Gotta Know The Lingo, Vol. 7
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burn rate, asset location, inventory turnover, customer acquisition cost, spiffy pop. Each of these represent intermediate-level terms that most serious investors know and most people who are not serious investors

Do not know? Well, I'm inviting on three serious investors this week, Motley Fool senior analysts, in order to help teach the rest of us some new terms, terms like the ones I just led off with, each of which has been covered in the past episodes of this week's recurring series. Some simple, some more advanced, all terms we think you need to know.

Drawn from investing and business, understanding these terms and the concepts behind them will enable you to become smarter about the game of investing, smarter, which in my experience leads to happier and richer over time. Or maybe you already know these terms, in which case I have a scoring system and you can score yourself this week. It's volume seven of Gotta Know the Lingo, welcoming in Nick Seipel, Yasser El-Shimi, and David Meyer to teach you and me

only on this week's Rule Breaker Investing. It's the Rule Breaker Investing Podcast with Motley Fool co-founder David Gardner.

Welcome back to Rule Breaker Investing. It's got to know the lingo, volume seven. The purpose of this series is to look at some of the terms that you might hear about and not always fully understand from business, accounting, investing, sometimes technology as well. Some new oncoming terms to get you thinking about the language of investing, business, and sometimes life to

To get you smarter about these concepts, we're about to do Volume 7. I'm going to be welcoming on Nick Seipel, Yasser El-Shimi, and David Meyer to share three simple terms and then three advanced terms. And I'll talk about the scoring system for that in just a minute.

Coming up a bit later this month, I'm excited to welcome back superstar business writer and marketer Seth Godin, author of iconic books like Purple Cow, who will make his first reappearance on the Rule Breaker Investing podcast since becoming my first ever author in August. It was August the 1st, 2018. So Seth Godin back, a

ahead this month. I also want to call out last week's mailbag for the extra notes coming in via TwitterX. The mailbag was originally a bit light on the email side until I reached out over on TwitterX, put up the Ask Us Anything flag. And so thank you again to those followers and listeners. Just a reminder that our email address is rbiatfool.com to power up your mailbag every month. You can always tweet us at RBIPodcast. I'm there on TwitterX as well, at David G. Fool.

They're since February 2009, actually. I'm not quite OG status for Twitter, but 16 years of interacting with the public at large has certainly strengthened me and helped grow The Fool and this podcast. I mentioned the scoring system for this week before I welcome our senior analysts. Let me make it clear how you can score this week's podcast while listening. You're scoring us.

We have six terms for you, six that we're going to share this week and illustrate for you at the end. I'm going to ask you, dear listener, quietly to think with each one, did I learn anything from these fools? If you feel like you didn't learn anything for a given term, your five minutes or so were wasted by that particular term, the score would be zero because you learned zero and we were zeros.

If on the other hand, you thought that was helpful, maybe you even did know the term, but hey, they made me laugh. Give us a plus one. Finally, if as Nick or Yasser or David present their terms with their illustrations, if you find yourself delighted, not just by the quality of the learning, but maybe you got to smile along with it. If you really enjoyed it, give us a plus two. That is the scoring system for Gotta Know the Lingo. All right. Well, as I shared at the start of the year, just

Just before we get started here, let me mention my 2025 book, Rule Breaker Investing, is available for pre-order now. After 30 years of stock picking, this is my magnum opus, a lifetime of lessons distilled into one definitive guide. And each week until the book launches on September 16th, I'm sharing a random excerpt. We break open the book to a random page, and I read a few sentences. So let's do it. Here's this week's page breaker preview.

Two sentences from near the very end of the book. And I quote, to quote the British historian Thomas Babington Macaulay, on what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us? End quote. And then I wrote the word Excelsior.

That's this week's Page Breaker preview to pre-order my final word on stock picking shaped by three decades of market crushing success. Just type Rule Breaker Investing into Amazon.com, Barnes and Noble.com, or wherever you shop for great books. You know, when you think about it, a great investment book literally pays for itself. And to everyone who's already pre-ordered, thanks. That means a lot to us.

Before we start, I want to mention what happens next week. It's my birthday next week and your annual birthday present to me. This has happened most every year the last several years is that you let me know what you've learned from me over the last year. Or if you're a longer term listener, maybe what you've learned from me over the longer term. What have you learned from David Gardner? Twenty twenty five edition. Our email address is

rbi at fool.com. You can tweet us at rbipodcast on Twitter. Again, if you have a little extra time this week and you want to celebrate my birthday with me, drop me a story, drop me a few lines, a few paragraphs if you like, rbi at fool.com. I will turn it around and share back the ones that feel most apt, the most beautifully written, the most inspiring on next week's show. Thank you in advance.

Without further ado, let's get started. Nick Seipel, welcome to this week's podcast. Great to be here with you, David. Nick is a senior analyst on the Motley Fool Canada investing team, supporting our Canadian services. Outside of the Fool, most of his time gets taken up by his two-year-old and his 10-month-old, but Nick tries to find time to follow Alabama athletics and get to as many concerts and shows as

as he can. Nick, my icebreaker question for each of our senior analysts this week is, what is a financial term that you, Nick Seipel, wish you'd known prior to adulthood?

