The Investing Philosophies Behind Team Everlasting & Team Rule

20 Starter Stocks The Investing Philosophies Behind Team Everlasting & Team Rule Breakers Our Investing Philosophies

At The Motley Fool, we are not a monolithic group of investors and services. After all, motley is in our name! And we think the differences in our investors’, members’ and services’ approach is a strength not a weakness. But we are far more alike than we are different. As Motley Fool members, you’ve probably noticed that our services don’t all take the same approach to investing. We believe there’s more than one way to be successful picking stocks. Even between founding brothers David and Tom Gardner, you’ll find differences in their approaches.

As Chief Rule Breaker, David was instrumental in Meanwhile, Tom has been the principal proponent developing the Rule Breaker philosophy. of his Everlasting approach to stock investing. You’ll see that philosophy in all the stock picks the Motley Fool Rule Breakers look for six signs to help them CEO makes across multiple services. identify promising companies to invest in: Everlasting stocks share attractive traits like: 1. First-mover companies in emerging but important industries that have become the top dogs in their 1. High-quality companies that have the sustained niches. potential to keep growing and beat the overall 2. Companies with sustainable competitive advantages, market over extremely long periods, justifying which can come from a variety of sources, including holding onto shares and adding to positions for five visionary leadership, valuable intellectual property, to 15 years or longer. business momentum, or competitors that simply 2. Companies that still have their founders in leader- can’t figure out how to compete in a fast-changing ship positions within the company, ideally having industry. retained substantial stakes that align their financial 3. Sizable past increases in share prices. Top growth interests with those of investors. companies and their stocks tend to build and keep 3. Companies with a strong corporate culture that momentum for a long time. unifies management, employees, and customers 4. Companies with good management teams that are toward the common goal of building up the business. able to take solid business ideas to the next level. 4. Businesses that have built a strong enough bond with 5. Businesses with strong consumer appeal that have their customers that they command substantial pric- built up brand awareness and therefore have superi- ing power and have identifiable proprietary advantag- or pricing power. es, especially through innovation and discovery that 6. Stocks that are grossly overvalued according to translates into clearly defined intellectual property. mainstream financial media sources. Many stocks 5. Cash-rich, low-debt companies that have the that were dubbed “too expensive” have gone on to financial resources to make smart strategic moves make shareholders rich. that will let them improve over time as they learn, while avoiding over-leveraged situations that could Few stocks will have all six of these Rule Breaker threaten the survival of their businesses. qualities. However, the better a company matches up against these traits, the more likely it’ll be to have true Moreover, Tom likes to look for great stocks in areas Rule Breaker potential to deliver amazing long-term that most investors don’t follow closely. He thinks for returns. himself, does his own research, and makes his own decisions. That’s a trait you’ll find that every analyst here at The Motley Fool shares.

2 20 Starter Stocks There’s considerable overlap between these two sets of philosophies. That’s why you’ll often find that great businesses end up becoming recommendations from more than one team of stock analysts here at The Motley Fool. Far from being a bad thing, those repeat recommendations can actually be a powerful signal telling you that companies have even greater promise. That signal’s worth paying attention to when you see it. Despite those different approaches to stock picking, though, there are some principles that we all share here at The Motley Fool. We believe that a diversified portfolio of 25 stocks or more maximizes the chances of finding truly life-changing investments. However, we’re not going to have a perfect track record, and in the end, it’s highly likely that a small number of recommendations will be responsible for a large fraction of our overall gains. Moreover, investors have to plan to endure volatility, as stock markets can routinely fall 10% to 15% in any given year, with some of our stock picks making even wider swings. We’re lifelong investors and regularly add money to make further investments, and setting aside cash to take advantage of market down- turns is a great way to be ready for opportunity when it strikes. Inside this report, you’ll find a total of 20 stocks. Ten of them embody the Rule Breaker philosophy, while 10 use Everlasting principles. We think all of them make great starter stocks for investors to establish the foundation of a strong portfolio. Read on to learn more about these stocks!

20 Starter Stocks 3 Airbnb team Rule Breakers

The sharing economy has utterly disrupted a plethora of industries. NASDAQ: abnb Instead of catching a cab, people now order an Uber (NYSE: UBER) or Lyft (NASDAQ: LYFT). Instead of local restaurants hiring delivery drivers, recent price $135.91 those businesses now list on DoorDash (NYSE: DASH) or Grubhub (NYSE: Market cap $83.6 billion GRUB). Instead of booking a hotel, travelers now look for unique places to HQ San Francisco stay on Airbnb (NASDAQ: ABNB). The Covid-19 pandemic decimated the global travel industry, and Cash $6.6 billion Airbnb was expectedly affected by widespread government lockdowns Debt $2.0 billion and reduced travel in 2020. The crisis forced the company to make some tough decisions, laying off 1,900 employees — approximately 25% of its revenue earnings head count — near the onset of the pandemic. Cost cuts like that are 2019 $4.8 b ($674 M) never easy, but the silver lining was a renewed focus on Airbnb’s core 2020 $3.4 b ($4.6 b) platform and the company has emerged even stronger than before. ttm $3.4 b ($5.4 b) Core metrics are starting to bounce back — nights and experiences booked jumped 13% to 64.4 million in the first quarter, with gross booking value increasing 52% to $10.3 billion. The unprecedented conditions have made recent year-over-year comparisons somewhat less relevant in the near term, but the sequential trends are encouraging. More importantly, Airbnb is positioning itself for the rebound as pent-up travel demand gets unleashed, including secular changes in consumer behavior that have been caused by the crisis such as remote work and greater flexibility. People are shifting toward longer stays $1 ABNB — 24% of nights booked in the first quarter were for long-term stays —

and Airbnb continues to roll out innovative new features to adapt to a $8

post-pandemic world. Jan Mar May Airbnb has created a virtuous cycle in its platform where people book a stay as a guest and then proceed to become a host — the company’s largest source of hosts in 2019 was prior guests. In 2021, Airbnb’s top priorities include educating more people about hosting while ensuring they are set up for success. As a global platform, Airbnb still faces considerable uncertainties as the pandemic rages on in certain countries while other markets are quickly recovering thanks to vaccines. Despite short-term risks, Airbnb’s incredible brand strength and scalable travel-booking platform make it a no-brainer long-term investment.

