David Gardner: My biggest loser of the last three years No. 3.
This one, I have to say, the ticker symbol is fairly ironic, because the ticker symbol is IQ.
You'd think, if I had a higher IQ, I never would have picked IQ when I did, but thereby hangs a tale.
Let's talk a little bit about iQiyi, which is sometimes called the "Netflix of China,"
probably a phrase that we used in our buy report that we put out June of this past year.
That's right, my biggest loser No. 3 I only picked about seven months ago.
The stock was at $40.51.
IQ now has touched down from $40.51 down to $16.75, and that's down 59% since June 14th just this past year.
Of all six of these companies, iQiyi, IQ, is the largest still standing.
This company still has a market cap of $12 billion.
And in many ways, it's a successful and impressive company.
It's had a poor stock market run in the last seven months.
But then again, so has all of China.
Chinese markets, I think, were down around 25% for the year of 2018.
We had a little bit of a disappointing year in the U.S., we were down single digits.
China lost a quarter of its value for its stock market in 2018.
So, it's not surprising that more volatile, higher-priced kinds of companies, with higher
multiples like iQiyi, would get especially badly hurt, and indeed it had.
So, what's the lesson that I have for you for No. 3 here?
I'm going to say this: adding to winners works more often than you think.
I said thereby hangs a tale. Let me now briefly tell the tale I'm referring to.
When I picked iQiyi in June of 2018, I'd actually picked it two months before that.
The June 2018 was a re-recommendation of iQiyi. I first picked it in April of last year at $18.
It had risen from $18 to $40 in just two months.
It's there, from that position at $40.51 down to $16.75 that we find ourselves today.
But the truth is, from the very first position, I picked it at $18, and today it's right around $17,
so it's down, but not that badly.
What I did, if you heard me right there, the stock more than doubled in just two months
and I re-recommended it again.
And while now, I look back with some regret, I'm here to say that that strategy is something
that I regularly do, and I'm not dissuaded by this example from doing it again.
In fact, let me just look at Motley Fool Stock Advisor over the last three years right now.
I'm going to give you four companies. Texas Roadhouse, Illumina, Match Group, and Okta.
All four of those companies, Texas Roadhouse, Illumina, Match Group and Okta, all four were
re-recommended within the last three years.
And each of those four respectively is up 95%, 99%, 193% -- thank you, Match Group -- and 68%.
And those are all bigger winners, for the most part, than any of the losers
that I'm telling you about today.
So, the very strategy by which iQiyi appears as my third biggest loser of the last three years,
which in fact, it has been, from that June position, that very strategy has also led
to many of my biggest winners.
I haven't even talked about Shopify, which I'll mention a little bit later this podcast.
Those are just four companies from Stock Advisor alone.
So, lesson No. 3, ironic in the face of a dog stock pick, which is what iQiyi was now
in retrospect in June of last year.
Ironically, the lesson here is adding to winner works more often than you think.
I don't think we should be dissuaded by a result like this to think we shouldn't do that.
I'm going to keep doing it, even when it sometimes hurts.