Motley Fool's Rule Breakers, Rule Makers: The Foolish Guide to Picking Stocks

by David Gardner and Tom Gardner

Book Overview

THE NEW YORK TIMES BESTSELLER
From the bestselling authors of The Motley Fool Investment Guide and its successful, savvy prequel, The Motley Fool's You Have More Than You Think, here's an engaging, humorous, and practical stock-picking guide, packed with Foolish insights, that caps off this invaluable personal finance trilogy from David and Tom Gardner.
The Motley Fool's Rule Breakers, Rule Makers presents...

• Format: Paperback
• Language: English
• ISBN: 0684857170
• ISBN13: 9780684857176
• Release Date: January 2000
• Publisher: Fireside Books
• Length: 336 Pages
• Weight: 0.90 lbs.
• Dimensions: 0.8" x 5.6" x 8.4"

Customer Reviews

You need to read the Motley Fool to avoid being a poor idiot

I first heard about the Motley Fool about 6 years ago on NPR. I have read all three of their books and they have convinced me that investing is common sense combined with a little bit of effort. Some of the common sense investment advice offered: Buisnesses that can put their products in the homes, pockets, or minds of millions of average people typically represent the best long term investments. Day trading is for idiots - long term investing is the only way to go. Between 1991 and 1996, University of California-Davis Buisness School professors Brad Barber and Terrance Odean investigated the performance of actively traded portfolios among sixty thousand households. And they found that a passive approach to investing in the overall market via an index fund delivered returns 70 percent better per year than actively traded portfolios. Extend these seperate rates of annual return out for decades, and it's like standing prices next to paupers. Off an initial investment of $10,000 , we're talking about a difference measured in hundreds of thousands of dollars. One of the facts that they pointed out in their first book - The Motley Fool Investment Guide - is that over the last five years 91 percent of mutual funds have underperformed the stock market's average return. It blew me away to find out that mutual fund managers were getting paid millions of dollars each year - when they can't even keep up to the stock market. They get paid a flat percentage based on the total amount of money in the mutual fund they are managing regardless of how poorly a job they do managing the fund! One thing that has really impressed me is half the material in each of the Motley Fool books can be found at the Motley Fool website for free! RULE BREAKERS ATTRIBUTES: #1 - Top dog and first-mover in an important, merging industry. #2 - Sustainable advantage gained through buisness momentum, patent protection, visionary leadership, or inept competitors. #3 - Strong past price appreciation equivalent to a relative-strength performance of 90 or higher. #4 - Good management and smart backing. #5 - The stronger the consumer appeal, the better: to attract, to habituate, to profit, and to protect. #6 - Grossly overvalued, according to at least one significant constituent of the financial media. RULE MAKER ATTRIBUTES: #1 - A manifestation of tireless commitment to either absorbing or dismantling every one of the pretenders to that same royal station. The asending maker must present its competition with a stark choice - cooperate or be demolished. #2 - patience #3 - Consistent improvement of their financial outlook. At least $1 billion in annual sales to be considered for Rule Maker status. #4 - A absolute commitment to convenience. Convenience rules the consumer landscape - convenience wins. #5 - The company probably involved in a nasty, loud lawsuit brought by one or many of its smaller competitors.

Fascinating to read

This book is meant for the fundamental investor. It was one of the first books I read and although I was largely into Technical Analysis, this book made me understand "the other world" of Fundamental Investing. The fools promote long term holding of the very best stocks and go into very detailed reasons why. This book may not be for the very experienced, but unless you know a *hell* of a lot about what to look for, This book is excellent!

Stock Picking Quantified

Having been disappointed in the earlier investing books by the Gardner's (You Have More Than You Think and The Motley Fool Investment Guide), I found Rule Breakers, Rule Makers to be a solid and satisfying investment book. That was a pleasant surprise.The first half of the book focuses on Rule Breakers, newer companies that have successfully established a new business model that will emerge as the new standard. The examples are pertinent and interesting to consider. The cases are turned into specific guidelines for you to consider in selecting stocks. In a time when new business models are created much more frequently than ever before, this is a superb focus for an investment book. I strongly suggest you read and focus on what is said here to select the companies.The Rule Maker section looks at more mature companies that have such market power that they can create a successful future for themselves. The main benefit is that it may be easier to sleep with a portfolio full of these stocks because they are typically not as volatile and as high priced. I particularly liked the appendix where 12 companies (AOL, Cisco, Coca-Cola, Dell, Disney, Gap, Intel, Kmart, Microsoft, Nike, Pfizer, and Schering-Plough) are evaluated using the Gardner's methods. This makes it much easier to understand their concept.People who love the flippant style of the Gardners may not love this book as much as I did. The book is more conservatively written and framed than the usual Motley Fool style. But where money is concerned, clarity should be selected over humor. I think the Gardner's made the right decision. If you are interested in stocks that may well grow faster than the market, I suggest this book as a solid way to evaluate the potential candidates. The book compares well to other books that look at this same question, being more specific and helpful. Well done!

Fool on!

A great book with a great perspective on investing. If anyone has ever been intimidated by investing before, then they definetely need to pick up this book. It helps take what seems to be an unapproachable arena and make it understandable - all in a fun way. Even if you don't open up a rule maker/breaker portfolio, you'll leave with a better understanding of business models, investing, and how it's all changing as a result of the net.

DON'T STALL YOUR INVESTMENTS, BREAK THE RULES - LEGALLY!

This is a more sophisticated book than the first two, yet no less enjoyable and candid. I applaud the Gardner's efforts to share their rules, or methodology for investing, with everyone. They are common sense rules, such as look for the "Top Dog and First Mover in an Important Emerging Industry". The Gardners also suggest that you ignore conventional valuation. Don't get caught in that Tradition Stall that is so well described in "THE 2,000 PERCENT SOLUTION" by Mitchell, Coles and Metz. The follower usually is not the "dog" to ride. However, the Motley Fool's do present lots of examples of how to analyze the numbers. They also explain when it is okay to ignore some of the rules from their earlier books. Yes, that is okay too - don't get caught by the "Disbelief Stall". In fact, to follow "THE MOTLEY FOOL'S RULE BREAKERS", you may have to suspend some of your old beliefs and look towards the future. Would you have invested in AOL, Wal-Mart or Starbuscks early on? What makes this book fun are the stories of wonderful companies that they made money on and are still wonderful companies. I urge you to read all three of the Motley Fool books, and to read them in order. I also urge you to read THE 2,000 PERCENT SOLUTION to help you look for what companies should be doing to be tomorrow's hot picks!