4 20 Starter Stocks Alphabet team Rule Breakers

With 92% search market share worldwide, Alphabet’s (NASDAQ: GOOGL NASDAQ: googl & goog & GOOG) Google is the undisputed king of finding information on the internet. Android remains the most popular mobile platform on the recent price $2,361.04 planet, and Google also pays Apple (NASDAQ: AAPL) billions of dollars Market cap $1.6 trillion per year to be the default search provider in iOS. The next time you pull HQ Mountain View, out your smartphone to settle a disagreement, Google is almost certainly California the one serving up the results. In addition to the core search advertising business, other operating Cash $135.1 billion segments within Google have become increasingly important to the Debt $ 27.2 billion company’s financial results. The company started disclosing revenue for YouTube and Google Cloud for the first time about a year ago and began revenue earnings sharing new data around Google Cloud’s operations this year. YouTube 2019 $161.9 b $34.3 b ad revenue jumped by nearly 50% to $6 billion in the first quarter, while 2020 $182.5 b $40.3 b Google Cloud’s sales increased by 46% to $4 billion. ttm $196.7 b $51.4 b The company’s cloud computing business continues to lose money — posting a $974 million operating loss in the first quarter — as Google invests heavily in competing with market leader Amazon.com (NASDAQ: AMZN) and its Amazon Web Services division. Alphabet is also known for experimentation and pursuing high- risk investments that could be the next “moonshot.” After its 2015 restructuring into a holding company, Alphabet has an “Other Bets” segment that houses all of these risky endeavors. Other Bets consistently $2,1 OO L loses money — $4.5 billion in operating losses last year and $1.1 billion in red ink in the first quarter — but management has long been transparent with investors that these are long-term plays that have the potential to $1,05 reshape the world. Google was one of the first tech companies to achieve “verb” status, ’18 ’1 ’20 ’21 a testament to its brand strength. Nearly 25 years after Google was founded, the company’s leadership in search remains unassailable. That’s the type of competitive moat that makes Alphabet a buy today.

20 Starter Stocks 5 Apple team Rule Breakers

As the most valuable and profitable technology company in the world, NASDAQ: aapl Apple (NASDAQ: AAPL) hardly needs an introduction. The iPhone continues to define the smartphone category, while even the mature Mac recent price $127.10 business is setting new records. Market cap $2.1 trillion Several years ago, Apple set out to build a booming services business, HQ Cupertino, California aiming to generate recurring, high-margin revenue from a growing installed base of active devices, which stood at 1.65 billion at the end of Cash $ 69.8 billion 2020. The company successfully doubled the size of its services segment Debt $122.0 billion over the course of four years. Services have now generated $56.8 billion in revenue over the past four quarters. That business is powered in part revenue earnings by 660 million paid subscriptions that are billed across Apple’s various 2019 $260.2 b $55.3 b platforms, a figure that has doubled in less than three years. 2020 $274.5 b $57.4 b Apple is also increasingly in-sourcing core technologies, investing ttm $325.4 b $76.3 b billions of dollars to further differentiate its products from the competition while taking its vertical integration to new levels. That includes a growing portfolio of proprietary chips, most recently including a new M-series of processors to power Macs. The company is notorious for generating copious amounts of cash flow — $24 billion in operating cash flow last quarter alone — and has committed to returning as much of that money as possible to share

holders through dividends and share buybacks. The sheer scale of $127 Apple’s repurchases is an important driver of shareholder returns, as AAPL retiring those shares is highly accretive to earnings per share. Apple just boosted its buyback authorization by another $90 billion, while

reiterating its goal of getting to “net cash neutral” (where cash and debt $42 are approximately equal). ’18 ’1 ’20 ’21 Apple is also the dominant leader in the wearables market thanks to Apple Watch and a growing number of wearable audio products like its popular AirPods. The company’s wearables segment is already a $25 billion business. In recent years, it has been an open secret that Apple is actively exploring ways to enter the auto market with some type of electric vehicle, an initiative known as Project Titan. These plans may or may not ever come to fruition, but Apple has plenty of optionality for new growth opportunities. With all major segments firing on all cylinders and an astounding capital return program in place, Apple should be a core holding in any starter portfolio.

6 20 Starter Stocks Axon Enterprise team Rule Breakers

Axon Enterprise (NASDAQ: AXON) provides non-lethal weaponry and NASDAQ: axon a host of services to law enforcement agencies. It’s known best for its Taser stun guns, which gave the company its start. Since then, Axon has recent price $129.99 dramatically expanded the scope of its business to include body cameras Market cap $8.5 billion and video collection both from within police vehicles and through aerial HQ Scottsdale, Arizona drone technology. In addition, Axon has become a tech-savvy business that collects Cash $596 million recurring revenue to support cloud-based platforms. Axon’s evidence Debt $0 management offering provides for collection, storage, and sharing of digital evidence across law enforcement and judicial agencies. The revenue earnings company also has platforms for dynamic records for police and for 2019 $531 m $ 1 M) emergency operational services like dispatch, unified communications, 2020 $681 m ($ 2 M) and situational awareness tools. That has helped expand Axon’s use ttm $729 m ($54 M) cases beyond police to cover prisons, fire departments, private security companies, and EMS and other first responders. As a first mover in providing alternatives to handguns, Axon is at the center of an issue that has created sharp divisions in today’s society. However, founder and CEO Rick Smith has high hopes that Axon’s drive to transform public safety to save lives and protect communities with greater transparency will win out in the end. Axon continues to innovate, with its latest products using artificial intelligence to power license plate recognition technology and allowing immediate access to AXON essential evidence via wireless networks for time-critical needs. $127 Axon’s complete platform has produced steady and rapid growth. In the first quarter of 2021, the company’s sales climbed 33% from a year ago, with revenue from the expanding Axon Cloud platform rising at a $27 ’18 ’1 ’20 ’21 34% year-over-year pace. Net revenue retention clocked in at 119%, showing that Axon’s clients are spending progressively more to take advantage of new platform features. Yet Axon is just getting started. It has only begun to tap into the vast international opportunity ahead of it, but new deals in Canada, the U.K., Hungary, Brazil, and New Zealand reveal the extent of its pipeline. That’s one contributing factor to Axon’s recent boost to its full-year 2021 revenue guidance. Axon has come a long way, but it also has a long growth runway ahead of it. With public safety being of increasing concern worldwide, Axon’s products have a huge addressable market that the company should be able to tap effectively.

