For 20 years, David Gardner has been playing the fool but winning at the stock market.
Gardner, 46, was a Morehead Scholar and English major at UNC-Chapel Hill, not an obvious pedigree for a stock market renegade. Through subscription e-newsletter services, Gardner and his brother Tom offer stock picks and tips while playing Shakespearean fools among investing pundits. The Gardners are not afraid to speak the truth about stocks, be held accountable for bad predictions, or share their expertise and glee about exciting discoveries with subscribers. Their advice can be found on Fool.com, in their syndicated newspaper column or in more than two dozen books about investing and personal finance.
“The fool or the court jester was the one character who could tell the truth to the queen without getting their head chopped off,” Gardner said. “We’re deadly serious about what we do, but we have fun while doing it.”
Gardner, who has three children with his wife, Margaret, is giving a talk called, “What I Wish I’d Learned as an Undergraduate ... about Business, Economics and Investment” at UNC-Chapel Hill on Monday. He answered a few questions about his company, why he’s not afraid of any fiscal cliffs, and transparency from his office in Alexandria, Va.
Q. What’s the Motley Fool up to these days?
We have 275 employees, mostly located here in Alexandria, but we do have some international staff and endeavors now. We’ve had the Fool UK for 12 years, and just started Fool Australia, Canada, and Singapore this year. We’re providing financial advice and education for yearly subscriptions. Our most popular service is the Fool Stock Advisor, which is in its 11th year. But we offer different flavors of services for different investors. It’s a private company, but I can say we have hundreds of thousands of subscribers.
Q. You used to offer free advice on your website, but now people have to subscribe for your tips. What changed?
We did things for free for several years, but that’s the advertiser’s business model. But we’re not working for our advertisers, we’re working for our subscribers. We changed in 2002. Now, we’re like a magazine. If you like what you get, you can renew each year. I can’t share how many renew, but it’s very high, more than 60 percent. That’s impressive, considering that when I started, traditional newsletters had about a 30 percent renewal. But unlike traditional newsletters or financial pundits, we’re accountable. That’s the beauty of the Internet; you can look up my biggest successes and misses, unlike someone on CNBC. We’re totally transparent.
Q. How did you start getting interested in the stock market?
My dad from an early age taught us about the stock market. I remember it sounded fun, and in the fourth grade stock market game, I won a big chocolate bar. So many people are raised without much knowledge about the market so it creates fear, they just see the big, scary headlines. But ownership is a very American idea, and to me it’s always been, “Why wouldn’t you want to take part ownership in Starbucks, or Panera Bread, or Nike?” I’m a sports fan, but our country is overindexed when it comes to enthusiasm for sports and underindexed when it comes to investing. When your stock wins, you can put your kid through college. When the Tar Heels win, you don’t get much besides pride.
Q. Why does the stock market scare so may people?
When people don’t know something, they create fear. Think of medieval maps; when you get to a part of the world the mapmaker didn’t know, he wrote, “Here be dragons.” That’s how it’s always been in this country: The stock market has been opaque. I don’t even like the word “stock.” It’s really part-ownership in a company. But the Internet has been a boon for us investors. It offers information and data. And I always tell my clients to talk to their kids and grandkids about investing. Remember, Warren Buffett said he got started too late, and he started when he was 11.
Q. How did the Fool handle the quake and aftershocks of 2008 and the recession?
Any stock I picked in 2007 was down 12 months later, but that was what happened everywhere. We kept growing during the downturn. I think the key reason that many of our members are still here is that our approach is a longer term approach. We’re not trying to win 2008 or 2013; we’re not highly speculative. We’re trying to build long-term wealth. I picked Amazon in 1996, and I try never to sell. I’m patient.
Q. What should investors be aware of as we head toward another fiscal cliff, or sequestration?
It’s frustrating for me that people are focused on the government; we’re going to sink or swim based on companies we’re part owner of. I hope my head is not in the sand. But there will always be a worry; even if the federal government had things in balance, there would be concerns.
Q. Any stock tips you want to share? Any companies that we should be on the lookout for?
I pick more stocks than anyone at the Fool, but the companies I like are behind a paywall. But each year I put out a scorecard of best picks and worst picks. My best from 2012 was 3D Systems, a company that’s leading 3D printing. Their stock just about tripled. My worst was Clean Energy Fuel Company. They were trying to make natural gas gas stations, and the stock was down by 42 percent. Both were fairly innovative companies. What I love about the stock market is that (stocks) can wipe each other out. The most you could ever lose on a stock is 100 percent, but the most you can gain is 30 times that value.