With March Madness upon us, it's probably no shock that Motley Fool co-founder David Gardner had a hankering to bring a competitive episode to his Rule Breakers podcast, though, of course, he's always competing with the broader market.
For this episode, he invited the Fool's Matt Argersinger back to play round three of The Market Cap Game. And you, readers and listeners, are invited to play along. Gardner presents us with 10 well-known companies, and gives Argersinger the task of guessing their values to within 20%. In each of his last two outings, he scored a not-too-shabby six out of 10. (Par is 4.) Can he repeat that or even exceed it? We'll find out. Along the way, they'll also share some investing insights that could be valuable to you.
A full transcript follows the video.
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*Stock Advisor returns as of March 5, 2018The author(s) may have a position in any stocks mentioned.
This video was recorded on March 13, 2018.
David Gardner: Welcome back to Rule Breaker Investing! As I mentioned last week, I'm really excited to play our game again. I've got my friend, Matt Argersinger. Matt, hello!
Matt Argersinger: Hey!
Gardner: Matt, you are the ringer at our Market Cap Game Show. You have been here for the first two episodes. This is episode three. Just to lay out the ground rules, because I'm sure we have some new listeners this week as we do every week.
The ground rules are that we're talking about the market cap of each of the 10 companies over the course of our podcast this week. Our game show. I've selected the companies. They're all picked from the Supernova Universe -- that is the sum total of all the stocks that are active recommendations that I've made in Stock Advisor and Rule Breakers -- and that's about 220 companies or so. All actively recommended. They're all my children. I love them all. They sometimes came with other dads or moms into the family, Matt. At least one of these you picked before, but we use these in the Supernova Universe to create real-money portfolios -- what we call missions -- to stick with our space theme and Matt, you have been from day one, the commander of which mission?
Argersinger: The Odyssey 1 mission.
Gardner: The Odyssey 1 mission, whose goal has been and is?
Argersinger: Well, like all our portfolios, it's to beat the market over time, but this particular mission caters to wage-earning investors. Investors who are probably at least, I don't know, maybe five to 10 years away from retirement. Who are still earning wages, saving money, and investing on a regular basis.
Gardner: And the Odyssey 1 mission just crossed a pretty remarkable milestone. Can you remind us, roughly, what month and year you started Odyssey 1 and what did you just achieve last week?
Argersinger: We are about one week away from Supernova's six-year anniversary. I think Odyssey launched March 2012 and just this past week we crossed the 200% threshold, so the Odyssey 1 portfolio has tripled in less than six years, or just about six years.
Gardner: Which is just absolutely spectacular...
Argersinger: For a portfolio, yes. I think it's amazing.
Gardner: It's real money, real recommendations, and people who signed on March of 2012 to join you and your team have just been treated to outstanding advice. It makes me proud to be on your team, Matt, and thank you for all that you and the Odyssey 1 mission team have done.
Argersinger: Oh, thank you, David, and thanks for selecting me to be on the team along with Aaron Bush, Tim Beyers, Sarah Goddard, Joe Tenebruso, and Paul Chi who were on the mission at various points. We're really proud. It's been an exciting and fun ride the whole way through.
Gardner: It really has, and obviously we've all been helped by a very strong stock market since March of 2012. It would have been hard to even get a +100 if we were in the middle of a protracted bear market over the last six years.
But I always like to say the market goes up more than it goes down and while it does go down faster than it goes up, if you can keep both those thoughts in your head, you're going to be pretty happy if you keep your head on, stay invested, and use the benefit of the stock market.
A lot of people, Matt, I think picture the stock market as a parabola, because they think they have to buy low and sell high and sell quickly before it goes back down again. I'm not a math major. Were you at Brandeis?
Argersinger: I was at Brandeis and good for you for knowing.
Gardner: You were actually a math major?
Argersinger: I was not a math major. I went to Brandeis...
Gardner: Oh, I see. I knew you were at Brandeis. So maybe we're fellow humanities guys?
Argersinger: Roughly. I did theater. I did some economics.
Argersinger: I used some math.
Gardner: So, you would recognize that the stock market, if you look at a graph of the last century, looks more like a hyperbola, not a parabola, and that's really important to know. It's one of the great truths that unfortunately I think a lot of people don't realize. They don't have that big picture.
Anyway, with that said, we're playing the Market Cap Game Show. Now, Rick Engdahl, our talented producer, will be bringing the music that you know and love [music plays in background] and that is the sound of the beginning of the Market Cap Game Show.
Now Matt, I've got 10 companies. I've queued them up alphabetically by ticker as we've done in our previous two episodes. I should mention -- not you, Matt -- no, you, my fellow listener, my fellow Fool, you are playing the game, too. Maybe you've been with us. We play this quarterly. Maybe you were here in November or last summer when we first started. You're playing along with Matt, and the goal is to guess within 20% above or below the actual market cap of each of these companies.
Now, Matt, for new investors can you briefly explain what market cap is?
Argersinger: Sure. Market cap is an easy way to measure the size of a company. Very simply, you take the share price of the company and multiply it by the shares outstanding. That gives you the market capitalization, which is a way to compare companies across various sizes.
Gardner: And what's important about this game, I think -- and just thinking in terms of market caps -- is if you have a company worth $10 billion versus one worth $1 billion, what does it take to double from $10 billion versus $1 billion? I think it's fair to say all other things being equal -- which they never are -- it's probably easier to find a double and double your money from a $1 billion standing start than a $10 billion standing start.
Argersinger: Absolutely. And then over time, if you've followed the stock market for decades, small-cap companies do tend to outperform larger companies over time.
