David Gardner: In the introduction earlier I mentioned a little bit the experiment that
we went on together with you and 162 others on our Motley Fool Rule Breakers service,
inviting some of our most-engaged members to come in, on a monthly basis, and play the
same game that we play internally as we select our Best Buys Now for the service.
So just to rehash a little bit, we asked Jean Marc and 162 others to submit five companies,
each month, over the last 12 months; five companies that they favored to beat the market.
And we asked you, specifically, if we gave you 10 chips and you had to put them on those
five companies, which one would you put two on or which one might you put four on or one on.
So you allocated 10 chips across those five companies and I'm really excited to be talking
to the No. 1 performer, Jean Marc Ayas, who outperformed everybody else.
Racked up over 5,000 points.
That's just basically multiplying the chips and the outperformance that he achieved and
so, of course, the rest of this interview, Jean Marc, is us finding out how you got so
good at this and what you've been doing.
Let me first start by asking when you were picking stocks from the Rule Breakers service,
did you find yourself picking from the industry that you professionally follow, or did you
find yourself spreading it out?
Marc Ayas: No, most of the picks were spread out.
In terms of the industry that I follow, I think maybe there was one name that I recall
Five Below, which is a discretionary retailer that sells items at five dollars and below
and has a lot of growth in the U.S., and that right now is seeing a tremendous performance;
but besides that one, most of the picks that I made were in industries that I'm not as
familiar with, but that I have been learning as I've been reading The Fool and covering these companies.
Gardner: Wonderful! Let's put a few more company names into play; companies that helped you toward
outstanding performance over the last year. What are some of your favorite Rule Breakers?
Are they ones you picked a year ago that helped you to this outperformance, or ones that you
would just favor right now going forward? Ayas: My favorite one, by far, was The Trade Desk.
It's funny because in the early stages of the game, I must have been in the bottom 10%
of the performers for the first six months of this stock-picking contest because
The Trade Desk's performance had been awful, and month after month I kept adding it to my picks
and weighing it pretty heavily. But it's a company that I believed in.
It's a company that for whatever reason wasn't performing well as a stock but continued to
see very strong market potential.
Then they reported a quarter and the stock got rewarded because the results were extremely
strong, and then there was a second quarterly report that did just the same.
I think in each case the stock went up on the next day more than 30% or so.
That not only allowed me to save face, but it propelled my score fairly high.
Gardner: That's a company that came to Rule Breakers in February of 2017 and so here
we are a year and a half later and from that initial buy at $34.30 to see it at about $136.00
today means that it's gone up 4x in value over that year and half.
But isn't it interesting to think that for the first several months, as you were playing along,
Jean Marc, that it was such an underperformer and so disappointing, even within that incredible
run over the last year and a half of it going up 4x in value?
Ayas: Absolutely, you're right. It's very interesting.
And even though the market reaction had not been great after some of the earnings releases,
their earnings were great.
The revenues were growing quickly and just listening to their conference calls and to
CEO Jeff Green and his team talk about their opportunities and the performance, it was
hard to understand why the market wasn't rewarding the company, and it was hard to understand
how things could go wrong.
And not just in the conference calls, but I've had the chance to listen to a bunch of
presentations that Jeff Green has made that are posted online.
He's a very insightful leader.
He's really on top of his business, on top of his industry, and he's got tremendous vision.
So all of these things made me appreciate where the company was headed.
And not to mention that when you look at the metrics, this is a company that had fast growth.
That had expanding margins.
It was profitable compared to many of its peers that weren't, and it was a major disruptor
of the current industry.
Gardner: That's right. And for those who have not yet found The Trade Desk, I should just mention that they
basically are behind programmatic ad buying.
Their goal is to put the right ad in front of the right shopper at the right time using
the internet as kind of a cloud-based optimization platform for ad buyers.
So if they're doing their job well, Jean Marc, you as an advertiser are really pleased to
work with them because you're working with a visionary team that knows how to use all
of the different ways we can reach people to reach the right people.
Ayas: That's correct.
And I would add to that that the demand platform that they've built is the largest independent one,
and I think in the long term this is going to be very important for media buyers
who are going to be choosing, basically, between the closed systems that are offered by Google
or Facebook. So not to get too technical, but I think it's a big advantage that the company has and that
the market potentially overlooked for a good chunk of time.
Gardner: I don't want to dwell too long on The Trade Desk because there are so many other
companies that I'd love to talk about with you, and I know we're going to run out of time.
I'm not even going to get to talk about everything I'd like to talk about anyway, but let's put
a couple of more company names into play.
