In this week’s episode of Rule Breaker Investing, a different kind of show — Motley Fool co-founder David Gardner brings on friend and fellow Fool Chris Hill for a War of the Worlds-esque act-out of the day after a market crash.
Listen in to steel yourself just a little bit for the inevitable drop — not to say it’s coming soon, but it’s definitely coming someday. What kinds of company news might come out when stocks across the board are down 30%; how to keep faithful to your long-term plans when your portfolio is painful to look at; and much more. Are you ready for the next crash?
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Jan. 15, 2020.David Gardner: So a few months ago, I thought, “You know, I want to do this. Let’s do this.” And so I got with my friend Chris Hill. I said, “Chris, would you be willing to do this with me?” He said, “Sure, I think that would be a good idea.” And so the idea of doing something like what Orson Welles once did with War of the Worlds for those who know it — if not, you can google it, check the Wikipedia page and see — I thought that would be a good thing to do for the stock market. And without going too deep into that, because you’re about to hear what we did, Chris and I pretend this week that the market had a really bad last couple of days. And so, improv-ing, ad libbing, and being real with each other. What you’re about to hear is what it might sound like if and when — and by the way, it’s more a when than an if — that eventually happens.
I want to take pains to mention, by no means are we predicting or thinking that the market is going to drop anytime soon. It does happen naturally from time to time. We never know when it’s going to happen. But the purpose of this for you this week is to get you thinking about it. For some of us, especially new investors, you may never have experienced a significant market drop. They do happen. And maybe not just to imagine what it would be like, but actually feel a little bit what it might be like, and to realize that while others might be panicking around you, and all of us naturally feel if not panic, at least deep disappointment when the market drops in the way we’re talking about this week, processing that ahead of time and asking yourself, “Am I invested in a way that I would want to be in good times, like the last 10 years, and in bad, like what we’ll talk about this week?” Are you ready?
Welcome back to Rule Breaker Investing! I’m David Gardner. Thank you so much for joining me this week, this, I’m going to say this special week, but not for good reasons, as I think is pretty evident to us all. So, with the stock market having fallen 7% toward the end of Tuesday, we had taped an entire podcast. The Rule Breaker Investing podcast normally records on Tuesdays, and we publish on Wednesdays. But obviously, given the events not just of yesterday, but of today, what we did yesterday has really no relevance or help for you today. So I thought, what could we do on this very unusual Wednesday? And I thought, well, why wouldn’t I have the voice of The Motley Fool, Chris Hill, come in, join me, and for us to talk about what’s happening, update you. We realize this is a podcast, so it’s not like this is a live news recording, but we’re doing our best to be as live as we can this week with you — what we’re seeing, how we’re feeling, and how we talk about it. Chris, thank you very much!
Chris Hill: Thanks for asking me! Like you said, I think back to the episode you did last week, you were talking about, when your stocks go down, it doesn’t feel good. And obviously, this is a really painful couple of days so far for everyone. As you mentioned, the market late on Tuesday dropping as it did, reminding a lot of us who’ve been investing for the past decade of the flash crash events that we saw in 2010, 2015. And then the ripple effect.
And let me just set the stage for anyone who hasn’t been paying close attention. Against the backdrop of all of this is a bull market that’s been going on for over a decade. So we poke fun around the office from time to time that profit-taking gets thrown out there as an excuse. I think what we’re seeing today, with the market drop today, that’s almost certainly a factor, because of the bull market run that we’ve had. So we have the drop on Tuesday. Overnight, every international market is down at least 7%, some double digits. We have the Federal Reserve coming out Wednesday morning with a statement that, let’s just assume that Chairman Powell and his colleagues are trying to be helpful, but alluding to the possibility of raising interest rates certainly is causing some concern on Wall Street with the big banks.
When I think about the market in general, and sort of, who are not just the business leaders, but who are the people that the financial media turns to for reassurance, I think No. 1 on that list is Warren Buffett. He has been strangely silent over the last 36 hours. Jamie Dimon, Chairman and CEO of JPMorgan Chase, the Wall Street Journal has a quote from him that is also not all that reassuring, particularly when he invokes the Great Recession and the collapse of Lehman Brothers and saying, and I’m paraphrasing, there’s going to be another Lehman Brothers, it’s just not going to be JPMorgan Chase.