Gardner: Especially when we find rule breakers, the ones that start out breaking the rules from a disruptive, small position, like, let's say Amazon.com, and then in time go from rule breaker to rule maker. So, knowing your market caps is really helpful. It gives you a sense of sizing. It's the way that venture capitalists often think. They don't have a public stock market quoting their stock every day, but they're thinking in terms of how much this thing is worth and then what it could grow to 10 years hence. A 20-bagger. A 100-bagger. So, market-cap thinking gets you thinking in terms of how that stock might perform and what the total possibility might be for a company.
Argersinger: That's very well put. And it gives you an evaluation measure if you want to compare the market cap versus, say, the sales of a company or the earnings of a company. Again, another way to compare companies across different industries or different sectors. It makes it easy.
Gardner: Exactly. And I'll say ahead of time -- hint, hint -- two of these companies actually have an identical market cap, and what's fun about that is these companies are quite different, and I love noticing that the market is valuing them equally, even though they're radically different in terms of who and what they are. It really is a simple, but great numerical tool and highly worthy of a game. A very entertaining and educational game. Our goal at The Motley Fool is to educate, to amuse, and to enrich. We're going to hope to do all three this week.
All right. Matt Argersinger, company No. 1. The ticker symbol is (DDD) and this company is 3D Systems (NYSE: DDD), the additive manufacturer. The 3-D printing company. Now, Matt, I wanted to lead off with this one because you brought back a story to Fool HQ some years ago, and I didn't quite pay enough attention and it's been very costly for me to do so. Matt, could you give that up close and personal that you had with 3D Systems?
Argersinger: Well, it was several years ago. We went to the Consumer Electronics Show, a few other analysts from the Fool and I. I want to say this was 2014, if my memory is correct, and there was nothing hotter in the market right then than 3-D printing. Of course, 3D Systems was the leader in the market.
Gardner: A monster-winning stock for us at the time.
Argersinger: Oh, it was huge. I just remember that we went into one particular demonstration hall at CES. I want to say that 3-D printing companies -- there were dozens of them -- took up probably half the room, which is thousands of square feet. It was just so impressive and a little overwhelming, and I got the sense that maybe this is marking a little bit of a peak...
Gardner: A little overblown.
Argersinger: ...in 3-D printing. And it turns out I should have paid a little more attention myself, as well, because it was around that time that I think 3D Systems and a few of the others hit their peaks in terms of market valuation.
Gardner: Did you have a chance to shake hands or meet the CEO?
Argersinger: We tried. That's a funny story, too. Mac Greer, one of our producers, here, at The Fool, tried his darnedest to get us an interview with the CEO of 3D Systems and we just got rebuffed at every point. That was just another indication that if they don't want to talk to The Motley Fool...
Gardner: Maybe they're a little bit too big and successful to sit down and talk...
Argersinger: Maybe they're just a little too proud of themselves.
Gardner: ...with Matt Argersinger. So, Matt, I know when I lead off with 3D Systems, there's a little edge, there, in you that I like, and I want to show off to our listeners. Matt, what is the market cap, within 20% either way today, of 3D Systems?
Argersinger: Oh, my gosh. I'll say this. It's a lot smaller than it used to be. I'm going to say it's still probably around $2 billion in market cap? Buzz! Oh! Not starting off on a good note.
Gardner: Well, you're not far off. You're not far off, but this is a numerical game. We've got to stick with the numbers, here, and the market cap of 3D Systems today is $1.4 billion, so players at home, if you were anywhere within $1.1 billion to $1.7 billion, you were within that 20% band either way, and give yourself a +1. Matt, unfortunately, we're going to have to keep you at zero to start this game which is rare for you.
Because we've played this game -- this is our third time now -- and the last two times you got 6 out of 10 both times, and six out of 10 is a remarkably good score. We've said par is 4. Now, in some ways par doesn't work that well, because par you want to be below it, but you're above it and that's good. Getting 6 is remarkable. Maybe we should change the concept and drop par.
Argersinger: No, no. Well, I don't know. I mean, we could use hurdle or something like that because I'm trying to get over it, but I like par because I golf like you.
Gardner: All right, good. We'll stick with that. And definitely warm up your Twitter hashtags, here, fellow breakers, because if you beat Matt this week, #IBeatMatt will be the one you want to use. If you lose to Matt, #ILosttoMatt. Now, in my experience, people are less willing to put that hashtag out there.
It's all in good fun, but, I mean, this is a great game to learn from and Matt, I think you may have just learned something there. I learned a lot about 3D Systems, myself, which is that it wasn't going to be a very good stock for us. It still remains an active recommendation today, but first recommended in January of 2012 at $12.27. It was up to $19. Five months later I recommended it again. Those positions, with the stock at $12 today are flat to down, but the market is up more than 100% from both positions, so we have gotten drilled by holding and advocating for (DDD) by about 300 points of alpha which hurts.
Argersinger: At one point, when you lose to it, though, I feel like 3D Systems was maybe a 7-bagger or 8-bagger.
Gardner: You're right. It's gone from about a 600% return, or something like that, down to about zero. That's not the first time it's happened, and it won't be the last, probably. I do continue to hold it, because I like this business. It is a relevant company but, as you said, a lot smaller. Even smaller than you thought as of this week.
Okay, company No. 2. Matt, have you been looking at clustered regularly interspaced short palindromic repeats recently?
Argersinger: I can't say that I have, David.
Gardner: All right, good. I definitely had to check Wikipedia for the words behind the acronym CRISPR, which is a really important oncoming technology. [It] gives us the ability, potentially, to edit your genes or mine. Get rid of the bad stuff. Put in some good stuff. Change humanity in some ways that I think humanity can be improved, but also has a lot of ethical questions, as well. It's a fascinating time and Editas Medicine (NASDAQ: EDIT), which is a recent pick in Motley Fool Rule Breakers, is one of the leaders in this emergent space.
The ticker symbol for Editas Medicine is, appropriately enough, (EDIT). Matt, have you looked into this company? Is this part of the Odyssey 1 portfolio?
