The impact that The Motley Fool has on share prices is a worthy question. I do think that, at times, particularly in small-cap investments, we begin to look like an institutional investor. I’m not opposed, in the years ahead, to working to determine the size of our ownership stake in public companies. I believe it can help us become a greater force for long-term principles in the public markets. Of course, I want the companies to know —- that we invest in, and even that we don’t —- that Fools are looking to optmize their investmeents results over 5- and 10- and 20+ years. All of my investments begin with a commitment to own the shares a minimum of five years. Because I believe the outliers winners will render the losers completely irrelevant, this puts us in position to be a louder voice with Boards and management teams. We love business at The Fool. And tax-deferred returns. And learning.
At present, I honestly don’t know what our impact is. However, I think it’s smaller than we might think. In the case of Appian, while the stock has gotten bumps from our recommendations and investments, there’s simply no question that the bulk of the buying is coming from larger institutional investors. Certainly, many of them are Motley Fool subscribers (and yes, at some point I want us to introduce institutional pricing). But institutions are driving the real volume here. It’s also worth nothing, though, that Appian has a relatively small public float. The market cap is now north of $2.2 billion. But you have the Founder/CEO, Matt Calkins, owning nearly 50% (and maintaining voting control). You have Novak Biddle owning a large chunk. Neither of these are meaningful sellers going into the IPO and in the secondary. And you have other founding members and long-term employees owning shares. The actual float is quite small. I would expect our impact on Appian is a little larger than normal.
Here’s where I track back to our holding period, though. I will be owning Appian for at least five years. I’m actually expecting to own it for the next 20 years. That isn’t an exaggeration. Because I focus my eyes on businesses, and search out patterns that have emerged in my own investments and in historical analyses of companies, I just don’t get much excitement from a great month, quarter, or year for an investment (I don’t ask that anyone view investing or the markets similarly.) I’ve been greatly influenced by investors like Shelby Davis Sr, who started with $50,000, effectively never sold a stock, died with 1200 stocks in their portfolio, and without adding much new money at all, ended up with $900 million. He did use low-cost margin, which I wouldn’t, but even without that, his returns and wealth creation are profound. Buffett has said that the best time to buy stocks is right now, and the best time to sell is never. And even though Fidelity won’t confirm it, I have reason to believe that the rumors are true — the best performing Fidelity accounts in history are those whose clients forgot them as they lay dormant for years and decades.
I say all that because the bump in a stock like Appian, while fun and surprising, isn’t material to my overall investments today and won’t matter much looking out 5-20 years. Either this will be a great business, riding a major trend, with A+ leadership for a very long time…or it’ll drift away into obscurity among my investments. Other companies mentioned like LGI Homes and Varonis and Arista Networks, et al, any bump they might have gotten from Foolishness is, I believe, similarly meaningless. My suspicion is that what The Motley Fool offers to great, emerging companies in the public markets is continuing exposure for years/decades in the event that they serve their shareholders well with great strategy, execution, culture, leadership and impact. Looking back 20 years, Jeff Bezos was a regular on The Motley Fool Radio Show. Amazon was, in relative terms, pretty unknown to NPR listeners. And it was viewed as highly questionable by the financial markets. Had Amazon executed poorly, it would have disappeared like America Online or Excite@Home or Yahoo. But since it executed brilliantly, the exposure it got from Fools was more about long-term relevance than short-term market movements.
Finally, I haven’t vanished to the sidelines here for any other reason than that I don’t want to interrupt the great conversation and diligent research here. I read this discussion group every day. I love the portfolio reviews that you all share here. Ultimately, I’ve come to believe that the structure of a portfolio, the average holding period, the number of holdings, and the ability to weather volatility matters as much as stock selection. From my side of this 25-year experience at The Fool, I’ve read far too many stories of people stopped out of Netflix or who traded Netflix, etc —- it makes it hard to lose sight of the importance of portfolio management. I say “as much as stock selection” and not “more” because the individual company research being done here and at The Fool is a very, very powerful driver of long-term wealth. It’s also a great way to learn more about our world, which can have a multiplier effect in other areas of life. So, thank you, Fools.
PS If the team here ever wants to delve deeply into JD.com, I’d be curious to hear your thinking. This is a company that Bill Mann truly loves. And I think he may be right.