20 Starter Stocks 7 Netflix team Rule Breakers

A pioneer and first mover in video streaming,Netflix (NASDAQ: NFLX) NASDAQ: nflx has become a mainstay entertainment option among the majority of U.S. households, and the company’s original content often shapes popular recent price $502.90 culture. Cord-cutting has been raging for over a decade, with consumers Market cap $221.9 billion continuing to cancel cable subscriptions in favor of over-the-top HQ Los Gatos, streaming services. California While most media networks have jumped into streaming with their own services and competition has undoubtedly intensified in recent Cash $ 8.4 billion years, Netflix continues to be an anchor service. Consumers are unlikely Debt $15.7 billion to sign up for every single streaming service, but Netflix is almost always in the bundle and has long enjoyed the lowest churn rates in the sector. revenue earnings The Covid-19 pandemic boosted Netflix’s business last year as people 2019 $20.2 b $1.9 b needed entertainment while stuck at home amid lockdowns. Growth is 2020 $25.0 b $2.8 b now decelerating slightly due to the pull-forward effect, but the overall ttm $26.4 b $3.8 b business is incredibly resilient, with nearly 208 million paid member- ships globally. North America is a mature market for Netflix, but the company is increasingly tapping international markets for growth. Importantly, Netflix has reached an inflection point with profitability. After years of borrowing lavishly to fund original content investments, Netflix is on the cusp of consistently and sustainably generating positive free cash flow. The company does not believe it will need to rely on external capital raises anymore and expects free cash flow in 2021 will be $50 NFLX break-even. That will help address longstanding criticisms that Netflix binges on debt and will also stabilize the company’s capital structure.

Going forward, Netflix will still need to invest heavily in localized $12 content that appeals to subscribers in international markets — the ’18 ’1 ’20 ’21 company expects to spend over $17 billion in cash on content in 2021 — but it’s encouraging that it can now fund those investments internally without needing external financing. Compelling content is instrumental in attracting new subscribers, so these investments are well worth it. Streaming is the future of entertainment and Netflix has become a dominant force in Hollywood, making it a compelling pick for new investors.

8 20 Starter Stocks Novocure team Rule Breakers

Novocure (NASDAQ: NVCR) is an innovative healthcare company focused NASDAQ: nvcr on cancer treatment. Its proprietary “Tumor Treating Fields” technology delivered through its Optune device targets cancer with electric fields recent price $185.24 that are tuned to specific frequencies to disrupt cancer cell division. Market cap $19.5 billion Novocure’s Optune device and Tumor Treating Fields technology have HQ St. Helier, Jersey obtained regulatory approval in several countries to treat glioblastoma (brain cancer) and mesothelioma (cancer on the thin layer of tissue that Cash $864 million covers the internal organs), both of which are rather rare indications. Debt $560 million About 12,000 new cases of glioblastoma and 3,000 new cases of meso thelioma are diagnosed in the United States each year. revenue earnings Despite these relatively rare incidence rates, the use of Novocure’s 2019 $351 m ($ 7 M) offerings in these indications has already led to a growing and strength- 2020 $494 m $20 M) ening financial profile. In 2020, the company reported $494 million in net ttm $527 m $12 M) revenue (up 41% year over year). The business swung from a $7.2 million loss in 2019 to a $20 million profit in 2020. Even more importantly, Novocure has seen 25 consecutive quarters of active patient growth, ending the first quarter of 2021 with 3,454 active patients on therapy and more than 18,000 patients treated to date. Novocure’s growth is far from finished. The company has active clinical trials for using its technology as a potential treatment for brain

metastasis, pancreatic cancer, ovarian cancer, liver cancer, and gastric $185 cancer. Growing evidence supports broad applicability of its technology NVCR across a variety of cancers, indicating that Novocure has a major opportunity to expand its market and make its treatment available for more

and more indications. $20 Novocure is a quintessential Rule Breaker, owning innovative ’18 ’1 ’20 ’21 technology protected by intellectual property rights and operating without any clear direct competitors. We are excited to see how the future unfolds for the company.

20 Starter Stocks 9 Nvidia team Rule Breakers

Not long ago, investing in Nvidia (NASDAQ: NVDA) was largely NASDAQ: nvda considered a way to play the growing popularity of PC gaming, as the company is one of the top providers of graphics processing units. recent price $624.48 However, it turns out that graphics cards have more applications than Market cap $372.6 billion just 3-D gaming. HQ Santa Clara, California In recent years, the computationally intensive nature of rendering 3-D graphics made Nvidia GPUs useful in a wide variety of new applica- Cash $11.6 billion tions, which have significantly expanded the company’s market opportunities. GPUs have proven to be remarkably effective for handling artificial Debt $ 7.0 billion intelligence and machine learning workloads in data centers, as well as high-performance computing. Additionally, cryptocurrency miners use revenue earnings Nvidia products to create more of those digital assets, whose prices have FY 2019 $11.7 b $4.1 b rallied to record levels recently. FY 2020 $10.9 b $2.8 b Thanks to these trends, Nvidia now serves a diverse set of end FY 2021 $16.7 b $4.3 b markets, with data centers becoming a massively important growth driver for the company. Data center revenue skyrocketed 124% to $6.7 billion last fiscal year, making that segment second in size only to the core gaming business. In order to capitalize on its momentum in the data center market, Nvidia recently unveiled a new specialized central processing unit called Grace, designed specifically for the data center that can handle complex $24 AI and machine learning computing tasks. This is the first Arm-based NVDA CPU that Nvidia has developed for data centers, and the company is promising a massive leap in performance. Nvidia is also in the process of trying to acquire Arm Holdings, the British chip designer that sits at the heart of the mobile chip industry. $14 Arm’s chip architecture designs power nearly all smartphones in the ’18 ’1 ’20 ’21 world, and the deal has the potential to reshape the industry and Nvidia’s position in it. Investing in Nvidia has evolved from a bet on PC gaming to a way to invest in the future of AI. That’s a trend that you won’t want to miss out on.