Argersinger: It is not part of Odyssey 1 yet, but Aaron Bush, who's on our team, has pitched it at least once, and so we've had a conversation as a team around it. I've heard of CRISPR, and that's familiar to me, but not the actual words behind it.
Gardner: Yes, let's go with that again. Clustered regularly interspaced short palindromic repeats. You know what a palindrome, is, right? It's a word that reads the same front or back. I've always felt like the word, itself, should be a palindrome. It's disappointing to me that palindrome is, itself, not a palindrome.
So, Editas Medicine has been a raging winner for Rule Breakers. We first picked it on September 27 of last year, so here we are about six months later. It's gone from $19.93 where we picked it at $19 to $41, so it's up more than a double in six months for Rule Breakers members. I took a shine to it, again, in December. Three months later it had gone from $20 to $25. Picked it again. That position is up 66%. This company has been on fire. Matt Argersinger and all my fellow Fools playing at home, what is the market cap of Editas Medicine?
Argersinger: I'm trying to remember Aaron's pitch, and I feel it's... Common sense... I'm going to say about $12 billion. Buzz!
Gardner: That is your biggest miss in the history of the Market Cap Game Show...
Argersinger: Oh, no! I am swinging and missing.
Gardner: ...but the few times that you get something dramatically wrong -- and it almost never happens -- it needs to happen to make this show fun. I always say this. Maybe you should listen to Aaron.
Argersinger: Clearly, I'm not listening closely enough.
Gardner: ...because you think that it's a worth a lot more than it actually is, so if you're willing to accept... And I'm not just saying this to you. I'm saying this to all of us. If you hear of a market cap that is well below where you thought something was, that sounds to me like further cause for research. Matt, the market cap of Editas Medicine is $1.8 billion.
Argersinger: Oh, my goodness.
Gardner: So, playing at home, fellow Fools. If you were anywhere from $1.4 billion to $2.2 billion, give yourself a +1. And if you are, you're beating Matt, because shockingly he's been shut out in the first two innings.
Gardner: So, remember, par is 4 for Matt and everybody playing at home. Matt, you've got some catching up to do.
Argersinger: Still have a shot.
Gardner: I've got some easier ones coming up. It's tough to throw Editas Medicine and break down that acronym for you and all our fellow rule breakers. Okay, company No. 3.
Speaking of dramatic misses, Matt, looking back over the last show, which I relistened to in preparation for this one, you missed this one by more than anything else, and I'm thinking you're probably going to get it because you're somebody who learns from his mistakes. You were about 2x off of this one the last time we talked. That's why I had to bring it back out and see if you're learning as we go. This is totally unfair. I've always pointed out I would never play this game in your seat. I much prefer being Alex Trebek for this game, so thanks for being the guinea pig.
FedEx. The ticker symbol is (FDX). It is your biggest whiff until Editas on this show. Matt Argersinger, what is the market cap of FedEx?
Argersinger: I think I remember that you said I was off by 2x, so I think I went way over on FedEx. I thought it was a lot bigger than it is. Sixty billion. Ding!
Gardner: Great job!
Argersinger: All right! Because I think I said $120 billion or $130 billion or something.
Gardner: You're right. In fact, FedEx is today at $67 billion. This is a stock we first recommended in Motley Fool Stock Advisor in January of 2003, so that's 15+ years. It was at $52.71 then. Today it's at $249.96.
Basically, it's gone from $50 to $250, so that's a 374% return, which sounds great, but the market is actually up something like 307 points in that time, so it's really only ahead of the market about 67 points. I did rerecommend it three years later. We're slightly losing on that position. Overall, it's been a winner, certainly. People are happy to own FedEx and I like the company a lot going forward.
Now, for all of those playing at home, if you were anywhere at the low end of $54 billion up to $80 billion, give yourself a +1 and Matt gets a +1, as well.
Argersinger: On the board. Okay.
Gardner: Ka-ching! Well, let's use that momentum to power forward into stock No. 4. Now remember, my fellow Fools, we are going alphabetically by ticker, so we're about to proceed from the letter F to the letter G and another one of those horrendous dog picks that I have made in Motley Fool Rule Breakers. I don't like to have to share that, but as a Fool, I am compelled to share both my losers and my winners as are all of us. Anytime you encounter a Motley Fool advisor, or investment researcher, you should fully expect him or her to be just as willing to talk about our losers as our winners, and both of those types are on display this week.
OK, Matt. The ticker symbol is (GPRO). The company is GoPro (NASDAQ: GPRO), which looked like a rule breaker when I picked it in October of 2014 at $80. I'll say in a little bit -- maybe you know where it is trading today, but that might start giving you too much information before you have to make your guess. It might be fair to say this company looks more like a faker breaker than a rule breaker. Matt, have you been a customer of GoPro?
Argersinger: I've never been a customer. I am a shareholder, though, and it's one of those ones where it's in the brokerage account. I gloss over it as fast as I can.
Gardner: And it gets easier to gloss over when the numbers get quite small.
Argersinger: That's right.
Gardner: Now Matt, one thing I know about you is that you've climbed some remarkable peaks in this world, and I would have thought maybe you had a drone flying above you to capture you in slo-mo and do a 360 Lord of the Rings sweep around you as you climb up...
Gardner: Kilimanjaro, for example.
Argersinger: No. I've taken a video camera on some of our expeditions, but I've never made the leap to a GoPro, let alone the drones. I've always used the old school -- even the handheld video camera -- which I don't think they even make anymore.
Gardner: I saw a great shot of you wearing a jester cap in full Fool regalia on top of maybe it was Kilimanjaro. It might have been a selfie. So, in the future you could help out our company, here, by maybe getting the GoPro 5 or whatever is the latest model and being a little bit more self-indulgent and vain...
Argersinger: Totally. I totally agree.