Well, David, I think for me, compound interest is the one that came to mind. I know that sounds a little technical and academic, but when I pictured kind of getting wealthy as a kid, I pictured, you know, Scrooge McDuck and his like bank vault swimming around and kind of big buckets of gold coins. I thought you just saved your money and you put it in the bank and then slowly over time

That's all that happened. But I didn't realize that your money is actually out there working for you. It's like when you're a kid playing baseball or kickball and there's some ghost runners on base. You already got a hit earlier on and there's a pretend person out there running the bases for you. That's what your portfolio is doing. But as a kid, I really had no understanding of that as I came to grasp that more.

over time, it'd be crazy not to be participating in the stock market, participating as someone benefiting from compound interest out there in the world. I didn't understand that until later in life. I wish I would have known it earlier. Appreciate that, Nick. You're reminding me, one of our fellow Fools, Mark Reagan, who was at our company for some years, told a great line when I first met him. He said, "My mom raised me and she said to me, 'Mark, there are three ways to make money in this world, with your mind, with your body,

or with your money? Which one would you like to do?" He said, "Tell me about that third one. How can I make money with my money?" Welcome, Nick, Roll Tide. Let's introduce next Yasser El-Shimi. Yasser is a Senior Analyst at The Motley Fool where he serves as the Acting Advisor and Investment Coordinator for Global Partners, our international markets-focused service.

Since having kids, Yasser's free time is a thing of the past, but he still manages to follow Italian soccer every week nonetheless. Yasser, welcome.

And can you remind me of the team? I know it's like Premier League, like it's the big time. Sure. So the league itself is called Serie A. That's the Italian Soccer League. And my team is AS Roma. That's the team I've followed for over 20 years now. And I think I'm going to stick with it, you know, for the next 20 at least. And there I am showing my ignorance in a lot of ways of international soccer. I guess I should just ask you this basic question, Yasser. Is AS Roma the best team?

Well, that depends, right? You know, for me, it is the best team, you know, no questions asked.

From a footballing perspective, however, it's not by far the best team in the world. No, they don't have the resources to compete with the likes of Barcelona, Real Madrid, PSG, or some of the Premier League clubs. But they still nonetheless managed to play for the fans, play for the jersey, and that's what I love the most about them. And thank you. And yes, so it looks like they're looking for at least one more promotion at some point.

All right, Yasser, what is a financial term you wish you'd known prior to adulthood? Well, I would have gone with compound interest. Thanks a lot, Nick. But, you know, minus the mental image of swimming in gold coins. You know, I think for me, I would have appreciated learning more about diversification. I think that growing up...

My parents and a lot of the people I knew, and of course, I haven't grown up in Egypt, not in the United States. A lot of the people I know tended to invest almost all of their money in...

real estate or to a lesser extent in CDs, certificates of deposit in the bank. Unfortunately, not a lot of investments go the way of stocks, bonds or other alternative investments that may exist. And I think that has definitely been a missed opportunity for a lot of people, especially with the depreciation of the local currency over time.

Thank you for sharing that, Yasser. Remind me of two quick facts. What was the year you came to the United States from Egypt, and what was the year you bought your first stock? At what age? Ha ha.

So I moved to the U.S. in 2007. I think I was around 25 years old at the time. And it took me two years to buy my first stock. And it was a process of getting to learn what stock investing even is. And thanks a lot to The Motley Fool for helping with that. But ultimately, I decided to go ahead. And even as a graduate student, I set aside the little money that I had and started investing. And thank God I did.

Fantastic. And 2009, by the way, not a bad year to start investing. Exactly. Hey, David Meyer. Welcome, David. Great to be with you. Great to be with you too. Thank you very much for having me. David is a senior analyst at The Motley Fool, where he's part of the Trends team, the lead investing liaison as well with our marketing teams. Since his daughter is out of the house married and an oral surgery resident,

At Case Western, he spends many afternoons on the golf course working to lower his handicap. David, I'm sorry to take you off the golf course this particular afternoon. How's the handicap? On the way down, which is good. Do you want to quote publicly for all time through this podcast where you are right now, or do you not want to? I am a seven index right now. Wow.

And descending. Single-digit. Very impressive. David, what is a financial term you wish you'd known prior to adulthood? So, obviously, cannot disagree with either of those two terms, but I'm going to go in a little bit of a different direction. I'm going to go with the term bond vigilante.

So, first of all, it's just pretty cool, right? I mean, imagine in your mind, picture these armed men and women who are terrorizing the bond market.

But in all seriousness, what really the reason that I think it's an interesting term is now hopefully I won't screw up James Carville's quote too bad. But he said, you know, some people dream of coming back, being reincarnated as a as a 400 hitter or a Cy Young award winning pitcher in baseball. I want to come back as the bond market because the and the bond market, I can intimidate anyone.