Gardner: Yeah. Well, obviously, with the market already down 18% so far today, after the 7% drop yesterday, so we’re now down to 25%, Chris, from where we were just two days ago, I don’t think it’s fair to say that Dimon contributed to that. I think the markets were already unsettled. But it certainly doesn’t help confidence at all to have the prominent CEO of the prominent bank say what he just said. There will be another Lehman Brothers, as you paraphrased, but it won’t be us.
Hill: So, also not helping — and it’s not Tim Cook’s fault, it’s not Satya Nadella’s fault — but even for investors like us who think for the long term and are focused on investing for the long term, to see the biggest, most successful companies of our age — Apple, Microsoft, Alphabet — all falling across the board. We’re going to get to some company-specific news for some of the stocks in your universe, in the Rule Breaker universe. There is some material news. But I’ll just be honest, because we’ve known each other for a long time — and I don’t own Apple, and I don’t own Microsoft, and that has been to my detriment over the last 5, 10 years — it’s unsettling to see companies that big and that successful falling to the tune of 20%, 25% like they are.
Gardner: Yeah. Actually, Apple down over 30%. Although, when you’re down by a quarter or a third, it’s almost a rounding error. Obviously, we’re talking about some of the bellwethers of not just American business but global business today, down from a quarter to a third of their value in just two days. So I think it’s important just to set that baseline, Chris. We all know the general indices. As you mentioned, the S&P 500, basically down 25%. It’s not unusual that some of the more premium-priced stocks, the ones that I love, the ones that we talk about all the time in Rule Breaker Investing, that those would drop more than the market indices. And sure enough, obviously, that’s happening now. Those are companies that you’re mentioning, Chris, that have no real news. They’re just down in sympathy with, well, the global market at this point. Obviously, there are some surprising news items this morning or in the last 24 hours. Some of them rumors, some of them real. It does remind me that often, you throw out the baby with the bathwater, right? When bad news hits, all of a sudden, companies sometimes throw in extra bad news just to pile it all in. I guess we’ll talk about some of those in a bit.
Hill: We will. I just want to hit on one really quick just because this just came out, this is your latest recommendation in the Rule Breakers service, Intuitive Surgical.
Gardner: Yeah, picked it last week.
Hill: Picked it last week. What goes through your mind when you see something like that? Obviously, thought and work goes into a recommendation like that. Because, for all of its success, Intuitive Surgical is not Apple, it’s not Microsoft, and it’s down…I mean, the last time I checked, it was more than 30%. I mean, it’s really getting hammered in a way that even Apple and Microsoft are not.
Gardner: Actually, for the record, as we see it right now, it’s down 36.7%. Apple is down right around 32%. But, Chris, more to the point, yeah, I would say, what’s my first reaction? There we go again. And I don’t mean that this happens on a regular basis. If it did, we wouldn’t be recommending you put your money in the stock market. We have recommended that. We do recommend that today, just like we said last week with Intuitive Surgical.
The reason I say there we go again is because this does happen. Certainly, the Rule Breakers service was running during 2008, 2009. I remember when I was picking a new stock twice a month in Rule Breakers, which I’ve done for years now. It didn’t feel good at all in 2008 and 2009. I felt like as soon as I would pick a stock, it’d be down 30% in the following month. So, of course, seeing that happen in a week now or just a couple of days hurts. But there we go again. I’m not going to say this too shall pass because that sounds like pablum. This is real. And so, it hurts. It never feels good. But you also have to understand, we’re playing the only game that counts, and that’s the long game. So, Chris, even though Intuitive Surgical, I loved it last week, and now it’s down 36.7% lower, at least with that company, maybe not all the ones we’ll talk about today but at least with that one, I’m like, great. So if you were a little slow on the draw and didn’t buy in with the rest of Rule Breaker members last week, congratulations, because you’ve got quite a discount right now.
Hill: All right, last thing before we get into some of the company news today. Goldman Sachs has a survey that they’ve been doing for the past 20 years, and it is a consumer confidence survey. And they overlay that with a survey of CEOs to measure CEO confidence. Anyone listening, you can just Google Goldman Sachs CEO confidence survey, you can find this. And I realize I’m about to talk about a visual chart on an audio podcast, so, I apologize for that. When you look at this chart over the past 20 years, there was a huge disparity between consumer confidence and CEO confidence in late 2009, early 2010. Back then, right in the wake of the Great Recession, consumer confidence was very low, CEO confidence was incredibly high. There’s a huge delta between those two.