10 20 Starter Stocks Pinterest team Rule Breakers

Social media has become a massive business, with ad spending of nyse: pins around $85 billion making it the third-largest advertising channel behind TV and paid internet search. But there’s a dark side to social media, with recent price $62.91 users having to put up with everything from family arguments to hacked Market cap $40.4 billion accounts and deliberate misinformation. Pinterest (NYSE: PINS) has HQ San Francisco aimed to change that with a positive vibe that is more supportive and aspirational for its users. Cash $2.0 billion Pinterest wasn’t the first mover in social media, but it was innovative Debt $0 in its use of visual imagery as the focal point of its platform. That’s made it a top dog in its niche, and competitors have found it very difficult to revenue earnings duplicate its ability to draw together such a positive group of core users. 2019 $1.1 b ($1.4 b) That user base is also valuable to potential advertisers, and Pinterest has 2020 $1.7 b ($128 M) worked carefully to boost its ability to monetize its platform without ttm $1.9 b ($ 9 M) endangering what makes it special. In particular, co-founder and CEO Ben Silbermann has looked at cre- ative ways to bolster Pinterest’s exposure. Recent deals with e-commerce marketplaces Shopify (NYSE: SHOP) and Etsy (NASDAQ: ETSY) have opened up Pinterest for hosting product catalogs from millions of merchants. Pinterest has also worked to expand its international scope. Those efforts are paying off. In the quarter ending in March 2021,

Pinterest’s sales jumped 78% year over year, with 478 million monthly PINS active users. Average revenue per user rose by 34%. Pinterest brought on $ more than 100 million new international active users, further accenting the importance of the platform outside the U.S. market. However, $1 domestic advertising sources remain vital to Pinterest’s success, as U.S.- ’18 ’1 ’20 ’21 based revenue still makes up more than 80% of Pinterest’s total take. Pinterest looks overvalued by most metrics, as the stock fetches around 20 times the social media company’s revenue over the past 12 months. Yet the share price more than doubled between August 2020 and February 2021 before pulling back, building upward momentum that investors hope will return in the near future. With plenty of catalysts supporting growth efforts, Pinterest has a lot of untapped potential in the years to come.

20 Starter Stocks 11 Teladoc Health team Rule Breakers

Teladoc Health’s (NYSE: TDOC) business boomed as a result of the NYSE: TDOC pandemic, with demand for virtual health services and telemedicine skyrocketing amid stay-at-home orders. But lately the stock market has recent price $142.33 punished Teladoc, with investors skeptical of whether the company can Market cap $22.4 billion continue its fantastic growth streak now that the lion’s share of the HQ Purchase, New York pandemic-related benefit has been realized. Since reaching an all-time high of $308 per share on Feb. 16, the stock Cash $723 million has plummeted 55% after its two most recent quarterly earnings reports Debt $1.4 billion disappointed investors. On the surface, it makes sense that investors would be unhappy: In revenue earnings those two quarters, net losses have ballooned, reaching $394 million in 2019 $553 m ($ 99 M) the fourth quarter of 2020 (compared with $19 million in the prior-year 2020 $1.1 b ($485 M) period) and $200 million in the first quarter of 2021 (versus $30 million ttm $1.4 b ($655 M) a year earlier). Additionally, the number of paid members on Teladoc’s platform contracted to 51.5 million members in the first quarter, down from 51.8 million in the fourth quarter of 2020. However, these GAAP net losses and sequentially slowing membership need context. Those net losses include major one-time expenses associated with Teladoc’s August 2020 merger with Livongo, including deferred income tax valuation adjustments, amortization of acquired intangible assets, and elevated levels of non-cash stock-based compensation. After adjusting for these non-cash, one-time expenses, Teladoc’s TDOC $142 adjusted earnings rose in 230% in the fourth quarter and 430% in the first $5

quarter, year over year. Revenue in the first quarter increased more than ’18 ’1 ’20 ’21 150% year over year, which was boosted by the Livongo merger but still marked impressive growth even when accounting for the acquisition. Additionally, the apparent sequential decline in paid members is misleading given that management warned last quarter that 1.5 million temporary members would roll off in this quarter. This anticipated temporary membership growth hiccup should normalize in the quarters ahead. We think Teladoc will weather the recent storm and continue to build on its industry-leading telemedicine platform, and once the messy financials from the recent Livongo acquisition have lapped the books, we think the true strength of the business will shine, and investors will benefit.