What are a couple of more companies that you particularly have favored or did well with
over the last 12 months?
Ayas: Some of the companies that I weighed more heavily I'm not sure did as well in the
grand scheme of things, but it's a company that I did weigh heavily and that I believe
in very much is Take-Two Interactive.
It's a company that's benefitting a lot from strong trends in the gaming industry with
mobile and e-sports doing extremely well and growing fast. They have some strong game franchises.
I know you're a gaming fan, so... Gardner: I can't wait for Red Dead Redemption.
Yup, Red Dead Redemption 2 is coming out in just a few weeks.
Ayas: Right. So their strong franchises are very good for the stickiness of the revenues and they keep
putting the money back in to develop new games and new franchises that are going to eventually
benefit in the future. But I think most of all, for that one, what I appreciated was its size.
It's maybe not always the best way to evaluate, but when you look at Activision Blizzard and
EA Sports and how big they are, it shows the potential that Take-Two has to get to these levels.
I think that's what was interesting to me.
Gardner: That's right.
Take-Two's market cap, these days, looks like it's clocking in around $15 billion, whereas
Electronic Arts is more than twice that size as is Activision Blizzard.
What a tremendous industry it's been.
They're all winners and I think that it remains such an important industry going forward.
Ayas: Correct.
Gardner: How about another company? Ayas: I also weighed heavily on iRobot.
This one is a company that I've always liked. I find it very innovative.
I don't personally own any of the products, but I know people who do. I've seen them operate.
It's a fun company with fun products and a lot of new uses that could eventually come.
In this case I think it was more a question of the stock had been beaten down after some
misses, but also because of some fears of competition coming from Chinese brands.
But when you would listen to the CEO talking about his business, and he's always been pretty
frank about it, the discussion has always been the same, which is the market opportunity is very large.
There could be other players that come in and it's not necessarily going to stop us
from getting the growth that we need.
And we have the opportunity to get into new product areas.
This was a company that I opportunistically, I guess, added to my stock picks based on
the weakness, and it eventually rebounded and that helped my performance.
Gardner: And one more curiosity question.
This is more about your strategy playing the game that we gave you to play.
When you were given 10 chips, were you typically going two, two, two, two, two across five
companies or did you go with some six, one, one, one ones? How did you play the game?
Ayas: I don't think I ever did a six, one, one, one, one; but I definitely put some different
weights on most months.
There were months where I didn't have any particular inclination and so I kept it at
twos evenly across the board, but I believe I've put some four weights a few times on
some of the companies depending on where the current stock price was when I had to make
the pick and depending on the potential that I could see in the next few months.
It's particularly interesting in a game like this because obviously, when you're investing
for the long term, the dynamic is going to be much different than when you're investing
for one year, and so you have to respect the fact that there's going to be earnings releases.
There's different things that you have to take into consideration in terms of timing,
and there's also the fact that momentum played a part.
I mean, it was obvious that there was a lot of momentum in Software as a Service stocks,
and so I focused a lot of my chips on companies like those.
Gardner: This was a one-year experiment for us.
It's the first time we tried the league and for now, we're just pausing it and just reflecting on the results.
And Jean Marc, I know we're going to invite you to come into our Farm Team and our team
on Motley Fool Rule Breakers and be part of our regular voting.
You've certainly distinguished yourself and we would love to do that with you. But I'm wondering.
Any advice that you would have for investors, in general, based on your perspective?
Obviously you're a professional at this.
But as a very successful investor [yes, it was just a year, and you and I know that anything
can happen in a year], but clearly your instincts backed up by your professional experience
suggest that you're probably going to do well not just last year, but in the next five years, too.
How do you suggest somebody approach these kinds of more volatile companies and these innovators?
Ayas: I have to say that my early years investing were horrible.
I didn't do well because I was mostly buying stocks and not buying companies, which is
something that The Fool has taught me to do better.
Over the years I followed a lot of the advice that has been dispensed on your site and in
your podcasts, and so I would say my biggest takeaway is to invest for the very long term
and to hopefully not sell. Never sell.
This is something that I learned and that has been good for my portfolio for a while now.
When I look back at some of the investments that I did have, it's interesting, because
I used to own Amazon. In 1999 I purchased it and probably sold it shortly thereafter.
And then I bought it again in 2002 and sold it shortly thereafter.
And I thought I was smart with 30% returns.
I think the key for me, now, has been to buy stocks and to hold onto them for a very long
time, especially when it's companies that are rule breakers. That are disrupting markets.
It takes time for these trends to play out and it's important to follow through with
these companies for the long term to see how they end up.