Customer Reviews

The MOTLEY FOOL'S RULE BREAKERS, RULE MAKERS: THE FOOLISH GUIDE TO PICKING STOCKS

5 star:		(34)
4 star:		(20)
3 star:		(10)
2 star:		(2)
1 star:		(16)

 

 

The Motley Fool awakened me to the fact that I can effectively manage and invest my money; Rule Breakers, Rule Makers gave me the confidence (and criteria) to choose the companies in which I want to invest. Especially commendable is Tom Gardner's Rule Makers section, which outlines easily understood and applied means by which the business world's "cream of the crop" can be identified-- I've already used it to good effect in my own portfolio. I wouldn't recommend this book to a beginning investor (start with the Gardners' earlier books), but the notion that the individual is capable of and better off managing their own investments is both radical and long overdue. Kudos to the Brothers Gardner.

Now, veering from my review, I'd like to humbly suggest that the reviewer immediately below me missed the point on Boston Chicken, and that the true point doesn't conflict with the Fool's thesis. What David Gardner was saying was that Boston Chicken's business model was flawed, that their main business was lending money to "area developers", who would open Boston Markets in their region; Boston Chicken would then take a slice of revenues and collect interest. However, all this model did was encourage the area developer to open more outlets than the region could support, so that they could generate revenue to pay off their debt. Thus, each Boston Market in the area was eating into the sales of every other Boston Market; same store sales dropped, and the overhead involved in having so many outlets buried the company. The more Boston Markets that were opened in each region, the closer the company came to bankruptcy. THAT was what David Gardner objected to about Boston Chicken, and that's what caused the company's demise. In no way is that model similar to Amazon.com or any other company put forth as a "Rule Breaker" in the book.

Fool on!

I was checking the ... site to see if this book was still being offered, and shocked when I found it still is. I have been a Gardner fool (note lack of capital) since 1997 and purchased and read this book when it came out as well as their other books before this one. The reason I am reviewing this book now is the brothers G have changed their investing philosophy and techniques making this book a dinosaur. Many of the stocks that made up the Rule Maker Portfolio have been and are being sold off because they no longer fit the new definition of a Rule Maker. While the Rule Breaker Portfolio has not been changed as much, it is still being carried by two stocks that the Gardners have held for a long time (... being one). The rest of the portfolio continues to meet or under perform the Market. The definitions for the Rule Breakers has always been more subjective, good luck if you try to find this type of stock on your own with the help of this book. It is very interesting that this strategy is thinly followed on their discussion boards. Regarding the Rule Makers, this book no longer reflects that failed strategy.

Because the Gardner Brothers no longer believe in most of the methods outlined in this book, I don't think they could recommend it. I personally can't recommend it, unless you want to read it as a history book, a reflection on stock picking from the late nineties.

As of April 2003 I felt compelled to add to this review; the Gardner Brothers have discontinued their Rule Maker/Rule Breaker online portfolios and for all intents the philosophies that this book presents. I think it is wrong for this book to be in publication and sold by Amazon when it is no longer represents what the authors believe. Please be strongly advised the authors are not practicing what is written in this book and haven't for some time. This is now only a history book, you should not buy it except for that reason.

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!

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.

This is like two separate books, one terrific and one mediocre. The first half, written by David Gardner, is devoted to identifying so-called "Rule Breaker" companies, those that take important new markets by storm and defy traditional valuation as they make daring investors wealthy. Unfortunately, despite lots of breathless excitement, David offers almost no criteria an investor can put his hands around, relying instead of vague and subjective criteria that can be tested only through the rear view mirror. In contrast, Tom Gardner's description of "Rule Maker" companies is a classic. Rule Makers are companies that dominate their industries through brand recognition and long-term market power. Tom not only offers penetrating insight about stock market investing and business models in general, but actually gives the erstwhile investor powerful tools for identifying promising Rule Makers himself. Because the first half is so weak the book is a disappointing sequel to the wonderful Motley Fool Investment Guide. The second half makes it a worthwhile purchase nonetheless.

If nothing else, the Motley Fools certainly generate opinionated responses. Few books, I think, get as many 1 and 5 star ratings at the same time.

I read their first book and liked it, I started this book and so far like it more. In general, they are fundamental investors at heart, and time spent learning their methods serves novice and experienced investors well. But I never take these guys as seriously as many others. Remember, they are selling something as surely as many other self-described stock market gurus.

The simple fact is that even by the Motley Fool's own standards - buy and hold for years - the jury is still out on whether they offer a superior method of investing. And we won't know for sure until they've been through at least one - and I personally think more than one - real bear market. The race isn't over until you retire, and an early lead can be quickly lost.

The Motley Fool's motto is "educate, amuse, and enrich". Their books and website will definitely educate and amuse, but the only certain enrichment is the cut they get out of the money you pay for their products. Read and enjoy, but read lots of other authors, too.

Tim Klepaczyk

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.

Selecting the right stocks (or rather the right companies) is the foremost important step in Investing. And this books is all about the process of picking the best stocks from the whole universe of Stock market.

As Tom and David believe, anyone with 5th grade math should be able to invest intelligently. And accordingly, they have written in simple and straight forward manner. There are no references to fancy formulas or any reference to 200 day moving averages etc etc.

Most of the rules described are empirical, intuitive and easy to comprehend.

For example ...

-> Seek companies with repeat business model (Starbucks, McDonalds, Gillete etc)
-> Seek companies that are the initial proponents and the market leaders (Coke, Gillete etc)
-> Seek companies with high profit margin products (Starbucks etc)
-> Seek companies which have good brand recognition (McDonalds, Coke etc)

There are ample more rules that are described in detail in the book.

This is definitely a must read for folks that are just getting started on Investing. I would suggest that you first read and understand the complete set of rules. For better understanding, apply those rules to few set of stocks that are interesting to you. Intuitively try to find out which rules really make sense to you. Probably come out of with just 7 rules that you find are absolutely interesting and relevant. Adopt those selected rules in your investing strategy.

Happy Investing! Hopefully you will recover the cost of the book by applying the rules in this book :-)

-Sachin

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!

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!