12 20 Starter Stocks Walt Disney team Rule Breakers

Walt Disney (NYSE: DIS) might not seem like a Rule Breaker company at NYSE: DIS first glance. Admittedly, the media and entertainment giant’s stock gained David Gardner’s notice solely because of the company’s aggressive bid to recent price $174.31 buy out disruptive content creator Marvel Entertainment back in 2009. Market cap $320.7 billion At the time, the $4 billion deal seemed like a high price to pay for a HQ Burbank, California fledgling studio that had only begun to capitalize on its full potential. Now, after the success of Avengers and countless other Marvel-inspired Cash $15.9 billion franchises, it looks like a steal. Debt $56.1 billion Despite being an industry behemoth, Disney has had its share of Rule Breaker-style moves since. Equally ambitious acquisitions of Pixar and revenue earnings Lucasfilm highlighted the value that the House of Mouse put on original FY 2019 $69.6 b $11.1 b) content — a recognition that it took many other industry players a lot FY 2020 $65.4 b ($ 2.9 b) longer to realize was becoming increasingly important. That’s built ttm $58.4 b ($ 5.0 b) Disney a sizable competitive advantage that’s proved invaluable in helping it survive an extremely difficult period for its theme parks, cruise lines, and movie studios during the Covid-19 pandemic. Those difficulties bear out in its recent financials, but Disney has been a powerful growth engine over the long haul. Between 2014 and 2019, the company increased its revenue and net income by 40% to 45%. That might seem slow compared to other Rule Breakers, but remember: Disney brought in almost $70 billion in sales in fiscal 2019 alone. More recently, Disney hasn’t shied away from facing existential DIS $5 $142 threats head-on. With Netflix (NASDAQ: NFLX) and other players using streaming video to challenge Disney’s strength in cable television and at the movie theater, the House of Mouse responded by rolling out Disney+, which topped the 100 million subscriber mark in its most recent quarter. ’18 ’1 ’20 ’21 Those 103.6 million customers have all come in just the past year and a half — further showing the power of the Disney brand. Few companies are happier than Disney to see signs that the global economy is returning to normal as the pandemic begins to come under control. The reopening of Disneyland Paris should bring the theme park division back to full strength, and many jurisdictions are lifting restric- tions on movie theaters and other public gatherings that should help Disney’s other businesses. Add to that the strong momentum the Hollywood giant has built in streaming and its penchant for smart acquisitions, and there’s reason to believe that Disney will keep breaking rules for years to come.

20 Starter Stocks 13 Appian team EverlastinG

Appian (NASDAQ: APPN) offers a cloud-based platform that provides its NASDAQ: APPN customers an easier way to build customized software and applications. The company’s pioneering low-code platform helps businesses create the recent price $84.09 technology they need to automate and optimize their workflow without Market cap $5.9 billion requiring large teams of IT professionals with sophisticated programming HQ McLean, Virginia knowledge and expertise. Another entry in the category of cloud technology stocks that have Cash $233 million had major pullbacks from their recent peaks, Appian was trading as Debt $0 high as $260 per share as recently as January 2021. Now, the stock is now nearly 70% off that all-time high. revenue earnings Aside from being caught up in the broader weakness among tech- 2019 $260 m ($51 M) nology stocks, we haven’t seen much from Appian’s business results 2020 $305 m ($34 M) to justify such a drastic shift in investor sentiment. In its most recent ttm $315 m ($35 M) quarter, Appian generated total revenue of $88.9 million, up 13% from the year-ago period. Cloud subscription revenue — its most important and fastest-growing category — rose 38% year over year, and total subscription revenue increased 26%. Cloud subscription revenue retention rate was 118%, demonstrating that existing customers spent 18% more in the first quarter of 2021 than they did in the same period a year ago. Appian’s leadership fits the Everlasting philosophy: CEO and co-founder Matt Calkins retains a 40% stake in the company (worth $2.4 billion at recent prices), having grown the business from a start-up in his basement to its multibillion-dollar valuation today. And in the Foolish spirit, Calkins has also been described as a “board game god,” authoring APPN $1 $84 several award-winning board games and frequently finishing at the top

of the World Boardgaming Championships. ’18 ’1 ’20 ’21 With the company’s value proposition to its customers, large and growing addressable markets (process automation, application platform- as-a-service), and Foolish leadership, we think an investment in Appian is worthwhile today, especially given the stock’s recent decline.

14 20 Starter Stocks Atlassian team EverlastinG

Software has made it easier for people to work together more produc- NASDAQ: TEAM tively, and Atlassian (NASDAQ: TEAM) has built a platform of workplace collaboration and communication tools to help workers be as effective as recent price $222.60 they can. Its Jira product assists with business management and project Market cap $56.9 billion tracking, while Trello and Confluence facilitate project collaboration HQ Sydney, Australia and document sharing. Other products address coding and software release management, cloud security, and other worker needs. Atlassian Cash $1.6 billion has helped make digital transformation and cloud migration a reality for Debt $542 million more than 212,000 subscribers to its cloud-based software-as-a-service platform. revenue earnings Co-founders Scott Farquhar and Mike Cannon-Brookes started 2019 $1.2 b ($638 M) Atlassian almost 20 years ago, but the company they lead together still 2020 $1.6 b ($351 M) remains committed to their core values that include a level of openness ttm $2.0 b ($868 M) and a no-nonsense attitude that’s rare among large businesses. With 4.6 stars out of 5 and a 96% CEO approval rating on Glassdoor for the founding duo, Atlassian’s vision resonates with employees. With Cannon- Brookes and Farquhar owning almost half the company’s stock and maintaining voting control, shareholders are confident in the pair as well. The need for digital work tools has never been greater due to the pandemic, and Atlassian’s growth has accelerated accordingly. The

company signed up almost 42,000 new customers in the past 12 months, $22 and sales jumped 38% year over year in the quarter ending in March TEAM 2021, while adjusted net income nearly doubled. Moreover, Atlassian has made continued progress in migrating customers away from site-based $4 installations toward its cloud platform, with the result of building a more sustainable source of recurring revenue for years to come. ’18 ’1 ’20 ’21 Atlassian has so much confidence in letting its software platform sell itself that it has moved even more aggressively toward offering free versions of its products and content. That’s been a recurring theme throughout Atlassian’s history, as the company has avoided dedicated sales acquisition professionals in favor of positive word of mouth and referrals from existing users. Content marketing through its Work Life blog and conferences with the broader community of Atlassian users and developers is more consistent with company values. With Farquhar and Cannon-Brookes both in their early 40s, they should have plenty more time to lead Atlassian to new heights. We’re happy to be along for the ride.

