In July, Consuelo Mack of Wealthtrack interviewed David and Tom Gardner, co-founders of The Motley Fool, to mark their firm’s 25th anniversary.
Here are some highlights:
The Gardner brothers contend, says Mack, that it’s “relatively easy to beat the market once you get the core principles down.” Tom describes these principles as:
- Track your returns against the market;
- Know your time horizon. It’s very tough to beat the market on a short time frame, he says. The Motley Fool tends to hold stocks for 3,5, and 7-year periods.
- Determine whether the business has a leadership team that’s going to be around for a long time.
The brothers argue that, by definition, investing is a long-term exercise. The opposite of investing is trading, they argue, adding, “We don’t do that at The Motley Fool.” They explain that only a small percentage of their investments drive a large portion of returns.
Tom describes his investment methodology as being more value-oriented. He focuses on the long-term, he says, identifying expanding businesses. His approach differs from David’s in that he will sometimes keep cash in the portfolio as a buffer for when the market goes down. He also claims to focus a bit more on leadership and culture than David does.
David describes his investing style as one that identifies innovative and disruptive businesses by “reading the zeitgeist.” He is drawn to innovation and disruption and focuses on those types of businesses. “It’s counterintuitive,” he says. “People think you should buy low and sell high, that they should look for discarded cigar butts, when you should be finding the best companies of your time.”