Gardner: Isn’t that amazing? First of all, keep going, but I just want to mention, before you showed me this Goldman Sachs survey, I had not seen this before. So it’s nice to know that they’ve been doing this for a couple of decades now, so there’s good meaningful data. And I was really surprised — keep going with the insight from 2010 and then what it looks like today.
Hill: So 2010, you can look at it and say, OK, CEOs are exponentially more confident than consumers; now may be a good time to get over whatever concern I have and invest in the market. Cut to today, the latest version of that survey, it’s reversed. Consumer confidence is incredibly high, and CEO confidence is the lowest point it’s been in a decade, and it’s the second-lowest point it’s been this century.
So here’s my question for you, armed with this information, and obviously what we’re seeing today: Is now the time to short stocks? I’ve never shorted a stock in my life, but I look at what’s going on in the market, and I look at this data from Goldman Sachs, and I think to myself, “You know what? Even with a 25% drop across the board, there are still some high-flying stocks out there that have a lot further to fall.”
Gardner: Well, let me just say that I think most people never need to short a stock, and they’ll do wonderfully as investors. I have shorted stocks in the past. In fact, in the early days of The Motley Fool, both on AOL and then Fool.com, when we first launched the website in 1996, we had shorts in our portfolio. It was a significant part of our online portfolios that people copied and followed along with us. Now, it was never more than 10% or 15% overall. I don’t think anybody should ever be net short. I think that’s a real mistake. Again, on average — I know it doesn’t feel good today, but on average — the market rises 10% or so a year when you take all the averages into account. So being net short for any meaningful period of time is a real mistake. Chris, obviously, you and I have known each other for a long time. I find it maybe a little bit humorous that you are thinking about now shorting stocks, with all of them down a quarter to a third of their value in the last couple days. But I do think that you’re probably mirroring what a lot of people are wondering. But, I mean, I truly believe that shorting should only be done by people who are very experienced investors and who are self-confident without being cocky about their view of things, and always as a small hedge, always maybe just a small percentage, 10% or 15% of one’s portfolio.
Hill: All right, let’s get to some company news. I’m going to start with MongoDB, which is a stock you’ve recommended before. For those unfamiliar: cloud data storage. Go back a year ago, January 2019. MongoDB dropped about 10% in a single day when it came out that Amazon Web Services was launching a competitor. I don’t know if — let me pause for a second. I don’t know if Amazon did this intentionally. I don’t know if they timed it today. But we have talked in the past about how, when there are rough times in the market, large companies, companies that have cash to deploy, are in better positions than smaller companies and in some cases can take market share. Amazon appears to be doing that, because this morning, Amazon announced a new version of this competition that they’ve created out of Amazon Web Services to compete with MongoDB. MongoDB, which had already dropped some yesterday, as pretty much every other stock did, today down more than 40% on this news. What, if anything, does this change about your thinking about MongoDB? Because I know you’re a fan of Amazon.
Gardner: Sure, and also MongoDB. And let’s be clear here: It is an active Rule Breaker recommendation. Even after today’s monster drop, it is still a very significant winner for our members over the last couple of years. We first recommended the stock February 28th of 2018. Here we are, less than two years later. It was $32 back then, Chris. Even after today’s 40% drop, the stock is over $80. So, it’s still more than a double over the last less than two years. So, yeah, I love this company. I think this is a great company. As you mentioned, Amazon had already kind of foreshadowed this in January of 2019, so just one year ago, that initial announcement that you cited. Amazon Web Services launching that new database tool called DocumentDB. So I can’t say we’re surprised by this.