So what these bond vigilantes are, are supposedly these groups of people who conspire and say, "We are actually going to be the ones who set rates." And the reason that it's interesting in my opinion is because over my 20 plus years of investing, 20 at The Motley Fool, the bond market actually plays a role. And I think it's good for investors to understand

how interest rates moving up or down can impact stocks. It's one of the things that's helped me become a smarter, happier, and richer investor over time. Well, thank you for that, David Meyer. And while that is not one of our official terms for Gotta Know the Lingo this particular week, I'm going to call that a bonus.

I admit, I didn't really know the phrase bond vigilante either. And there's at least one phrase on this week's roster that I didn't really know much about. So I'm learning along with everyone else. And let's get started. Let me turn first to Nick Seibel. Nick, you're queuing up a simpler term and a more advanced term. We're going to rotate through our simpler terms first. What do you got for us?

Yeah, David. So for my simple term, I went with proxy statement. Might also find it referred to as SEC form DEF 14A. The proxy statement is a document that publicly traded companies are required to file with the Securities and Exchange Commission and distribute to their shareholders before any annual or special shareholder meeting. It exists.

to give shareholders enough information to competently vote on the matters before them at the meeting, whether that's election of electors at regular annual meetings, or if there's a big transaction where there might be a special shareholder meeting, that's to vote on that transaction, other changes in corporate policy as well. Gives you insights onto executive compensation and incentives, insider ownership, potential conflicts of interest, and that sort of thing. So all good background information, one of the most important SEC filings to check each year. Well, I would say, Nick, first,

from the earliest days as a little investor raised on my daddy's lap, I think that I remember receiving through the mail proxy statements. And then as I came of age, I would get them all myself for stocks in my portfolio. Do you have an opinion on how seriously we should take these, how much time we should spend for somebody who's keeping up with

The diversification required by the Gardner-Kretzmann continuum, a very difficult term to parse. We'll skip it this week. But for somebody who roughly has as many stocks in their portfolio as their age, number of years on this earth, and that's me. I'm around 58 years old and I have around 58 stocks. How much time should I devote to proxy statements?

So I think it is important to understand kind of how management is compensated and what their incentives are, right? Especially when you're looking at a company for the first time and you're unfamiliar with the business. If management is incentivized to increase per share metrics, which I own the shares, I would like to increase earnings per share. That is a lot more aligned with me than, for example, a manager that's incentivized on adjusted EBITDA, where

hey, those adjustments are pulling out some real important costs and also incentivize things like acquiring assets to juice those types of metrics. So knowing what the incentives are of the management team that you're following and knowing potential conflicts of interest they have is important. Is it important to spend a lot of time debating whether they should be hiring X auditing firm versus another auditing firm? I don't think you should spend any time on that at all. But

who is running the business and what their incentives are, I think is super important, especially when you're starting a position. Thank you. And I might also add that I agree, executive comp would jump off the page versus who the auditing firm is. I think maybe in terms of time management, we're all time starved in this society. We should be. There's so much productivity to our every hour, I hope. But I would say it makes a lot of sense. Do you agree, Nick, to focus on the proxies of your biggest holdings?

If I have a small starter position in something that really isn't going to tilt my portfolio too much, maybe I shouldn't spend too much time with that proxy. If I have a 5% or greater position in anything, I think I should probably vote that proxy.

That's right. That's right. I'd say the bigger the position is, the more important it is. And, you know, the more influential a particular manager is over the business, the more important that is. So, you know, you might be curious about what's going to happen next for Berkshire Hathaway. Well, if you read through that proxy statement, you get a pretty clear sign of who the next chairman is going to be. It's going to be somebody with the last name Buffett. But, yeah, I think it's for different companies.

So I'm so glad you brought this term to the podcast, Nick, because this is actually not from a time management standpoint, but this is the first document that I go to whenever I come across a new company.

And it's for the exact reason that you say, I want to know one, who the management teams are. But more importantly, I really want to know what their incentives are. Charlie Munger famously said, if you give me the incentives, I'll show you the behavior. And we have seen, you know, across the years of stock market investing, that is exactly what tends to happen. So you can root out what you think is bad behavior right away just by spending a few minutes going over that section.

And lastly, I'll say the other thing that you get to see is who are you investing alongside? You get to know who owns a big stake, right? Who's been selling their stake? It's a document chock full of information and it's nowhere near as famous as a 10K or a 10Q or anything like that. Good points, David Meyer. Nick, let me turn back to you to close. I've asked you each to produce an interesting and illustrative sentence to put your term into to close. What do you got?

So my sentence is, if you're worried your management team is taking advantage of you and other shareholders, go check the proxy statement and you'll find out real quick. Very well done. Thank you, Nick, for getting us off to a fine start. Proxy statement, term number one this week of the simpler sort. Let me move on to Yasser El-Shimi. Yasser, term number two, what do you have?

