The Motley Fool Ethos: Creating Safe Harbors for Investors

Motley Fool got its start as an asset manager in 2008 – an intentional choice. Bill Mann, Chief Investment Strategist at Motley Fool Asset Management, shares why the firm launched during one of the worst periods in recent market history, and the investment process powering their funds. 

Transcript

Opening: The DeLorean Approach to Investing

Mann: You get into the DeLorean with Dr. Brown and go 10 years from now, what's that business look like? You know, it's a process by which you ask your questions about the optionality of the business, how the managers are being paid, if they're going to stick around, or they're looking for an exit, and you can begin to look at patterns.

Building a Safe Haven in the Worst Financial Storms

Nadig: Hi there, I'm here with Bill Mann, Chief Investment Strategist at Motley Fool. Bill, I've been a Fool forever. Back in the '90s, the brothers Gardner got me through a lot of confusing markets. That really brought about this whole era of individuals doing real research. Talk to me a little bit about that history and how it bridges into an asset management company.

Mann: Yes. So, I've been with, I started with the Motley Fool in 1999, and so I was there during the heyday – during the dot-com era. And at the back side of that, we really saw individual investors get hurt a little bit as they they weren't able to ford the fear cycle when things went bad. And so, Motley Fool Asset Management was a way for us to provide a safe harbor for investors; for individual investors if they got afraid, they wanted a little bit more guidance, a little bit more hand-holding.

So, for years – we started in 2008, which is an incredible year to start an asset management company – but we did it on purpose. We wanted to make sure that people didn't freak out and sell and go away and do what you see over and over and over for individual investors. So, that's where Motley Fool Asset Management got its start.

Nadig: Well, talk to me a little bit about the Fool ethos. What does it mean to be in a Fool product?

Mann: So, we are buy and hold investors is the classic definition. What we really are is, we're looking for the highest quality companies that we can find. We want to hold them for the long term. And so, that's the exact same process and formula that we have at Motley Fool Asset Management. Our ETFs have very low turnover. Only one of them has a turnover that's higher than 25%, which means the average stock that we have in the portfolio, we've held for four years. And so, we are bringing that exact same ethos to active and passive management of ETFs.

4 Steps to Determining Quality Stocks

Nadig: And let's discuss sort of “the process”. So, how do you look at a company? What ends up in your funds? Quality is a big word. Everybody says they want to have high-quality stocks. But, you know, we both know there are some real stinkers on people's quality list. Talk to me about the actual investment process and what determines what's a good stock for a Motley Fool product.

Mann: Yes. So, we have a four-step process that involves managing, evaluating the management, evaluating what the economics of the business are, the incentives of the business. And then we have a process that we call, I guess, fancifully, we call it the DeLorean. If you really think about investing itself, it's an act of being wrong a lot. And so, you have to be very comfortable with being wrong and making mistakes. But, for us, the process is everything, and we feel like if we get that process right, we're going to be right enough that it's going to work out just fine for our investors.

Nadig: Well, great. Bill, it's been great catching up with you. Thanks so much.

Mann: Thanks to you, Dave. Thank you.