20 Starter Stocks 15 CrowdStrike Holdings team EverlastinG

CrowdStrike Holdings (NASDAQ: CRWD) is a recent addition to the NASDAQ: CRWD Foolish universe, with just a few years of public market history since its IPO in June 2019. Despite the company’s relative youth, CrowdStrike recent price $214.35 has quickly established itself as one of our highest-confidence Market cap $48.3 billion recommendations. HQ Sunnyvale, California CrowdStrike is a cybersecurity company, differentiating itself from competition with its cloud-native platform that uses crowdsourced data. The company’s platform operates with two key components: a single Cash $1.9 billion lightweight agent (i.e., a security application) and its centralized data- Debt $738 million crunching, AI-enabled Threat Graph. Customers benefit from both components, as the lightweight agent revenue earnings collects data and monitors locally for security problems, constantly 2019 $250 m ($140 M) sending back information to the Threat Graph that is then analyzed with 2020 $481 m ($142 M) AI. If the Threat Graph discovers something in one customer environment, ttm $874 m ($ 93 M) CrowdStrike’s application updates automatically and in real time through the cloud, pushing out the update to all of its other customers immedi- ately. CrowdStrike takes advantage of a data-based network effect, as the more customers and data the Threat Graph gathers and processes, the more its clients benefit. CrowdStrike’s technology advantage and value proposition to its

customers is evidenced by its financial results. In full-year fiscal 2021, $214 which ended Jan. 31, CrowdStrike reported revenue of $874.4 million (up CRWD 82% from fiscal 2020), with both gross and operating margins increasing. The company added a record 1,480 net new subscription customers in the

fourth quarter, up 82% year over year. And its dollar-based net retention $4 rate (a measure of how much customers increase their spending year ’18 ’1 ’20 ’21 over year) was 125% at the end of fiscal 2021, indicating that those newly acquired customers are likely to spend more with CrowdStrike as time goes on. CrowdStrike is in the early innings of a major growth story in re-plat- forming the cybersecurity market to a completely cloud-based model, which is a playbook that other cloud-based leaders such as Salesforce (NYSE: CRM) and ServiceNow (NYSE: NOW) have already run successfully in other markets. Led by energetic 50-year-old CEO and co-founder George Kurtz, CrowdStrike is in position to capture an increasing share of the growing cybersecurity market, which should lead to strong revenue growth and attractive investment returns for the stock over the long run.

16 20 Starter Stocks Fiverr International team EverlastinG

The gig economy has grown by leaps and bounds lately, and Fiverr NYSE: FVRR International (NYSE: FVRR) has been an instrumental player in further- ing its success. The company provides an online platform connecting recent price $189.56 freelancer workers looking to provide skills in hot areas like technology Market cap $6.8 billion with companies who need them. Demand for gig workers was already HQ Tel Aviv, Israel high even before the Covid-19 pandemic made digital transformation absolutely essential for businesses around the world. Cash $434 million Fiverr fits well with the Everlasting philosophy. It has tapped into Debt $376 million just a tiny portion of an addressable market for tech-focused freelancers worth $115 billion, and that market is growing rapidly. Co-founder and revenue earnings CEO Micha Kaufman has united Fiverr workers behind the company’s 2019 $107 M ($34 M) goal to change how the world works, earning a 95% approval rating on 2020 $189 M ($15 M) Glassdoor, and his roughly 6% stake in Fiverr is worth more than $300 ttm $224 M ($27 M) million at recent prices. Financially, Fiverr has been highly successful in building customer loyalty and pricing power. Sales in the first quarter of 2021 doubled from year-ago levels, with 56% more buyers spending 22% more on average for freelance services. Fiverr’s take of the total transactions on its platform rose to 27.2%, continuing a steady climb that has contributed greatly to its overall growth. And with more than $430 million in cash, bank deposits, and marketable securities and most of its debt in the form of convertible notes that are likely to get replaced by equity, Fiverr has the financial resources to make future acquisitions or other strategic moves FVRR without overextending itself. $10

Fiverr is excited about its future. It recently raised its guidance for $21 2021, pointing to buzz stemming from its 2021 Super Bowl ad and ’18 ’1 ’20 ’21 ongoing expansion into new categories of work and new job markets around the world. The freelancer revolution has already been a disruptive force in the traditional way that employers and employees worked together. Although the pandemic accelerated the trend toward embracing the gig economy, freelancing is here to stay. Fiverr has established its position as an early leader with the budding gig economy ecosystem, and we think investors have a great opportunity to get in on the ground floor with the stock.

20 Starter Stocks 17 Lemonade team EverlastinG

Almost no one likes dealing with insurance companies. But Lemonade NYSE: LMND (NYSE: LMND) has set out to change that, with a very different take on providing renters, homeowners, term life, and pet health insurance. recent price $80.84 Unlike traditional insurance companies, Lemonade has fully embraced Market cap $4.8 billion technology, using artificial intelligence-driven chatbots to allow HQ New York customers to get insurance on a monthly subscription basis in just minutes. Lemonade’s AI can process claims in seconds, dramatically Cash $1.2 billion improving the customer experience. Debt $0 Lemonade is just at the beginning of its efforts to disrupt the $5 trillion global insurance business. Customer counts jumped 50% revenue earnings in the past year to almost 1.1 million as of March 2021, and those policy- 2019 $67 M ($109 M) holders are spending an average of $229, up 25% year over year. 2020 $94 m ($122 M) Customers especially appreciate two aspects of Lemonade’s business ttm $92 m ($135 M) model. First, Lemonade obtains reinsurance for the majority of its insurance risk, which helps avoid the conflicts that typically pit traditional insurance companies against their own policyholders. Second, Lemonade sets a fixed portion of premiums aside for its expenses and profit, and anything left over is available for customers to designate toward worthy charities. Co-founders Daniel Schreiber and Shai Wininger have a lot of experience in the tech industry, with Wininger having also co-founded freelancer platform provider Fiverr International (NYSE: FVRR). The pair has a combined stake of roughly 10% of the company worth about $450 LMND million at recent prices. Schreiber also gets high marks for his work as $81 CEO, with a 99% approval rating and Lemonade getting 4.8 stars out of 5 $2 on Glassdoor. ’18 ’1 ’20 ’21 Lemonade has almost $1.2 billion in cash on its balance sheet against no debt, and it’s looking to make its biggest growth move yet. The insurance disruptor recently announced plans to enter the auto insurance market with its Lemonade Car product. Car insurance in the U.S. alone is a $300 billion market, and more than 90% of American households own a vehicle. That offers a massive new area for Lemonade to pursue that’s between three and 80 times larger than its existing product lines. Moreover, it opens up new cross-selling opportunities across its entire insurance lineup. Lemonade is a very young company, but it’s already making big waves. We’re excited to see where Lemonade goes in the years to come.