But I will also say that it’s a big world out there. And I think one of my favorite podcasts I did way back in the day, this one’s way below the fold, you’re going to have to search it on the internet to find it, it was called Of Killers and Kings. And what I tried to say about both is that they’re not real. You hear all the time people say, “Hey, here’s a MongoDB killer.” Or you hear people say, “Content is king.” Killers and kings are almost always overstatements. And I believe in this particular case, while MongoDB is obviously threatened by this, and Amazon is Amazon — and I do admire Amazon greatly — I think probably, I would be happy to buy these shares right now. And I want to say, that’s true of almost every stock that we might talk about. Maybe not every one. There are a couple we’ll get to. But with the market down dramatically, while it could fall further — and often, when we have these moves, the following few months, there is more fallout — but let’s pinch ourselves a little bit and realize you have an entry point that is significantly — this stock was at $150 just last week. We’re now in the $80s. Same business. Amazon’s announcement, definitely threatening. Maybe tied into the fear and panic in the markets today. I’m not sure. I’m certainly not going to accuse them of that. But, no, I feel comfortable with MongoDB.
Hill: By the way, speaking of Amazon, there’s not news per se about this, certainly not confirmed news. There is speculation, as happens. It’s sort of the blessing and the curse of social media, particularly Twitter, that news can travel very quickly, but therefore so can speculation. But there is speculation about Jeff Bezos potentially stepping down. And it’s an interview he gave in 2015. He sat down with Walt Mossberg at the Recode conference. I think at the time, Bezos had recently become the wealthiest person in the world. And Mossberg asked him, “How much longer are you going to be CEO? You’ve got this, you’re interested in space, Blue Origin, that sort of thing,” and Bezos, a couple of times, “I think of myself as a shopkeeper. I love being CEO.” And he said, “I’m definitely going to be CEO for the next five years.” And people are now posting that clip on Twitter and saying, “Well, here it is five years later, and the market is tanking. Is he going to step aside and hand the reins over to someone?” All of which is prelude to this question: To what extent, if any, does Bezos leave — he’s going to leave at some point. He’s going to hand the reins of that company to someone else at some point. It may not be this year; it may not be this week. What does that do for you thinking about Amazon?
Gardner: Well, anytime you have an iconic CEO, and not just a ceremonial figure like a king or a queen, speaking of real kings and real queens, but the person who’s actually done it. They were the entrepreneur in the arena getting bloody and built something amazing that was a global phenomenon. I mean, Bezos owns, I think, around 59 million shares of Amazon today. I sincerely doubt that Jeff is going to step too far from Amazon. I obviously acknowledge his interest in outer space. Blue Origin is a rocket company — competing, by the way, with Elon Musk, somebody else we might talk about today, in outer space. But I’m not worried that Jeff Bezos is no longer going to care or pay attention to Amazon. I’m very confident that’ll be a whole-life thing for him.
With that said, I was the first to say when Steve Jobs died, “Steve, we’re going to miss you. You were amazing. Tim Cook, take the reins, because you know what? People are doubting you.” People are doubting Berkshire after Buffett. But when we’re looking at great companies, these companies’ culture that runs deep, miles deep. And so, when they’re promoting from within and bringing in people that have been part of that company — like Tim Cook was for Apple — for years, I would typically try to look past the media fear and fearmongering, some of the headlines that make you think that Amazon’s toast if Bezos leaves. But anyway, it’s not surprising to me that these kinds of rumors on social media get kicked around in a time where, frankly, a lot of us are just hurting.
Hill: Bezos wasn’t tweeting anything because he rarely tweets. Elon Musk — I mean, you mentioned Tesla — on the other hand, was tweeting last night. I won’t read all of them because this is a family show. But this is a stock that was closing in on $500 a share last week. It hasn’t been cut in half, but it’s on its way to that. And this tweetstorm of his culminated a last tweet that just reads simply, “I think I’m done.” And, from there, again, speculation. Which is what happens. That’s part and parcel of the environment that we’re in. It seems like when the market is frothy and hitting all-time highs, we don’t have this type of speculation. But when the market is dropping precipitously the way we’re seeing, then we have people wondering out loud, is Elon Musk actually going to step away as CEO of Tesla? And, another guy who’s interested in space. He’s hinted at it in the past. Would you be shocked if he did that? And what would that do for your thesis about Tesla?
Gardner: First of all, I would be shocked if he did that. The way that I took “I think I’m done,” because I saw that last night, too, I think he just meant he was done for the night tweeting. I think this has been misconstrued, and some people are now saying, “Yeah, he’s leaving Tesla.” And obviously, again, in light of the dramatic sell-off, I’m quoting Tesla right now, it’s at $265. It was at $498, all-time high last week. Again, I think it’s very unlikely that Musk is going to leave Tesla or Bezos is going to leave Amazon. But when people use social media, which is such an ephemeral medium, some of us, Chris, I think you and I, I want to put us in this category, when we tweet something, we mean it. But there are definitely some big public figures out there that tweet all the time, but I don’t necessarily trust what they’re saying, because it could change frequently.