Well, so some of us rule breakers are familiar with the first trait of a rule breaker that you, David, came up with, and that was, you know, top dog and first mover. However, I'm going with a slightly version of that term today, which is something that, you know, you would find in MBA textbooks, basically, the first mover advantage.

Now, what we mean by first mover advantage is basically the benefits that a company would gain by being the first to enter a new market or introduce a new product or service that even creates a new market.

So, you know, this strategic position can give a company several advantages, including brand recognition, for example. So being the first allows you to establish a strong brand, maybe even brand association. So if your company's name becomes a verb for the action that's being done, think of Google, for example, for search.

and Uber for ride sharing and so on. It can give you other advantages, including having bigger market share in that new market. It can give you resource access. So if you can secure critical resources like

patents, supplier contracts, or even physical locations. So think prologes for warehousing, for example, that could be an interesting example here. All of that gives you an advantage as a first mover that makes it a little more difficult for your

rivals, for your competitors to try and play catch up with you. And the final thing I'm going to conclude here in terms of the advantages is effectively setting the industry standards or the customer or user expectations. So

First mover can define basically how products work. They can set the expectations for the end users of what they can come to expect from the service or from the product, and therefore forcing anyone who is trying to enter into this sector, a later entrant, to adapt to those expectations and those standards that that first mover had in fact set itself.

First mover advantage is obviously a very important concept. And you're right, it is a little bit the stuff of MBA or grad students coming from the business world, Yasser El-Shimi. And I do think that it's something anybody can understand. It can be taught or explained pretty well to a bright child.

And they are real. You're right. You mentioned brand and setting the benefits of brand. And I sometimes just think about the media coverage that goes to somebody like OpenAI, just the sheer amount of brand building that the media does for you because you got out first. It's hard to put a number on it.

Maybe there's a new term here, brand wagon. I don't think I'm going to go there. But there's getting on the brand wagon with the media helping you out is part of that. But I really appreciate your points about consumer expectations, kind of making the rules early, even though you're ironically breaking the rules, but sort of setting the standards of expectation.

It's really interesting in either technology adoption or in the process of innovation. You're absolutely right. First movers can grab a lot of that advantage for themselves. But there's a paradox in there in that sometimes it's actually the fast follower that reaps all the benefits because either they come up with a

better way of doing something or less expensive or something. So the first mover did a whole lot of hard work, but it was the person, it was the company that came in second that reaped all the rewards. So again, I could not agree more that it is a great thing to understand, but just beware, there's somebody out there always trying to get you. And that's an excellent point. Thank you so much for raising that because I was actually going to talk about some of the risks that come with being a first mover here, including

what I might call a first mover disadvantage. So there are certain sectors where there are, in fact, lower hurdles for new entrants to come into that sector, especially in technology. Think, for example, coding. That's something that's both quick and easy to do and scale as well. So

if you're a first mover, good for you, but that may not necessarily give you a clear advantage over late entrants. In fact, who might come from behind, fix your mistakes, out innovate you and still benefit from the fact that you had made the first move to create the market to begin with. I'm thinking here, for example, Zoom for video conferencing versus Webex by Cisco. Cisco was the first to create this

this field or this industry. And Zoom comes in with a better product and basically takes a lot of market share. It's a good example. And obviously, we can find good examples on both sides. That's why we're just here to educate and to make sure that you, dear listener, know these terms and

and have a nuanced appreciation, even of the simpler terms like Yasser's first mover advantage. Thank you for that, Yasser. Do you have an interesting illustrative sentence for us? Sure. My sentence is, the Patriots' first mover advantage makes it impossible for another New England football team to rise and claim to be the team for New England. Ha ha ha!

I don't think – even if you don't like the Patriots, and I know some people listening don't, you can't disagree with that. Well said. Let's move on. You went from football to football. Very nice. Exactly. Very nice, Yasser. All right, David Meyer, you have our final simple term. This is term number three for Gotta Know the Lingo, volume seven. What do you got? I'm coming with portfolio management.

Now, I actually was down in our asset management group for a while. And so I actually got to manage other people's money. And I thought about this a lot. But portfolio management, really, when it comes down to it, it's just how are you collecting a group of stocks into a portfolio that is going to try to do what you want it to do? There's no right way to do this. And it's really...

And sometimes it gets much more complicated or it seems much more complicated than it is. For example, like professional investors on Wall Street, right? They will say, I need a portfolio of stocks that are not correlated with each other. Well, that's great, but that's hard to do. And then I remember something that you said, David, which was make your portfolio be the future that you want to see. That's a completely different approach to portfolio management.

I will say this. The way I try to go about it and the way I still try to do it is I try to create a group of companies in a portfolio that have the highest quality and the most attractive risk and reward. I figure if I can do that,

Over the long term, I should be able to beat the market a little bit. But put very simply, anybody can do portfolio management however they want because it's just a way of putting stocks together.