Gardner: ...in slo-mo from a panning shot 100 feet above you. So, speaking of peaks, GoPro was probably at or near its all-time high when I picked it then. It's much lower today. Matt Argersinger, and all my fellow Fools, what is the market cap, today, of GoPro?
Argersinger: I'm going to guess... I mean, it's just below $1 billion. I'm going to say $900 million. Ding!
Gardner: Killed it!
Argersinger: All right!
Gardner: It's almost like you own the stock. The market cap of GoPro, as we tape this on Tuesday afternoon, March 13... Well, the stock had dropped from $80 to $5.64 and that checks in at a market cap of $824 million. So, Fools playing at home, if you're anywhere at a low of $660 million to a high of let's call it $970 million. You can't give it to yourself if you said $1 billion. If you're just below $1 billion then do give yourself a +1.
Matt, it has been a rocky ride. In fact, that is a stock that I picked that has led to a 93% drop from the price we paid for it back in October of 2014. Ouch!
Argersinger: Tough! Can't win them all. I still believe in the company and I believe in the CEO and the founder. I think it was the competition and not being able to transition from that hardware-focused business to a real software-focused business which was the intent. It's been a tough road.
Gardner: That's right. Part of our thesis had been -- and we've had to change it -- that the company in addition to being a hardware company was going to become a network -- basically like a television network -- with advertising and all the platform benefits that you get from creating something. With all the GoPro videos that people were pinning up on YouTube, etc. that GoPro had an opportunity to be its own media brand.
Gardner: And it turns out it hasn't really achieved that. Meanwhile, Nick Woodman, the CEO. I was watching him on... Was it Shark Tank or reality TV?
Argersinger: He was on Shark Tank. You're right.
Gardner: I was like, "Shouldn't he be our CEO and be doing the work of the business for the shareholders and not on somebody else's reality TV show?" But take it as it is. We've kept that recommendation all the way in, so we've gone from $80 down to $5. It hurts, but it hurts a lot less if you don't add to things on the way down, and that's something that we're pretty good at avoiding, here, as Rule Breakers.
We're just about near halftime, but we've got to fit in stock No. 5. Matt, now one thing I remember about you. We haven't talked about this in a long time, but I believe that you and I have both acted on the same stage in Alexandria, Virginia.
Argersinger: At the Little Theatre of Alexandria. That's right.
Gardner: So, I took a role, back in the day, as a younger fool myself. Literally my role was the Young Fool. It was in the musical Big River, and I was singing the Arkansas song and having fun as one of the boys in Huck Finn's band. That was my Little Theatre experience. Now Matt, what was your Little Theatre experience?
Argersinger: I've actually done several shows, there, but the most memorable one was I was in Biloxi Blues and that's how I met my wife. Gosh, that was 12 years ago, now.
Gardner: And that's remarkable. So, it's our community theater, here, in lovely Old Town, Alexandria. The Little Theatre of Alexandria. You and I share that bond, even though we didn't know each other, at all, and we weren't in the same productions. But I'm thinking about theaters, Matt, so as we hit the letter I, I'm thinking about IMAX (NYSE: IMAX).
IMAX is a company that fills a lot more seats on a daily or annual basis than the Little Theatre of Alexandria, but it's been an interesting company. I've recommended it, now, three times -- in 2005, 2010, and 2015. You might see a little mathematical pattern, there. It was looking like a raging winner as of a few years ago, but IMAX hasn't been great in recent years. Matt, what is the market cap of IMAX?
Argersinger: This one I should know because we own it in our Odyssey 1 mission in Supernova. I know it's struggled a little bit lately. I'm going to say it's probably around $3 billion nowadays. Buzz!
Gardner: It's been a tougher time for this company and for Matt Argersinger than you would have thought. Actually, IMAX is at what we'll call $1.3 billion today.
Argersinger: Wow! It has been much tougher than I thought.
Gardner: Yes, it's about half of what you thought. And frankly, it's about half down from where it was the summer of 2015. It was around $40 at that point. Today the stock tips the scales at about $20.60. Just over $20. So, the pick that I made in August of 2005 at $10 and then adding five years later at $13. Those felt really good. They're still in the black, but when I added it at $32 in the summer of 2015, that wasn't a good call. Again, now the stock is just below $21.
Give yourself a +1 at home if you were anywhere from $1 billion at the low end to $1.6 billion on the high end. Now, IMAX has got to have sold a lot of Black Panther tickets, here, in the last month.
Argersinger: It has to be. It has to be a huge hit.
Gardner: So, it is a portfolio holding for Odyssey 1, Matt. Do you have any perspective that you want to share other than you thought it was worth twice as much than it actually is?
Argersinger: I kind of held onto the peak market cap. Well, I think with IMAX we thought, going in, that theater going was going to be declining, but if people were going to go to the theater, they were probably going to go to IMAX and see big superhero movies like Black Panther or The Avengers movies. So, knowing that I thought IMAX can still be a good investment because I think that's still a growth market. And, by the way, it's expanding in Europe, China, and elsewhere, but it's been just a very rocky road. They depend on one or two big movies a season, and if those movies disappoint in any way or if the tickets fall off, it can cause the stock to feel some pain.
Gardner: It's a company that in a lot of ways has the makings of a classic Rule Breaker. It's a brand that everybody knows. One of my tests I often ask I call my Pepsi Test. When a company is the Coca-Cola in its industry, if you can't find a Pepsi, that's usually a pretty good sign. I think everybody knows IMAX. I can't think of really... Maybe real 3-D or something...
Argersinger: Right. It's not a good brand.