That happens, by the way, with financial television. There are people who come on financial TV and say this or that on shows on CNBC. No one’s holding them accountable. There’s no real sense that this will ever be remembered or you’re really being scored. And I think the same thing is true of social media for those who use it that way. Again, I’m not going to uphold us as some kind of paragon for everybody, but when we do that at The Motley Fool, or at least some personalities, like you or me, Chris, I mean, I like to think we’re saying what we mean. At the same time, I’ve never really taken Elon Musk that seriously. He’s said a lot of crazy things. And others too. Again, my interpretation with “I think I’m done is” that he’s done for the night, and don’t keep waiting to see his next tweet. But people are going to read it different ways, I guess.
Hill: OK, so, to go back to what I mentioned earlier, where companies take advantage of crises. Every company, because every stock is down across the board, they’re all dealing with some type of crisis or another. Some of them are just, “Well, our stock is down a whole lot.” But others are being very strategic, and Walmart appears to be one of those companies. Nordstrom has announced that Nordstrom is selling Trunk Club, which I’m going to say 2013, maybe a little bit earlier, Nordstrom bought Trunk Club for about $350 million. Wrote down about $200 million of that. Nordstrom is selling Trunk Club to Walmart. We don’t have exact figures, but some reports are putting the price tag somewhere in the neighborhood between $115 million and $225 million, somewhere in that range. Happy for Nordstrom that they are about to get a big check. Walmart goes even further into the online world as they have methodically built that.
Gardner: Wow. First of all, I did not know this, so thank you for bringing it. Keep going, but that’s pretty shocking to me.
Hill: Here’s where it comes home to roost for one of the stocks that I’m sure you’re more familiar with than probably Walmart and Nordstrom, and that’s Stitch Fix. Because Stitch Fix, which was already down coming into today’s trading — like every other stock — on this news being announced, Walmart basically taking square aim at Stitch Fix and its business. Stitch Fix falling precipitously. It had already been down somewhere in the neighborhood of 20%. Go ahead and tack another 20% on top of that. What do you do with Stitch Fix at this point? Because I think that in a weird way, it’s validating for Stitch Fix and the business model that they’ve created, that Walmart looks at it and thinks, “We don’t want to build this from scratch, we’re just going to buy Trunk Club from Nordstrom to compete with them.” On the other hand, this is a very real competitive threat. And let’s be honest, for a couple of years now, Stitch Fix has been identified as one of those businesses that could get bought, whether it’s by Amazon or someone else. And I’m wondering if a greater competitive threat makes you think differently about Stitch Fix.
Gardner: It’s, first of all, surprising. I’m just obviously reacting to this for the first time. Stitch Fix has been an ongoing recommendation in Rule Breakers. It has been a losing recommendation. I mean, it’s one of those — I don’t know if you were listening last week, Chris, but I did David’s Biggest Losers. I’m used to losing. That’s a superhero power that I think you need to be a good Rule Breaker investor. But, yeah, Stitch Fix for us, a stock that certainly my brother Tom took a shine to. We added it to Rule Breakers. It was at $36 back then in August of 2018. Last week, it was down to $24. But the good news, I guess, for investors is, it was up from $18, and we had it on our best buy now list last week. So I guess my top of mind reaction is, you never know what’s going to happen next. You have to remember that as an investor. It hurts to watch a stock that was a Best Buy Now — in my mind, it had already been beaten up. And I was like, “This thing can’t go down much more.” But it can sometimes, in life. And sometimes it’s external events like a big market drop that can hurt. But, yeah, I guess I’m interested by Nordstrom opting out a little bit of online delivery. Such an important, I thought, part of its future. Obviously, very focused on stores.
Stitch Fix is a challenged company, especially in the environment that may ensue from this market drop. You have to look at a company’s cash. You have to look at the balance sheet. And you should do this before the market drops, by the way. You should think about, how much cash does this company have? How much debt? And if they have a lot of cash and little debt, that’s what we like, that gives them permission to evolve into new states of being based on market and industry conditions. If they don’t have a lot of cash, or if they’re stretched, they don’t have as much chance. So, again, I’m certainly disappointed by Stitch Fix. I’m not going to be great and reacting to news coming out right away that I didn’t even know about, but that, too, happens during these turbulent times.
