It's a quote that has been attributed to witty leaders like Winston Churchill and Abraham Lincoln, but in fact, nobody really knows who said this first: "Success is going from failure to failure with no loss of enthusiasm." But more interesting than the quip's source is its implication: You have to take a lot of risks and rack up a lot of losses if you're going to win in the long run.
That's a lesson that Rule Breaker Investing host and Motley Fool co-founder David Gardner has certainly taken to heart. In this segment from the podcast -- another in his "Great Quotes" series -- he talks about the stock picker at the company with the most big losers in his portfolio: himself. But wait a minute more for the numbers, and you'll see confirmation that his "risky" strategy is far better than what looks like playing it safe.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
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*Stock Advisor returns as of June 1, 2019The author(s) may have a position in any stocks mentioned.
This video was recorded on June 12, 2019.
David Gardner: Great quote No. 5. I have to mention to you one of my favorite new websites. Occasionally I'll rock out one of my top 100 websites. This one, I'm going to say, falls somewhere in the 60s. It's quoteinvestigator.com. If you're doing Great Quotations: Volume 10, and you've done nine previous volumes, you probably care about quotations. If you do care about quotations, you should care to know whether they were actually said by people. quoteinvestigator.com is a wonderful site that I use to figure out, did this person actually say this? I've been asking that question at different points in this podcast for the last few years. Only recently did I discover that there's an entire website dedicated to getting to the source, the actual, real, non-fake-news source, for every one of these great quotes. Sometimes it turns out they said it, and sometimes they didn't. Before referring to quoteinvestigator.com this week, I would have told you that Winston Churchill said great quote No. 5. As it turns out, not only did he not say this, nor did Abraham Lincoln, to whom this is also attributed, nor anybody else. We really can't figure out who first said great quote No. 5, one of my favorite quotes.
Great quote No. 5. Not by Churchill, not by Lincoln. You know it, you love it, here it goes.
In fact, I use that quotation on a regular basis when welcoming new Fools to our offices. New employees, when we have coffee together, I ask them, "What's your superhero power? You obviously have at least one, you got hired by our company. So share it with us." We go around the table, what your superhero power is. Whenever it comes to me, I always share mine. Mine is the ability to lose, and lose constantly.
I'm amazingly good at losing. Most of the board games that I play, even though I'm teaching people the rules, they then beat me at the game. People assume, since I have hundreds of board games, that I must be really great at them, that's why I have so many games. Not really. I'm actually not that good at games, I just love them. People would also assume, since I help run Motley Fool Stock Advisor and Motley Fool Rule Breakers, clearly, I must be winning all the time out there in the stock market. You, dear listener, if you've been with me for any measurable amount of time, you already know that I lose constantly. In fact, I have more bad losers than any advisor or analyst in Motley Fool history. As I've often said, I have more bad losers, just flat-out more losers, than anybody else, and more bad losers -- stocks that drop 50% or more.
And yet that leads to a little conversation about losing to win. I won't bore you with that now near the end of this podcast. But for me, the process of losing is necessary in order to win. When I pick stocks, I take risks on purpose. I've always said the greatest, least-mentioned risk of all in investing is not taking enough risk. I think most people don't take enough risk. Sometimes, arguably, I take too much risk, and I lose more than anybody I know, which is why I've always loved what I thought was Churchill's line about stumbling from failure to failure without losing your enthusiasm.
In fact, if you're going to be a superhero at losing, you'd darn well better count it up. Let's take a quick look live at The Motley Fool Rule Breakers scorecard as I tape here on Tuesday afternoon. Counting down, I have -- and this is a shocking statistic. Before I give it to you, let me mention that I picked two stocks on behalf of my team and myself, two stocks every single month, since October of 2004. That's 24 stocks a year, times about 15 years. We're talking about 350 or so stock picks in history of Motley Fool Rule Breakers.
Here's a shocking statistic. About one-sixth of those are down 50% or more each. Literally 58 of those stock picks have lost between 50% and 98%. We've never had one lose 100%. But 58 times in the history of those monthly stock picks, we have literally lost 50% or more, which sounds horrible. Every single one of them I believed in at the time. I thought, "Sure, I'm going to pick this. I'm ready for new members to buy this, and old members and anybody who wants this, because I believe in this company. We're going to take some risk; we're going to be willing to lose." We've always said that as Rule Breakers. And it's happened 58 times that we've lost 50% or more of our money.
But, even given that, not only has Rule Breakers whomped the market averages over its 15-year history, but I'm not sure there are any other services in the world that are even close -- with the exception, maybe, of Motley Fool Stock Advisor. But here's the beautiful statistics: 58 stocks losing 50% or more of their value. Winston Churchill. But 58th-best pick, the 58th-best pick, is up 294%. That's the 58th-best pick. We've had 57 do better than that. The very best pick so far for Rule Breakers has been MercadoLibre, which is up 4,263%. If you multiply all those 58 losers, their losses get wiped out by that one stock. And we still have 57 below it that are all multiple times in values. Seventeen 10-baggers, etc.
That's why I think that my superhero power is the ability to lose and look like a small fool, look silly, airball from the free throw line when you thought I was a professional, on a regular basis. The secret here, as Rule Breakers, is that we lose to win.
So, yes, even if Winston Churchill never said it and Abraham Lincoln never said it -- you can look it up on quoteinvestigator.com, there is no evidence that either of these gentlemen ever said it -- my secret to success is stumbling from failure to failure without losing my enthusiasm. There's something in there about resilience, too, but I think you get that, fellow Rule Breaker.