Gardner: There's really nothing -- no, not at all -- and so those really look good. And frankly the stock looked really good for about the 10 years that we've held it, but the last couple has been cut in half. The only real question going forward is what the future of IMAX is. How's it going to do? Obviously, we keep our recommendations in Rule Breakers. You still have the stock in Odyssey 1. Our money is where our mouth is, but we'll see. A lot of growth in China. But yes, they are kind of beholden to hits showing up and to people still wanting to go to the movie theater instead of the home theater or their big 4K set at home. [Music plays in background]
Gardner: Alright, Matt, company No. 6. Matt, what is the first musical concert of any kind -- but a real concert -- that you attended as a younger Argersinger?
Argersinger: In high school I went to see Tracy Chapman who I absolutely love. She's just great. She should be classified these days as "folk rock," maybe? I don't even know.
Gardner: Let's go with that -- the few songs that I've heard from her. I'm not as much a follower, I figured she's outstanding. Do you remember what you paid for that ticket? Did you pay for a ticket?
Argersinger: Oh, gosh. It's funny. I was in Germany at the time, and by the way, this is pre-euro. I want to say it was 30 deutsche marks. I don't even know what that was worth at the time.
Gardner: Amazing. What was the venue? Do you remember?
Argersinger: It was a concert venue right in Munich because I lived about an hour south of Munich.
Gardner: That's great. You paid 30 deutsche marks to see Tracy Chapman...
Argersinger: In Germany.
Gardner: In Munich. That's tremendous. My first concert was Phil Collins. He came to Chapel Hill and I went to the Dean Dome, the basketball stadium where the North Carolina Tar Heels play, and Phil Collins was there.
The reason I'm asking this is because Live Nation (NYSE: LYV) is a wonderful Rule Breaking company. The ticker symbol is (LYV). I first picked it in March of 2017 at $29. Four months later it had gone to $36 and a fraction, so I picked it again. Today it's at $45, so I'm really happy that we picked and added to this winner. And the reason that we love Live Nation in Motley Fool Rule Breakers is because music has changed. There are not many CD sales anymore. Not as many people buying stuff on their iPod.
So, talented performers like Tracy Chapman do, in fact, these days do a lot of live music, and that's the way they make a lot of money. And what's great about Live Nation is that the company owns a lot of the venues where these performers perform. They also contract with the performers --make some money there -- and, as you probably know, Matt, they own Ticketmaster...
Gardner: ...so they're even selling us the tickets to go to the venues that they own to see the musical artists that they've contracted with. This is a really great model and a company that we think has low risk and lots of upside going forward. Matt Argersinger, what is the market cap of Live Nation?
Argersinger: I should get this because I looked at the company recently. I'm going to say $9 billion. Ding!
Gardner: Wow! You nailed that. All right.
Argersinger: I thought I might.
Gardner: $9.4 billion, as of this afternoon, anyway. Playing at home, if you were anywhere from $7.5 billion up to $11.3 billion, you're within that 20% band either way and give yourself a +1. Now, Matt, if I'm keeping score right, that was company No. 6 and I think you just got your third.
Argersinger: Right, so I'm 50%. I should be doing better than that.
Gardner: You started cold. The first half wasn't your half, but it sounds like you had a great halftime pep talk.
Argersinger: I'm focused on number four. If I can get to four or above, I'm going to be happy.
Gardner: That's it! Par, baby! That's Live Nation. Let's move to company No. 7. And I'm all ready to go to company No. 7, but our producer Rick Engdahl is breaking into this podcast. Rick, what do you have for us?
Rick Engdahl: Breaking news. From 2015, which is the last time Tracy Chapman updated her page, she does not seem to have any immediate plans for touring I'm afraid to say.
Gardner: Oh, my! She has not updated three years later?
Argersinger: I hope she's still alive. I mean, I hear her all the time and I still have CDs of hers.
Gardner: Well, every great musician lives forever, thanks to the world in which we live. In which we can just hear them anytime at our beck and call. [This] is really one of the most remarkable changes from a century ago if you think about it. The ability for us just to constantly be hearing and relistening to music versus having to find a concert hall if anybody was even playing that night. If you were near a city and getting to hear anybody play an instrument, [it] must have been a magical feeling a century plus ago. Wow, we kind of take it for granted these days. Tracy Chapman? She still sounds just as great, here, in 2018, even if she's not performed for about three years.
Argersinger: That's right.
Engdahl: Still alive. Still alive.
Gardner: I mean, we would have expected that. That would make me feel really old. Thank you, Rick. Back to company No. 7. Now this one is very well-known. It's probably the most widely held stock by Motley Fool Stock Advisor members, although perhaps Apple is there. And part of the reason that it's so widely held is because it's performed so well. It's been recommended numerous times as a Best Buy Now. The ticker symbol is (NFLX). The company is, of course, Netflix (NASDAQ: NFLX).
Matt, the reason I wanted to include Netflix -- I see you already smiling, so maybe you were ready for this one. I mean, I realize you can kind of game the system. Figure out, "What is Dave going to ask me? Is he going to talk about his biggest winner of all?" You might know your market cap -- and this game is for you, Matt -- but really, as you and I know, this game is for all our listeners, so I'm really curious. You at home, playing along here, are you going to get within 20% of what Netflix is worth today?
Now, part of what I want to introduce is this amazing statistic. That in the last three months Netflix stock is up 73% -- in the last 90 days. Now, I realize this might be a market top for Netflix. We might look back and go, "Wow, they highlighted it right at the top." Who knows? People were probably thinking that two or three or five years ago, but Netflix has just been a tremendous company.
First picked in 2004 in Stock Advisor. Our cost was $2.33. The stock, today, is $316, so it's been a good investment from there. Two months later, in December of 2004, it had dropped, so I picked it, again, at $1.85 and then twice in 2006. My brother Tom found it, discovered it, and it added to his side in Stock Advisor in 2007 at $2.82. Nice pick, Tom.