Hill: Let’s step back from the news for a second. How are you feeling on a personal level? Because while you were talking, I pulled up my Ameritrade account — which I had not looked at last night, and did not even look at this morning. It’s been that crazy of a day around the office. And so, just looking at it. And I am one of those people — and I’ve said this before on Market Foolery — whose biggest holding in their portfolio represents an outsized percentage.
Gardner: I am also such a person.
Hill: For me, it’s Starbucks.
Gardner: For me, it’s Netflix.
Hill: And for the past 11 years, that’s been fine. [laughs] It’s been somewhere on the spectrum from fine to great. And on a day like today, when you’re single biggest holding gets whacked like this, holy cow, is this painful!
Gardner: Yeah. Again, I’m not going to say we’ve seen this all before. Some of us just started investing last week. Some of us have invested for longer than I have. But I’m 53 years old today. That means I’ve been investing since I was 18, I managed my own account, so that’s 35 years. This has happened…let’s see. The 1987 crash, I certainly remember that. I’ll never forget 2001, 2008, and 2009. The flash crashes, as you mentioned. This happens. It is part of the game that we’re all playing. It’s one of the most beautiful, valuable games you can play over your whole life. The earlier you start playing this game, the better off you and your kids and everything around you will be.
That’s why we want to get everybody on the train at the earliest depot in the stock market. First stop, if possible. But you have to realize, if you’re on the train for your whole life long — which I am; Chris, I know you are — you’re going to have some tough, tough moments. Without pain, sometimes it’s said, there can be no pleasure. And whether or not you subscribe to that maxim or not, the reality is, you can take a look at a stock market graph of any meaningful vintage — let’s say 25 years, 100 years — you’re going to see these kinds of drops. Sometimes they happen in a day. Black Monday, right? 1987. I think it was 22.6% in one day. Today, it’s actually not as bad. But the problem is, even though we’re down around 18% as we speak today, we’re down 7% yesterday, so, yeah, that’s a really bad two days.
Hill: Well, and you mentioned ’87, I mean, that was another situation where, you can look back at that and say, “You know what? At least part of what was going on then,” very different time, obviously. Pre-internet and all that. But the run-up before that that the market had was tremendous. It was north of 40% over a single year.
Gardner: Yeah, the whole ’80s, the previous five years, were pretty great back then, too. Just like now.
Hill: Since I’m looking at my account, I’ll just, if you’ll indulge me a little gallows humor, my smallest holding, Under Armour, another couple of bucks and it’s going to be in single digits. [laughs]
Gardner: Misery loves company — I think I heard you talking about that in the wonderful Company of Fools podcast you did for Market Foolery on the final day of last year. By the way, if you’re not already listening to Market Foolery, here’s a quick ad in the middle of the Rule Breaker Investing podcast. I listen to Market Foolery every day, with Chris, our dozens of listeners and our handful of wonderful analysts. Chris, I really enjoyed your Company of Fools, and I’m feeling that one a little bit today here, just a few weeks later. It is important to feel as if we are all kind of in it together, which we are. And so here we are, breaking our normal approach to this podcast, throwing out what we did yesterday, and bringing this to you today to let you know you are in the company of Fools. That’s a good thing. We’re all in it together.
Hill: Yeah, and not to get overly corny or anything, but anytime this happens — I haven’t been investing in the stock market for as long as you, but I’ve been through, certainly, a bunch of the drops that you’ve mentioned. And there is a feeling of solitude. For me, anyway. I don’t want to speak for anyone else, but for me. Even coming to work here every day, 2001, 2008, 2009, walking home or just being by yourself, thinking about your money, it can be a little crushing if you let it.
