensive, and they don't buy it. But that's what I first saw in Yahoo at an impressionable early age in my late 20s. And that's the last time I'm ever going to do that. The didactic lesson is learn from your mistakes, or as Nelson Mandela once put it in a oft-quoted line, I never lose. I either win or learn.
Well, next week, ever heard of the X prize. It's the global competition that's pushing the boundaries of human achievement. Don't miss my deep dive with my Foolish friend, Elaine, who helps lead the organization that's changing the future, aiming to solve the world's biggest challenges, one million or $100 million prize at a time.
Thank you again, to Dave Meier and his story about Meta platforms, the Facebook, The Long Arc. Thanks to Mary Long for sharing a Bumble story. A stock, we at Rule Breakers, by the way, bumbled, but she did not, but learned a lesson. One might say a Chloe lesson for life to Nathan Alderman, breaking down in a painful and painstaking way, the pain that has been visited on Discovery scripts, now Warner Brothers Discovery. Oh, my. Oh, so much debt. To Tracy Dahl for reminding us why we invest in the first place, you have more than you think. Well, as the fire dies down, and the night deepens, I'm left here to the glow of the full moon, reflecting on the tales we've shared. Until we meet again, may your own stories light the path ahead. Good night, Fools.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Gardner has positions in Alphabet, Amazon, and Berkshire Hathaway. David Meier has no position in any of the stocks mentioned. Mary Long has no position in any of the stocks mentioned. Nathan Alderman has positions in Amazon and Berkshire Hathaway. Tracy Dahl has positions in Alphabet, Amazon, and Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Meta Platforms, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