In 2013 we rerecommended it. It was up to $31 at that point. But now, yup, it's at $316 a share. So, we have made tens of thousands of percentage points in the company. Our very best pick, again. $1.85 in December 2004 is up 16,890%. That's about a 170-bagger for Motley Fool Stock Advisor members who believed and have stuck with it, even through the Qwikster debacle and all the rest. Matt Argersinger and all my fellow Fools, everywhere, what is the market cap today of Netflix?
Argersinger: Shame if I don't get this, because it also happens to be our biggest position size in Odyssey 1 in Supernova. $130 billion market cap. Ding!
Gardner: Outstanding guess. I'm not surprised you were within the band needed. It is at $137 billion today, so give yourself a +1 if you were anywhere from $110 billion on the low end to $164 billion on the high end. I don't think any of us could have possibly expected the kind of performance that we've seen, not just in the last three months, but in the last 14 years.
Argersinger: Oh, no. It's been remarkable. And I can understand why. You have Reed Hastings, a founder, CEO, and a relentless leader who is just singularly focused on providing great entertainment as easily as possible. That sounds so simple, yet they've done it so effectively. We might be calling a peak here. I don't think so. I just think there's just so much more growth ahead of them, especially outside the U.S., as we've seen already.
Gardner: And Matt, in Odyssey 1 you made this a pick in the first year of the service. It has been a spiffy-popper for you. Have you pared it back? What rough portion does it occupy of that real-money portfolio that you manage today?
Argersinger: We've never sold. We bought it in 2012, which was the first year of Supernova and I want to say... It's probably bigger, now. I haven't looked at it in a while, but I think at least a 14-15% position in the portfolio.
Gardner: And since I'm looking at a computer -- you can't, because otherwise you'd be cheating at the game and you are an honest lad, throughout -- it is a 17% position in the portfolio. Is there an unlimited percentage that you would allow this to occupy of your portfolio? Does the team discuss the dynamics of how to handle a huge winner like this?
Argersinger: No, we haven't. I think we've always decided that as long as we still believe in the company, we're going to let those winners run. It might get to a situation where we might be uncomfortable adding to it, just if it gets to, say, 20% of the portfolio, but I don't see us paring back anytime soon.
Gardner: All right. We've got three more companies left. Matt, you're at four right now, so let's see what you think of our next one. No. 8. Now the company's name begins with D, but the ticker symbol -- we're going alphabetically, here -- starts with a P. Dave & Buster's (NASDAQ: PLAY). And the ticker symbol for Dave & Buster's, the restaurant-entertainment venue, is (PLAY).
We've had some fun ticker symbols this episode. Editas is (EDIT). Live Nation (LYV). Sure, that works for me. And certainly (PLAY) for Dave & Buster's. Now, Matt, have you ever been to a Dave & Buster's?
Argersinger: I have.
Gardner: Can you briefly describe the experience for those who've neither heard of nor been to this chain?
Argersinger: Many listeners might have taken their kids to, say, Chuck E. Cheese's, which combines pizza and games, but it's mostly for kids. I feel like Dave & Buster's is the adult version of Chuck E. Cheese's. You go in. It's usually huge. You have arcade games, but there's also live music and other things you can do. And the food is really good. It's just the kind of place to hang out and have a good time. And it's good for kids, too. It's really a family oriented place.
Gardner: Matt, have you been more than once?
Argersinger: I feel like I've been at least three times.
Gardner: Is there a particular game that you would go back to?
Argersinger: Now it's an old game. One game I still like to play when I go to Dave & Buster's is Guitar Hero, because you load up your favorite song. You just to out there and you feel like you're rocking out. I know Guitar Hero is like 10 years old, now, but I still have a good time playing that, and Dave & Buster's is one of those places you can play games like that.
Gardner: What about growing up as a little Argersinger? Was there a particular arcade game that caught your fancy or that you were remarkably good at? Maybe Atari or something. Throw me a bone, here.
Argersinger: When I was growing up it was games like Street Fighter. Games like that were kind of the games I played. The Kung Fu type games.
Gardner: Right. The 2-D fighters where you're banging...
Argersinger: Double Dragon.
Gardner: Matt, before we go to the market cap for Dave & Buster's, the whole company had a lot of fun in the last couple of weeks because we had our Foolympics event. When I think of play, I can't not mention the tremendous job done by three of our leaders, internally, of our culture to put our company through a variety of events. We all divided up, 320 employees, into 12-Fool teams and we were subjected to all kinds... Could you just give a range of a few different events that we participated in, in Foolympics?
Argersinger: Anything from pull-ups, to speed typing, to listening to music and guessing songs. It's a whole range. It's a lot of fun.
Gardner: Cornhole -- I got a gold medal. You played, right?
Argersinger: I didn't. I failed through medals in any event. I'm terrible.
Gardner: But you're actually very talented. What was the name of your team? We all named our teams.
Argersinger: Oh, my gosh. It was Winners Stand.
Gardner: Winners Stand.
Argersinger: The Olympic Athletes from Winners Stand. We were doing a play on the Russian athletes. The Olympic athletes from Russia.
Gardner: I was part of the Republic of Swaney. I don't know if you remember Elizabeth Swaney, but she's the one who competed for Hungary even though she's an American and went to Harvard. She competed in the halfpipe and she had no skills whatsoever, so much was made of her journey down the halfpipe as an Olympic athlete who couldn't really do any moves, but it's kind of a great story about somebody who figured out how to go through all the compulsory events -- and there are a quite a lot -- to qualify for the Olympics, and had her Olympic dreams, so we were the Republic of Swaney.
My gold medal was in the spelling bee! I am the best speller at Fool HQ, and that is something that I find deeply gratifying. Probably as gratifying or more as my selection of GoPro for Motley Fool Rule Breakers. All right. Matt Argersinger, Dave & Buster's. What is the market cap?
Argersinger: I've got the number $5 billion ringing in my head for Dave & Buster's. Buzz!