Gardner: I agree. Chris, I want to speak two points, one of which we’ve already raised, but I really want to pound this one home. You mentioned how you have an overweighted position in one or more stocks in your portfolio. I do, too. Some of our listeners will, some won’t. But for those who do, realize that you have to own it on the way down, too. Netflix is my biggest holding. It’s been amazing over the last 15 years. Couldn’t be happier today to be a Netflix shareholder. I’m looking ahead and seeing a world in which Netflix continues to effloresce, grow, and add value globally. So, I strongly believe that. But, yeah, I was there in 2011, when the stock lost two-thirds of its value in less than a year, Qwikster, etc. I rode it all the way down. It was somewhere around, I’m going to say, $100, and then it touched down at around $25 to $30 just months later. This has happened before. It’s going to happen again in the future at some other point. But if you’re going to have these overweighted positions, you have to be willing to own it.
I also, I want to take pains to add, not everybody necessarily has that same mentality. So if you have overweighted positions today, and that is not your mentality, I would be the first to say, wind those down. Ask yourself, now that it’s real, or if it were real, what would it be like if your biggest holding lost half of its value in a couple of days? Again, some of us can deal with that. Others can’t. Make sure that you’re suiting your strategy to your own mentality. That’s just the overweighted position.
The one other thing — I’ll make this quicker, Chris — margin. Some people use margin. Some people use it responsibly. In my experience, most people use margin don’t use it very responsibly. A lot of people see the market rise for 10 years, and they’re thinking, “Great. I’m going to borrow more than I have and put it in these stocks that keep going up.” And then, all of a sudden, when we have a few days like what we’re talking about right now, the classic line about the tide’s gone out, and who was wearing pants, who was wearing a bathing suit, and who wasn’t. Usually, the people who are really embarrassed, ashamed, and are in pain are those who overmargined. So if this is you, obviously we’re sorry for it. But if you’re playing the lifetime game of investing, which is what we’re playing, you have time to come back. I have friends who made mistakes with margin in the past. They smartened up. And after it smarted for a while, they did better, they invested in, I would say, a more Foolish way. I’ll speak to this quickly — margin’s not bad or wrong unless it’s too much for you, in which case it’s going to feel really bad on weeks like this.
Hill: There’s any number of companies we could dig into. The Stitch Fix news, Nordstrom selling Trunk Club to Walmart, I feel like, looking at the clock, we still have somewhere in the neighborhood of north of 2.5 hours to go in the trading day. It’s not going to surprise me if we see more announcements like this, smaller companies either selling themselves entirely or selling off pieces of their business. Obviously, in the case of Nordstrom, it’s been looking to sell itself entirely for a while now. Maybe it’s decided to go piecemeal. I think, as investors, we should expect more in that category. More large companies taking advantage of this situation. And maybe for some people, that’s one more reason to buy a Stitch Fix, because you think, “Well, you know what? Either they turn it around, or they do become an attractive takeover candidate.” I know that’s not necessarily the way I like to invest. I don’t want, “Hey, maybe someone’s going to buy this company” to be the No. 1 reason I’m buying a stock.
Gardner: “Hey, maybe someone will date me!” Not the person who usually gets the dates. I understand what you’re saying.
Hill: Exactly. So, there’s obviously going to be a lot more news to come, and probably more of this type of approach that we’ll be taking across our podcasts and across everything we do at The Motley Fool.
Gardner: Well, thank you, Chris! I’m obviously looking forward to hearing what you all do with Motley Fool Money this weekend. I guess my concluding note will just be, hey, we’re here for you. I’ve been doing this podcast every week now for almost five years, but The Motley Fool business has been around since my brother Tom and I started 27 years ago. It’s been an amazing 27 years for the stock market. And I believe the next 27 years will be amazing for people who are invested in the stock market — in particular, directly invested in the best companies of our time. It doesn’t feel good at all weeks like this. And we may all look back and say, “God it was so obvious.” Those people will come out of the woodwork, by the way, Chris.
The people who knew this was coming, who called the crash. Often, they were calling it in 2019, ’18, ’17, ’16. Stopped clock right at least twice a day. If I’m doing the math right, just twice a day. But expect that. You’re going to hear about the people and how it was so obvious in retrospect. And some people probably did predict it ahead of time. But that’s not the way to approach the markets, I don’t think. That’s not the way to approach your portfolio and your life in investing. It’s all about saving more money this week, next week, adding. If you’re a retiree, it’s about making sure that you have some in fixed income, which softens the blow for stock market weeks like this one. Obviously, stick not just with us but with the plan that you entered with, to find great companies and hold them.
And if you’re off plan, if you overweighted too much or if you went on margin, change it up, because this is a wake-up call.