Really appreciate that. Portfolio management, when you rock out that phrase, a lot of people, for them, it probably means something formal and something that they need to study. And while none of us is going to disagree with that, it is important and it is worthy of study. I don't think, David, as you're saying, that there's any single school of how to do this. In fact, I would say in some ways it is undertaught. Even just looking at our company, I think The Motley Fool does a great job

identifying stocks you might want to add to your portfolio. We've tried to think about people's portfolio dynamics over the years, but the reality is other than our asset management part of our company, which is regulated and we don't really talk about that here,

everybody is left to their own to figure out how to manage their own portfolios. We can't give specific prescribed advice about what to do in your portfolio, even though that would be so relevant if we could. Anyway, therefore, there's a little bit of choose your own adventure. What color is your parachute? And I'm all about that. I really want each of our listeners to be thinking about what are more principles that sort of contain their intentions. Roughly how many stocks do you want to have? What kinds of diversification, et cetera.

David, I wanted to ask you, maybe I'm throwing you a hand grenade here, but sort of the pros and cons of concentration, being concentrated in your portfolio versus being diversified. We always hear arguments on both sides of those coins, and I'd love to hear your thoughts on it. Oh, it's such a great question, and thank you for asking it.

Well, there's something to be said for investing heavily in what you know, right? Because that's the thing you're most comfortable with. That's the thing that you probably pay attention to the most. And that also may be the thing that if there are times when the stock is volatile, because you know it well, you may be more patient with it. You may be actually think on a longer term time horizon than if I was trying to switch things in and out.

But there is actually, you don't necessarily just want one stock. Some people can do it. Not everybody can because that's going to be a very volatile portfolio. But do I need five to create diversification? Do I need eight, 10, 12? Some of it will depend on your own bandwidth, meaning how many of these can I follow?

If I'm a normal retail investor who is doing this as part of the family's... I'm a breadwinner, plus I'm trying to manage the family's finances, probably not a whole lot of extra time to be going through this. I personally think you can get some decent diversification on about 10 to 12. If you can follow more and you know those companies, it certainly will help.

Well, well said. And Yasser, I mean, hand grenades are welcome. I don't really think that qualified as a hand grenade. It was just a very thoughtful and important question to ask. Thank you for sharing that. David, your interesting and illustrative sentence, please. Portfolio management. I think for everyone, the best portfolio management is the one that enables you to sleep best at night.

And I do love that. And that is an excellent sentence. Thank you, David Meyer. We are at the halfway point of this week's podcast, my dear fools. We've just gone through three simpler terms. A reminder for each of them now, proxy statement, first mover advantage, portfolio management. Again, if you feel like you already knew any of those and we added no value to your life for that one or

Even all three? Well, that would be a zero. That would be sad. That would be a zero. On the other hand, if for one or more of these terms you learned something or laughed, give us a plus one. Finally, if you found yourself utterly delighted and you now see the world in a new way that you didn't before this week's podcast, give us a plus two for that one. This is a quality assurance system. Let us know on social media or via our mailbag how we scored for you this week.

and why. Okay, let's now move from our simpler to our more advanced terms. Gentlemen, I'm going to turn back to Nick Seipel. Nick, what is your more advanced term for Gotta Know the Lingo, Volume 7?

Yeah, my more advanced term is 10B51 trading plan, which if that doesn't sound complicated, it is refers to the rule 10B51 of the Securities and Exchange Act of 1934. A 10B51 trading plan is a prearranged written plan established by corporate insiders like officers, directors or other large shareholders.

to buy or typically to sell company stock at a future date. They exist to provide an affirmative defense for those insiders against insider trading. To qualify for that, you have to establish the plan at a time when you don't have material, non-public information. You have to give your broker specific instructions on how to carry out those trades, whether the date, price, or formula to calculate those. And also you have to exercise no further influence

over the plan once you've established it. There's also a minimum cooling off period. It's about 90 days after you put the plan in place. And then since 2023, now every time a company files a quarterly or an annual report, they have to disclose those 10B5 plans that their executives have entered into during the quarter. So it gives you advance notice on upcoming buying or selling from insiders of the companies you own. Very well explained again, Nick. And for those keeping score at home, and I hope you are, if you're

if you're wondering how this is spelled, it's 10B5-1, just to make sure we're parsing the language as perfectly as Nick, who by the way is a lawyer, would do himself. I admit, this is the one I needed to look up, guys. If you just hit me with 10B5-1 trading plan, I know it in concept, but I didn't actually know it by that highly technical name. But I appreciate that you brought it, Nick. Let me ask you back,

What is significant about 10b51 trading plans for you as an individual investor? Right. So if you looked at the headlines last Friday, you may have seen just about anywhere you look on big financial websites, Jeff Bezos has filed to sell up to $5 billion worth of Amazon shares.