Gardner: That's a bad jingle. That's a bad sound in your head. You have overrated the importance and value of play in our society, pun intended, I guess, because the market cap for Dave & Buster's is $1.8 billion.
Argersinger: Oh, my goodness! So much smaller than I thought. So much smaller.
Gardner: And probably me, too. $1.8 billion. So, playing at home, if you were anywhere from $1.4 billion to $2.2 billion, go ahead and give yourself a +1. Matt, for now, is stuck at four. At the top of the podcast this week, I mentioned that there were two companies that had an identical market cap but couldn't be more different from each other, and the two companies are Editas Medicine and Dave & Buster's.
Argersinger: Two that I totally whipped on.
Gardner: Well, fair, but really what I love is that they have the same market cap and yet they're so wildly different in terms of what they do and at what stage the companies are. That's part of what I love. When you learn the lingua franca of market caps, you start to see things a little bit smarter, and it's a really interesting view you get.
In fact, I think a lot of people, Matt -- I know you're going to agree with me on this one -- think that the size of companies comes down to the price per share of the stocks. They'll say, "Don't give me a stock that costs $438 a share. I like the ones that are $4.38 a share." People confused about the sizing of things based on the price per share of the stock and not the market cap.
Argersinger: Right. It's really confounding to a lot of people, especially beginning investors who are just learning to buy their first stock. And unfortunately, as we know, buying stocks usually with single-digit stock prices is usually not a game you want to play.
Gardner: And thinking back just to our previous stock, Netflix, where we said we paid $1.85, that sounds like we were buying a penny stock but, of course, that's all split adjusted. It's split a number of times. Netflix was never down at $2 a share. It's just that after some splits of the stock, that is the actual cost that we have. That sometimes confounds people, too. They think that you have to find a Netflix at $2 a share, and it never actually works that way.
I should mention we picked Dave & Buster's at $36.70 in June of 2015. It's up to $45 today. That's been a nice 25% gain, but behind the market. The S&P 500 has outperformed Dave & Buster's by about 16%, so I'm looking for a little bit more play from (PLAY) going forward, but we like the company.
The last two stocks. Matt Argersinger, this is another company with a corporate name much earlier in the alphabet but a late-sounding ticker symbol that starts with the letter S. And this is a pick that you made on behalf of me and my team in Stock Advisor some years ago. It's a company I know is near and dear to your heart, I'm assuming. The company is Boston Beer (NYSE: SAM). I think a lot of us know it through Sam Adams, but it has a lot of craft beers these days. It has its own beer ecosystem, but it's also a very competitive beer world.
Argersinger: Right. Too competitive, in a lot of ways.
Gardner: The ticker symbol is (SAM). Matt, one of the reasons I would not have been able to pick this without your help is that I'm not as much a beer drinker. I don't know that world, as much. You're definitely more that I am, but you don't appear to have a beer belly, so you're taking good care of yourself. What is your thought, right now, about microbrew and the revolution, and where Boston Beer plays these days?
Argersinger: Boston Beer (SAM), which is the Samuel Adams brand were the leader of this revolution in craft beer consumption that happened starting 10, 12, or maybe 15 years ago, now. There's just been this rush of all these microbrewers and small craft breweries coming to market and flooding the market with new options. It's great if you're a beer consumer and a customer and you like to try new beers. It's just been tough for somebody a company like Boston Beer, which had such a big market share in the space and has seen that market share eroded a little bit. It's all these new competitors that come to market.
But they're holding their own, and they're one of the few companies that has nationwide distribution in terms of craft beer. Still a fighting competitor.
Gardner: We first picked this stock, together, in 2010. It was May. It was about $59. Today it's at $182, so it's been a fine investment. Up 211%. The only bad news is the market is up 200%, so it has beaten the market, but not by much. Now, I don't think anybody's going to sneeze at tripling our money over eight years, which is what your pick has helped Stock Advisor members do with Boston Beer. Matt, what is the market cap? I see it is in the Odyssey 1 portfolio -- no pressure -- but I feel like you really should know this one.
Argersinger: I should. I should know this one.
Gardner: I think you do know this one, but Matt, what is the market cap?
Argersinger: I've been going high too much, lately. I'm going to say $2.5 billion. Ding!
Gardner: Let's give you a checkmark for that one. You were on the very precipice of too high, but you reeled it in, because the actual market cap of Boston Beer is $2.1 billion, so give yourself a +1 if you were anywhere from $1.7 billion to $2.5 billion. Do you want to say anything more about Boston Beer or should we go to our last stock?
Argersinger: It's a company still near and dear to me. I've owned it since college and I plan to keep owning it for as long as I'm alive, probably.
Gardner: All right. We're near the end of our game show. It's time for our final stock. Now Matt, if my math is right you've gotten five. Five out of nine. Now your two previous appearances on the Market Cap Game Show you got six, so let's see if you can do it one more time.
Matt, this is a company that I know you know because you have an account on this platform. It starts with a T and it's one that we know a lot because we talk about it on this podcast and it's Twitter (NYSE: TWTR). The ticker symbol for Twitter is (TWTR). Now Matt, if I wanted to follow you on Twitter, what do I follow?
Argersinger: Mine's tough, unfortunately, but it's @MArgersinger.
Gardner: So, it's M, A-r-g-e-r-s-i-n-g-e-r.
Argersinger: You've got it.
Gardner: I'm the spelling bee champion. Of course, I've got it.
Argersinger: You know that.
Gardner: Is it just that?
Argersinger: @MArgersinger. You've got it. That's all you need to do.
Gardner: Matt, I do follow you on Twitter. I'm not sure you're highly active, nor am I, really.
Argersinger: I'm more of a follower than I am a tweeter.
Gardner: If I do follow you, what could I expect in the next couple of months? What would you be doing for me if I were to follow you on Twitter?