18 20 Starter Stocks Shopify team EverlastinG

Not everyone can compete with Amazon.com (NASDAQ: AMZN) in NYSE: SHOP e-commerce and live to tell the tale, but Shopify (NYSE: SHOP) famously did just that. The Canadian company caters to businesses of all sizes, recent price $1,261.43 helping them set up online storefronts while providing a slew of services Market cap $149.3 billion to power the backend infrastructure. Shopify’s offerings are so powerful HQ Ottawa, Ontario that Amazon shuttered its competing Webstore service back in 2015. In the years since, Shopify has thrived by positioning itself as a sort Cash $7.9 billion of “anti-Amazon,” empowering sellers and merchants to be successful on Debt $0.9 billion their own. Many merchants have grown increasingly wary of selling on Amazon’s dominant platform over fears of anticompetitive practices, and revenue earnings that sentiment has bolstered demand for Shopify’s services. The Covid-19 2019 $1.6 b ($125 M) pandemic also supercharged Shopify’s business as small local businesses 2020 $2.9 b $320 M) scrambled to shift to online sales, accelerating digital transformations. ttm $3.5 b $1.6 b) Shopify is now the No. 2 e-commerce platform in the U.S., with an 8.6% share of retail e-commerce sales in 2020. The company trails Amazon, which has a 39% share, but is ahead of other prominent players like Walmart (NYSE: WMT) and eBay (NASDAQ: EBAY), which command 5.8% and 4.9% shares. Shopify’s platform is booming, with gross merchandise volume skyrocketing 114% in the first quarter to $37.3 billion. The company is processing more payments through its platform, which helps strengthen $1,21 its monetization of those sales — gross payments volume represented SHOP 46% of gross merchandise volume last quarter, up from 42% a year ago. Looking at the bigger picture, gross merchandise volume hit nearly $120 billion in 2020, compared to just $15.4 billion in 2016. That type of $4 staggering growth is helping drive operating leverage as Shopify scales, ’18 ’1 ’20 ’21 while the company continues to invest heavily in the business. Among the more important long-term strategies that Shopify is pursuing is building out its Shopify Fulfillment Network, a $1 billion move to offer a true end-to-end solution for merchants. As Shopify continues to expand its platform, add to its menu of merchant services, and strengthen its flywheel, the company has become an indispensable partner to merchants. Even after soaring 185% in 2020, we think Shopify will continue delivering for investors.

20 Starter Stocks 19 Tesla team EverlastinG

Tesla (NASDAQ: TSLA) has created an aspirational brand that is NASDAQ: TSLA synonymous with the electric vehicle revolution, establishing itself as a dominant leader in the category. It is remarkably difficult to even enter recent price $606.44 the automotive industry due to extremely high barriers to entry, much Market cap $577.3 billion less thrive, but Tesla has done just that by redefining consumer HQ Palo Alto, California perception of EVs. The company is also a pioneer in the quest for semiautonomous Cash $17.1 billion and autonomous vehicles, pushing the industry forward with its suite Debt $10.9 billion of advanced driver-assistance systems. No stranger to controversy, Tesla is also a polarizing company. Led by brash billionaire Elon Musk, the revenue earnings company has unnerved an entire industry while attracting skeptics and 2019 $24.6 b ($862 M) short-sellers. 2020 $31.5 b $721 M) Still, Tesla continues to execute on its grand vision of accelerating the ttm $35.9 b $1.1 b) transition to sustainable transportation, ramping vehicle production as it constructs factories around the world and introduces new EVs to capture consumer mindshare and imagination. Total vehicle deliveries increased 36% in 2020 to nearly 500,000, a significant milestone. Tesla built on that momentum with another 185,000 deliveries in the first quarter, thanks in part to a strong reception to the Model Y crossover in China. The company’s success has attracted the attention of legacy auto makers, who are now scrambling to electrify their vehicle lineups. While bears argue that the forthcoming EV competition will put a dent in TSLA Tesla’s growth, the better way to frame the competitive landscape is EVs $0 versus internal combustion engine cars. EVs represented just 3% of global car sales last year, while ICE vehicles represented 98% of trade-ins $2 for Tesla in the first quarter. ’18 ’1 ’20 ’21 As EVs continue to chip away at ICE vehicles and adoption accel- erates due to supportive government policies, Tesla will enjoy a strong growth runway as it defends its leadership position within the category. The company is targeting 50% average annual growth in vehicle deliveries in the years ahead. There is no doubt that EVs represent the future of transportation, which is good news for the EV leader.