And if you go check Amazon's 10Q, you will indeed see that on March 4th, 2025, Jeff Bezos, founder and executive chair of Amazon, adopted a trading plan to satisfy Rule 10b-5-1, where he's going to sell 25 million shares of Amazon.com over a period ending May 29th, 2026. So when you see that headline and say, wow, Bezos is selling $5 billion of stock, maybe I should be concerned about what's going on with Amazon right now if you actually

drill into what's going on here. This is a plan established two months ago that's going to run over the course of a year plus. And if you go and cross-reference those sale numbers with the proxy statement that we talked about earlier, you see that's less than 3% of Bezos' overall stake in Amazon, something that's very likely just for personal financial planning, funding his other business interests, not something to worry about as an investor.

So I'm glad you brought this one up too, because I think it's very important that executives, directors, et cetera, disclose ahead of time when they're going to be selling. And one of the things I just, I can't stop thinking about Peter Lynch and his favorite quotes is that people sell stocks for a variety of reasons, but they only buy for one.

And yes, it's great to know this information. And it's also great to know when they've actually purchased shares as well. And there might be just a little more information value in the purchase, but it's always good for investors to understand what is happening with the leadership of the company and their stakes in the company.

Yeah, I'm glad you mentioned the purchase angle. And I think there's definitely a lot more information available in management purchases than there are in sales. I did mention you can use a 10B5 plan for share purchases, although that's pretty rare to see done management blind buying into the market, although you do see that occasionally. One example we saw actually earlier this year, TKO Group, which is the parent company of WWE and UFC, they're a controlling shareholder organization.

Endeavor bought about $300 million in stock over the course of just about a month between January 17th and February 12th. That price is up to $177 per share. If you know anything about TKO Group, there's some pretty big catalysts coming down the line this year. The UFC's rights agreement with ESPN expires here at the end of 2025. They're going to be launching a new boxing league in collaboration with the Saudi Entertainment Authority.

this year. And then domestic rights for the WWE's premium live events also expire in March of next year. So with management blind buying in January and February, legally compliant, maybe says something about how they expect those negotiations to proceed throughout the year. And if you look at the shares here today, here in the mid 160s, management was blind buying $10, $15 higher than where we are today. Maybe it's something to have your eye on.

And there you go, Nick Seipel, somehow managing to fit in some references to WWE and our UFC. I know you're a fan. By the way, Netflix seems to be doing pretty well with its WWE show.

Yeah, that I think is going to be a big driver for Netflix's advertising business moving forward. You think about that weekly inventory, getting folks to tune in, and they're continuing to put the gas pedal on when it comes to sports content. Going to have another Christmas Day game this year, another boxing event this year. I don't think this is the end of Netflix's forays into live sports. Well, and as I looked this up, because I did not immediately recognize the numbers and letters together in the way that they're configured on my friend Wikipedia, one of my best friends in this world.

I found out that SEC Rule 10b-5-1 was enacted by the SEC in the year 2000. And so it's been around for 25 years, but then it wasn't around for 100 years. And it makes me kind of glad that I think in general, the world for individual investors, the world of transparency and better information is so much more present here in 2025, starting really somewhere around 2000. I remember Arthur Levitt

SEC chair. We had something to do with that back in the day, Regulation FD, fair disclosure, where companies could no longer give information just to Wall Street. Any material information had to be given to individual investors. And The Motley Fool was a big proponent of that and helped get that passed. Anyway, it makes me happy to see that this has been around for 25 years, but it does make me wonder, Nick, about the century before that.

That's right. I mean, it was the Wild West, I guess, back before we got some of these investor protection laws here in the past 25 years. Yeah. How about an interesting and illustrative sentence to go? If you see insiders selling under a 10B51 trading plan, usually that can be safely ignored. But when you see purchases made under a 10B51 trading plan, you should start paying attention.

Very well done. Very well said. Thank you, Nick. Let's keep moving on to term number five. Yasser, earlier you brought us first mover advantage. You could even argue you were taking advantage of a first mover advantage with that introduction to that term. What do you have now for term number five? All right. So for term number five, I'm going with insider ownership.

And insider ownership refers to the shares of a company that are owned by executives, directors, and other key insiders. So think, for example, venture capital firms and so on that may have invested early in the business and kept their shares.

in the business as they IPO'd. So these individuals often have significant control over the company and they exercise a lot of influence over its decisions and how the company operates. But I think the most important element of insider ownership is the kind of signals that it sends to market. And I'm going to just go ahead and say that generally speaking,

The higher the insider ownership, the more positive I feel about the stock. And I can go on about why that's the case, if you'd like. Well, do go on. Do go on a little bit about why that's the case. So I think there's an important signal in the insider ownership here. The first one is alignment of interest, right? So the higher the insider ownership, the more certain you are as a retail investor, right, that the company's management...

has skin in the game, it's deeply invested in the company and its success, and that the interests of management should align, hopefully, with those of other shareholders who have obviously a vested interest in the company's success. But it can also be a confidence indicator. So

It shows you that executives, directors, and so on feel pretty bullish about where the company is headed and the kind of business they are creating, and that's always a good indicator to have. And finally, I think it also, and that's my favorite one perhaps, it should signal that

an inclination on the part of management and the board to be more long-term oriented, right? Or have more of a long-term focus. So companies with higher insidership, they often prioritize, you know, sustainable long-term growth over just the quarterly earnings that, you know, and kind of trying to move the company around one way or another in order to, you know, make it for just one quarter.