Argersinger: Well, I'd probably be tweeting about Tracy Chapman and her return to the tour... No, no. I don't know. To me, it's the most random stuff. I'm a Boston sports fan, so the Red Sox are in spring training. The season is about to start, so I might tweet some things. Or retweet the Boston Red Sox. That might not be exciting to most listeners, but if I read something in the news that I find interesting and I want to share it, I'll write something about that and tweet it.
Gardner: That's the way a lot of us use Twitter. You don't have to tweet that you just ate this or that at this restaurant. Or anything like that. A lot of it is just helping people find links to cool stuff, and that's a big purpose of Twitter. By the way, do you have it in Supernova Odyssey 1?
Argersinger: We do. I think we've bought it a few times. I wish we'd bought it a little more recently, because it's been on quite a run. I know Tim Beyers, who's on our Odyssey 1 team, is a big fan of Twitter, as well.
Gardner: Excellent. I'm glad to know that. Now, it first came to our attention in Rule Breakers in December of 2013. The stock was at $55 and a fraction. Today it's $34, so that's the bad news. We've been invested from that original point for more than four years and it's gone from $55 to $34. However, good news. I did take a shine to it, again, thinking, "How can this thing be so beaten down in January of 2017?" So just over a year now. It was at $16.73, so it's more than doubled, from last January. You put it all together and the alpha not quite even between those two positions, but I think we're going to catch up. We're going to see. Matt Argersinger and all of my fellow Fools, what is the market cap of Twitter?
Argersinger: I want to say it's right around $25 billion. Ding!
Gardner: And it is exactly $25 billion and that's the way this show should end. Matt, you did six out of 10 again, and on your final one you nailed it! You landed that triple axel with a half flip.
Argersinger: Nice! Right! A toe loop at the end. A double toe loop right after.
Gardner: The double toe loop. I'm assuming that you, as do I, believe that Twitter will be worth more in the future, and is a good stock to hold.
Argersinger: I think so. The influence of Twitter seems to always belie the business and the market cap. Facebook is larger by so many factors, but for some reason I feel like the influence of Twitter has the potential to be so much larger. I feel like some day it might.
Gardner: Yes. Twitter, for me, is one of those companies that passes what I've often called in the past my "snap test." If you snapped your fingers and that company disappeared overnight, the next morning would anyone notice? Would anyone care? And to me, if Twitter disappeared, everything from lots of celebrities and athletes (right through to little you and little me looking for good content and sharing it out) would all desperately miss Twitter. I think the world would be really disoriented that next morning. I feel like Twitter is a really good candidate for passing the snap test.
It also has a pretty good balance sheet, which is why I was willing, after it dropped from $55 down to $16 -- I'd held it for three years -- I did something I usually don't, which is add to a loser. And usually if you see a strong balance sheet and you see a big snap test pass, those are the few times, the exceptional cases, where I consider stepping up and going, "Let's add to it even though it's down." So far, it's worked out pretty well. The positions about even out, so it's all about what happens next and it's going to be really interesting.
Speaking of what happens next Matt, I'll hope you'll join me in a quarter, or so, and let's play the Market Cap Game Show again.
Argersinger: I'd love to. Absolutely. I always look forward to it.
Gardner: Good. Thank you. There was a little bit of This is Your Life Matt Argersinger this time through, from the Little Theatre of Alexandria right through to your pathetic holding of GoPro that you're still desperately holding onto and so are the rest of us. Thank you, Matt, for your good nature, your good sportsmanship, and your talent! (Music plays in background)
Argersinger: Thank you, David!
Gardner: So, if you scored 6 or higher, because after all, if you tied Matt, I think you beat Matt. So, if you were 6 or higher, definitely #IBeatMatt. If you came in under, #ILosttoMatt, and just keep studying up and get better, because the more that we learn about the various market caps out there in the marketplace -- within a given industry or a cross-industry like Editas Medicine and Dave & Buster's -- I think the better you're going to be thinking as an investor. Somebody, again, who acts, by definition, for the long term.
I hope you had at least half as much fun as Matt and I did this week. Next week I'm going to be welcoming in the author of one of my favorite business books. Yes, one of those external interviews, although in this case you won't hear a studio audience or a bad echo or anything because Les McKeown will be joining me right here in studio at Fool HQ in Alexandria, Virginia which by the way... Did you see this, Matt?
On behalf of the Alexandria Chamber of Commerce, I think we need to point out that Money magazine earlier this month put Alexandria as the No. 1 U.S. travel destination when you're factoring in quality, cost, and value coming together to provide a terrific travel experience.
Now, the good news for Les McKeown, my visiting author who wrote the book Predictable Success, which is recommended reading for anybody who wants to read ahead of next week... The good news for Les McKeown is like you and me, he lives in the Greater D.C. area, so he can enjoy Alexandria. But yes, the magazine cited Alexandria's historic charm and proximity to Washington, D.C. So, exciting. On behalf of the Alexandria Chamber of Commerce, which could have been our ad, this week, and probably should be next week to do it here in our studios.
But yes, Les McKeown, the author of the book, Predictable Success. It's going to be a delight to check in with him and feature him for the first time on Rule Breaker Investing.
In the meantime, Matt, Rick, and all my fellow Fools, have a great week. Fool on!
As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at RBI.Fool.com.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Gardner owns shares of 3D Systems, Amazon, Apple, Editas Medicine, and Netflix. Matthew Argersinger owns shares of Amazon, Apple, Boston Beer, GoPro, Netflix, and Twitter and has the following options: long January 2019 $15 calls on Twitter. The Motley Fool owns shares of and recommends Amazon, Apple, Boston Beer, GoPro, IMAX, Netflix, and Twitter. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends 3D Systems, Dave & Buster's Entertainment, Editas Medicine, and Live Nation Entertainment. The Motley Fool has a disclosure policy.