20 20 Starter Stocks The Trade Desk team EverlastinG

Programmatic advertising leader The Trade Desk (NASDAQ: TTD) has NASDAQ: TTD been a standout performer since its Foolish debut in early 2017. Dating back to that original recommendation, the stock is up an astounding recent price $555.57 1,400% cumulatively, or 90% compounded annually. Market cap $26.6 billion What’s even more astounding is that those performance figures HQ Ventura, California account for the stock’s value after a recent sharp decline in The Trade Desk’s share price. Since setting an all-time high in December 2020 at Cash $680 million $972.80, the stock has lost nearly half of its value. Debt $0 The recent decline is due to a combination of factors, including broader weakness in the software-as-a-service (SaaS) and technology revenue earnings sectors and an announcement from Google in early March that it will 2019 $661 m $108 M be phasing out third-party browser cookies (which will change the way 2020 $836 m $242 M internet-based ads are delivered). The fall included a 26% one-day drop ttm $895 m $241 M after reporting first-quarter earnings on May 10. But even after all the bad news, the fact that the stock is still up 15 times in less than five years shows just how significant the company’s market opportunity is and how well management and the business have executed over the last few years. We’re big fans of CEO, founder, and chairman Jeff Green, who remains actively involved with the business and owns nearly 10% of the total shares outstanding, strongly aligning his financial incentives with those of investors. The recent stock decline makes the The Trade Desk all the more TTD $55 compelling as an investment, considering it retains all of the qualities of our favorite businesses: a highly engaged founder in Green, a massive $4 long-term market opportunity (digital advertising), accelerating revenue ’18 ’1 ’20 ’21 growth (37% year-over-year growth in its most recent quarter compared to 33% in the same quarter a year ago), excellent profitability and margins, a balance sheet flush with cash and carrying no long-term debt, and and loyal customers (it achieved a client retention rate of over 95% for the past three years).

20 Starter Stocks 21 Wix.com team EverlastinG

Founded in 2006 and based in Tel Aviv, Israel, Wix.com (NASDAQ: WIX) NASDAQ: WIX provides a cloud-based web development and design platform that allows users to create websites and build a digital presence on the recent price $247.21 internet. Wix offers its solutions through a freemium business model, Market cap $54.3 billion allowing customers to use its services for free and then generating HQ Tel Aviv, Israel revenue by selling advertising on their free websites and upselling the free customers to premium services over time. Cash $1.1 billion Wix is another company that was a clear beneficiary of the Covid-19 Debt $919 million pandemic. With people locked down at home, economic activity in 2020 flowed strongly toward platforms that enabled business to be conducted revenue earnings online, and Wix took full advantage of its opportunity. 2019 $761 m ($ 86 M) Coming off an already strong year in 2019 — with annual revenue 2020 $989 m ($165 M) of $761 million (up 26% from 2018) and ending the year with 165 million ttm $1.1 b ($299 M) total users (up 16%) and 4.5 million premium users (up 13%) — Wix acheived accelerating growth in 2020. Full-year 2020 revenue came in at $989 million (up 30% from 2019), and Wix ended the year with 197 million total users (up 19%) and 5.5 million premium users (up 22%). Growth continued to accelerate in the first quarter of 2021, with revenue rising 41% and Wix increasingly converting more free users to premium subscriptions in the quarter, leading to 32% higher collections compared to the prior-year period. In addition to the financial momentum, Wix’s leadership fits the WIX Foolish bill. The three partners who co-founded the company are still in $247 command. Avishai Abrahami serves as CEO, Giora Kaplan is chief tech- $58 nology officer, and Nadav Abrahami (Avishai’s brother) is vice president of client development. Avishai Abrahami sports a 97% CEO approval ’18 ’1 ’20 ’21 rating on Glassdoor, and the company is described as “an amazing place to work.” Wix is squarely positioned to benefit from ongoing trends in website development, internet-enabled business, and e-commerce. With accelerating financial momentum, a founder-led managerial culture, increasing user monetization, and the ability to tack on new products and services to its current offerings to fuel continued growth, Wix is likely to remain a strong investment for years to come.

22 20 Starter Stocks Zoom Video Communications team EverlastinG

Zoom Video Communications (NASDAQ: ZM) has been the poster NASDAQ: ZM child of pandemic stocks, cementing itself as a household name during the depths of the Covid-19 crisis as a way for businesses, educators, and recent price $321.56 families to operate and communicate face-to-face in the midst of stay-at- Market cap $92.1 billion home orders. HQ San Jose, California The rapid adoption of Zoom’s videoconferencing platform during the pandemic led to monumental growth in 2020. After achieving 85% and Cash $4.2 billion 78% revenue growth in the two quarters before the pandemic, Zoom’s Debt $0 quarterly revenue growth skyrocketed throughout fiscal 2021, reaching 169%, 355%, 367%, and 369%. revenue earnings Management is expecting growth to slow to a measly (kidding!) 175% FY 2019 $331 m $ 8 M in the first quarter of fiscal 2022, but despite the expected slowdown, all FY 2020 $622 m $ 22 M told Zoom has transformed itself into a monster growth machine during FY 2021 $2.7 b $672 M the pandemic. At the end of fiscal 2020, Zoom had $623 million in annual revenue and $22 million in net income, with $855 million in cash on its balance sheet. At the end of fiscal 2021, Zoom posted $2.7 billion in revenue (up 326%) and $672 million in net income (up 2,987%), and had more than $4.2 billion in cash on the books (up 396%). It’s hard to overstate just how astronomical Zoom’s business performance was in 2020. Nonetheless, like many other high-growth stocks, Zoom has recently gotten swept up in a boom-and-bust sentiment cycle, with its stock price ZM down nearly 50% from its all-time high in October 2020. $22 We simply view this stock price weakness as a buying opportunity, with Zoom’s recent success providing the financial firepower for the $ ’18 ’1 ’20 ’21 business to reinvest heavily to maintain its leadership position in the ever more critical live videoconferencing market.

20 Starter Stocks 23 DISCLOSURES

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors.

David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Axon Enterprise, Netflix, Tesla, and Walt Disney.

Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Appian, Atlassian, CrowdStrike Holdings, Fiverr International, Lemonade, Netflix, Salesforce, Shopify, Tesla, The Trade Desk, Wix.com, and Zoom Video Communications.

The Motley Fool owns shares of Airbnb, Alphabet (A shares), Alphabet (C shares), Amazon, Appian, Apple, Atlassian, Axon Enterprise, CrowdStrike Holdings, Etsy, Fiverr International, Lemonade, Netflix, Novocure, Nvidia, Pinterest, Salesforce, ServiceNow, Shopify, Teladoc Health, Tesla, The Trade Desk, Walt Disney, Wix.com, and Zoom Video Communications.

The Motley Fool has a disclosure policy.

Company information as of May 18, 2021; prices and charts as of May 24, 2021.

24 20 Starter Stocks