Thank you for that, Yasser. Yasser and/or other senior analysts, if I'm interested by this, if I'd like to know how to find these numbers, what is a ready source that you could recommend that I as an individual investor tap into?

Sure. So one easy free source to use, although I cannot vouch for the veracity of those statistics, would be Yahoo Finance. So if you go on Yahoo Finance and you write the stock name, under financials, you'll find a bullet that says percentage of shares owned by insiders or something like that along those lines.

So that's a very easy way for retail investors to access that kind of information. Although for us, we tend to rely on other more professional behind paywall sources for that kind of data.

Yeah, I might also just to double underline, you can go to the proxy statement, which we talked about earlier. And while, you know, that won't be updated throughout the year unless there's, you know, additional special meetings, at least around May every year, you'll get the proxy statement filed for the companies that you follow and they will disclose all shareholders, usually over 5%. And then also for any named executive officers, they'll tell you exactly how many shares those individuals hold. So, you know, the proxy statement at least once a year will give you some of that information as well.

Well, I have to give Nick kudos for weaving in his proxy statement again into this term. So, bravo, Nick. Plus one. Plus one for Nick. I do ask you guys just to independently come up with your terms, but it is fun to see the interconnectedness because in insider ownership, we do see some proxy statement. We also see some 10b51 trading plan. And these are one level down in terms of

complexity. This is more under the hood relative to many people that we meet in society, at the water cooler, at work, on the bus, or in our investment club who don't necessarily know these things or know how to look for these things, but they do count. So thank you. Thank you, Yasser. Thank you, Nick, for those comments. Yasser, an interesting and illustrative sentence, please. So let's go with this one. The Gardner Brothers' big insider ownership in The Motley Fool gives us fool's confidence in the business and its future. Wow.

Well, I really appreciate that. I mean, come on, score one for the home team. And without navel-gazing too much, thank you for that. Tom and I are substantial owners of The Motley Fool, and all of the other owners are our employees. We really have no real outside capital in our company, despite having taken in a lot of venture capital money back in the day. That's a fun story we don't often talk about, but thank you for that, Yasser. Appreciate that. Insider ownership. By the way, we always hope our insiders are

friendly, good people. Sometimes they are active private equity types or showing up trying to sway or take over the board. So this is also something to be guarding against in some cases. Let's move on to our final term this week. Got to know the lingo, volume seven. David Meyer, last time you went with portfolio management, is the next one tied in? Not really. That's fine. And yes, I appreciate that. But it's a horse of a different color. Yeah.

but it is one that's been popping up in the news lately. So I thought about, I thought, you know, from a current event standpoint that the term that I would come bring to everybody is stagflation.

It's probably a term that we haven't heard here in the United States for going on 40 plus years, because I think that was the last time it occurred. And so what is stagflation? It is the combination of stagnant growth. So the growth of our economy is very small to zero at a time when inflation, stagflation, is rising.

This is actually a very bad scenario for our economy. And one of the reasons that it's bad is because those two things are work against each other. For example, if I wanted to increase the growth of investment in our country, one thing I could do is I could bring down rates. I could bring down interest rates. But bringing down interest rates actually might make the inflation problem worse.

And making the inflation problem worse is very, we would all feel the negative effects of rising prices. But one way that I can make inflation come down is to increase rates. The unfortunate byproduct of that is if I increase rates to combat inflation,

I actually might push the economy into a recession because companies will not be willing to invest in growth, whether it's factories or human capital and things like that. So the fact that it's coming up in the news gives me a little bit of pause. And that's why I think it'd be good to bring it to listeners today.

Appreciate that, David. The last time I really heard that in a regular way was in my undergraduate economics course at the University of North Carolina Chapel Hill, which by the way was the late 1980s, which is the last time reflecting on it at that point that it had happened.

I admit, I ended up not majoring in econ. I went the English literature route. So I didn't really tie a bone or complete this. But David, have you looked back at this and can you remind us of kind of how we got out of it the first time through?

Well, this is part of the problem. It actually takes a long time to get out of it. So there was significance, if I remember my history correctly, there was significant stagflation in the early 70s, but it wasn't until the late 70s and early 80s when interest rates increased, some of it from the Fed, actually pushed the economy into a recession and

Again, it's a negative outcome that we didn't necessarily want, but that's what resets things. Unfortunately, the recession resets the expectations, right? The aggregate demand comes down, people stop buying things. Therefore prices sort of moderate. You combat the inflation. Then people say, Oh wait, there's an opportunity. Let me start investing because I'm

The United States has typically been a great place to always invest. And then the economy then mends itself on the way out. All right. Let me throw you a curveball, David. Not a hand grenade. Not a hand grenade this time. I expect nothing less from you. It's just a curveball. If I were to put you on the spot and ask you to choose either 10 years of stagflation or 10 years of deflation, which would you go for?

