Why Rule Breakers Buy a Stock That's Already "Won"

You found a great company, then watched it double before you got round to buying. So you crossed it off your list and waited for a pullback that never came.

Every investor has one. Team Rule Breakers has a rule for not collecting them, the one Fools argue with most: before we buy, we want the stock to have already gone up.

The man who taught David to buy high

Motley Fool co-founder and Chief Rule Breaker David Gardner calls this Trait #3 of six in Rule Breaker Investing: stellar past price appreciation. The idea comes from William O'Neil, founder of Investors' Business Daily, whose research on past market winners found that the best stocks rise, then rise again. Most investors build watchlists from 52-week lows; O'Neil taught David to hunt among the highs.

David took that one idea and left the rest of the system. O'Neil also told traders to sell any stock that fell 7%. Our Foolish belief is that buying high only pays if you then refuse to sell.

Three buys after a jump (and what they're worth now)

Guardant Health (NASDAQ:GH), a cancer-diagnostics company, went public on Oct. 9, 2018, at $19. Six weeks later, we recommended it at $37.16, after the stock had already gained 96%. By Feb. 14, 2019, it was $48.87, up another 32%, and we bought it again.

Then it broke. Guardant peaked above $180 in February 2021, then ground down for three years to $15.81 on April 19, 2024, a low it has never revisited.

We were holding it that day, badly. Those two positions were down 57% and 68%. Every instinct says: average down.

We didn't. Seven weeks later we bought it at $30.50, nearly double the price we'd just walked past.

The science hadn't changed. On May 23, 2024, an FDA advisory panel reviewed Guardant's Shield blood test for colorectal cancer screening and voted 8–1 that it was safe, 7–2 that its benefits outweighed its risks. We recommended the stock a third time on June 11. The FDA approved Shield on July 29.

Colorectal screening fails on compliance. Roughly three-quarters of deaths happen to people who weren't up to date, because colonoscopies work superbly and get skipped. Shield is a blood draw at a physical they already booked.

The June 2024 recommendation has returned 430%, against a shade under 48% for the S&P 500 -- a gap of 382 percentage points. The 2018 pick has more than quadrupled, beating the market by 106 percentage points. The 2019 pick has more than tripled.

The pick that won by most is the one we bought after a 93% run!

Revenue has since caught up. It hit $982 million in 2025, and Shield's quarterly revenue went from $5.7 million to $41.6 million. Then in July, UnitedHealth Group (NYSE:UNH) agreed to cover the test, putting it within reach of some 100 million more people.

What holding actually costs

Trait #3 only shifts the odds, and Guardant proves it: The 2018 and 2019 picks carried the trait beautifully, then lost more than half their value. A 7% sell rule would have closed both positions in 2021. Seven years on, that 2019 pick is barely 15 percentage points ahead of the index.

In September 2025, weak data on the next Shield version sent the stock down, and Guardant lost $416 million last year against $1.7 billion of debt.

Guardant is also the flattering case. David is candid that the trait has led him into losers.

Drawdowns are routine. Counting declines of 50% or more from a prior closing high: Netflix (NASDAQ:NFLX) five since its IPO, Apple (NASDAQ:AAPL) five, Amazon (NASDAQ:AMZN) four. Every one of those Netflix falls was followed by a new high, and in the year after each, the stock gained between 55% and 725%. Its worst came after the Qwikster mess of 2011: an 83% collapse from a split-adjusted peak of $4.35 -- a price that looked expensive at the time, and a sixteenth of the high the stock would reach a decade later.

Buy high, then sit still

Trait #3 doesn't work alone. David says to look elsewhere if a stock offers just one of his six traits, because a rising price alone is only momentum.

When the business checks out, stop treating the run-up as a reason to pass. Excellent companies double, then usually double again. The investor who crosses one off because it already did is the investor who never owns it.

David asks readers to stick seven words on the fridge: "Buy high and try not to sell." Trait #3 is the first half of that sentence.

Which stock did you pass on because it had already run, and what were you telling yourself at the time? The price you refused is the easy part to remember. The reasoning behind it is what the rest of us can actually learn from. Drop it in the comments!

Tom Gardner has positions in Netflix. The Motley Fool has positions in and recommends Amazon, Apple, Guardant Health, and Netflix. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.