Oh boy, I would go for 10 years of stagflation. If we had 10 years of deflation, that would be exponentially worse than stagflation because at least we have a little bit of growth, right? We have, you know, prices might be moving higher, but we would still be able to consume things.

In a deflationary environment, the problem there would be if even if prices are coming down, no one would be buying anything because most likely the companies would be shedding labor. So we'd probably see in a situation like that, unemployment rising rapidly, unemployment

And again, we're talking deflation across the board, not in various... There are certain instances where deflation is a good thing. But if all of our prices are going down, then businesses are probably struggling. If businesses are struggling, employment is struggling, therefore citizens are struggling. I'd much rather have 10 years of stagflation. Fortunately, we haven't had deflation in any meaningful way in a long, long time. Although there have been worries. There have been worries over the last 15 years. The markets have reacted and it's not pretty.

All right. Well, let's actually add some pretty here, David. What is your interesting illustrative sentence to close? So Peter Lynch, going back to him again, also said, if you spend 13 minutes a year studying the economy, you've probably wasted 10 minutes. I disagree. Given that stagflation has reared its ugly hand again, I suggest spending at least five minutes on it. Are you throwing a hand grenade at Peter Lynch on this podcast?

No, it's definitely not a hand grenade. It is a backhanded compliment. Well said. Well, fellow fools, there you have it. Got to know the lingo, volume seven. We had six terms this week just to review them in order. Proxy statement, first mover advantage, portfolio management, 10b51 trading plan, insider ownership and how to find it, and stagflation.

I think my talented fellow fools did indeed bring some simpler and some more advanced, a little bit of headier talk here at the end of this week's podcast. How'd you score us at home? Remember, zero, one, or two for each of those. Feel free to tweet it out if you got a high score or a particularly low score.

And we hope your results, dear listeners, speak for themselves, whether it was a zero, one or two for each of our terms. We had a lot of fun bringing that to you this week. Thank you again to Nick Seipel, Yasser El-Shimi and David Meyer. In fact, I want to give them each an opportunity for a final line. You know, it's baseball season again. And in Major League Baseball, as hitters come up to bat, they get their requested walk-up music played. So for my senior analysts this week, I thought, why not give them a walk-off line?

lines. So let's do it in order. Nick Seiple, you're up first with your walk-off line.

All right. Well, you know, I think it's fair. It's okay to steal lines from other people and bring them together and make them into something new. So here's where I'll go. So on the Canadian investing community, I love to quote Stein's law, that which cannot go on forever must stop. And I think that certainly describes the macroeconomic world that we're in today. Jack Bogle always used to say, you should stay the course, keep on investing. My favorite head football coach ever, Nick Saban says, trust the process. So listen, in this world that we're in,

That which cannot go forever must stop. Stay the course, trust the process, and you will be a successful investor over the long term. Pretty good walk offline. Thank you, Nick. Yasser, your walk offline.

Sure. So, you know, as a recent steward of our global partner service, I would like to remind investors that there are other markets beyond the United States. And that is not to say that we should not be investing in the U.S., absolutely not, but rather that diversification, all diversification

It's not just for sectors or market caps, but it's also for geographic locations. And being overly concentrated in one geography can come with its fair bit of risk. So look at your portfolio. Think about how diversified you are from a geographic perspective. Thank you, Yasser. Very well said. And could you put the name again on the service that you help lead? Global Partners.

Something to consider signing up for, fellow fools. All right, let's go to David Meyer. David, your walk-off line. How do I top those two? I guess maybe I don't need to top it, but how am I even in the same ballpark? Just play music with this duo. I'll give it a try. In periods of short-term volatility, quality companies are always your long-term friends.

What a nice close. You know, I was reminded last time on Volume 6 in this series, our fellow Fool analyst, Sanmeet Deo,

rocked the Dos Equis man of TV advertising fame who says, as you'll all remember, stay thirsty, my friends. But Sunmeet went with, stay curious, fools. And that is indeed the spirit of this series, Gotta Know the Lingo, where we're here to educate, especially, of course, always to amuse and enrich as well, but to educate. We're actually building up quite a glossary of terms, A to Z. Once you start multiplying six times seven,

We've done 40 plus terms and concepts at this point. So if you enjoyed what you heard and want to keep learning with your child in the car or just by yourself on your phone somewhere, Google, got to know the lingo, Rule Breaker Investing.

And you'll see our previous six episodes in this series. And a final reminder, next week it's my most self-indulgent podcast of each year because it's my birthday week. What have you learned from me? It'll be the latest addition to 2025 of what you've learned from David Gardner. It's always fun to summarize the cardinal points or things that

you've heard from me and just share them back. I take your gifts in the form of emails. RBI at fool.com is the address. And then I share them back out as a summary of some of the most important takeaways that I can give you in investing and business and life. Again, RBI at fool.com. You can tweet us at RBI podcast. In the meantime, have a foolish week. Fool on.

As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.