Motley Fool Review
Product Name: Motley Fool
Product Description: Motley Fool has been offering stock recommendations and investment advice since 1993. Over two decades later, they are still one of the largest financial media companies in the world.
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Quality of Research
Motley Fool has been offering stock recommendations and investment advice since 1993. Over two decades later, they are still one of the largest financial media companies in the world. We did an in-depth review of their stock advisor program to see if it was worth the money. Here’s what we found.
- 1 About Motley Fool
- 2 Motley Fool Stock Advisor Program
- 3 How Good Are Motley Fool’s Stock Picks?
- 4 Motley Fool Performance 2020
- 5 Motley Fool’s Investment Strategies
- 6 Is The Motley Fool Legit?
- 7 Is the Stock Advisor Program Worth the Money?
- 8 How to Make the Most of the Service
- 9 Motley Fool Stock Advisor vs. Rule Breakers
- 10 Motley Fool vs. Zacks
- 11 Motley Fool vs. Jim Cramer
- 12 Motley Fool vs. Robo-Advisors
- 13 Motley Fool vs. The S&P 500
- 14 Final Thoughts on Motley Fool Stock Advisor
About Motley Fool
Motley Fool is one of the most well-known multimedia companies in the financial industry. The company was originally founded in July 1993 by David Gardner and Tom Gardner, who still run the company today. The company provides a combination of both free news (similar to sites like MarketWatch and Yahoo Finance) as well as premium financial advice and investment newsletters. This is no small operation. Our Motley Fool review takes a closer look inside this operation to see whether or not the company is legit.
Motley Fool now employs over 300 people and is recognized as one of the top companies in the space. The company has maintained a positive reputation and is most well-known for its stock-picking service, Stock Advisor.
Motley Fool Stock Advisor Program
Motley Fool’s Stock Advisor program is a subscription service that offers premium stock picks backed by extensive research. Members get two new stock picks every month, as well as access to a list of all of the stock picks the company has ever made.
The Stock Advisor service claims to beat the returns of the S&P 500 by selecting high growth stocks that are set to outperform the overall stock market. Since its inception, the stock advisor picks have returned 522%, compared to 103% returns from the S&P 500. This is no small feat
So, what exactly does the program offer? Let’s take a closer look.
Monthly Stock Picks
The Motley Fool Stock Advisor service offers a few benefits, but the biggest value comes from the monthly stock recommendations. Subscribers will receive two new stock picks every month. These stock recommendations come from Tom and David Gardner, the company’s co-founders.
If you are just starting to build your stock portfolio, you can check out the “Best Stocks to Buy” list so you can start investing right away (vs. waiting for the two new picks every month). Below is a screenshot of the best “starter stocks” stocks from 2018. Two years later, these stocks have yielded exceptional returns (more on this later). Shopify (SHOP) alone is up over 700% from the time of the recommendation.
Of course, this list of starter stocks is updated regularly and the current 2020 list includes stocks that should yield exceptional returns in the coming years. Here is the 3-month performance of the 12 starter stocks I invested in recently:
36% returns in three months is no small feat!
The Motley Fool Stock Advisor service offers a handful of member benefits, but these stock picks are the reason I’ve been a subscriber for years. Most members sign up because they want simple stock picks and investment advice that is easy to follow. Motley Fool certainly delivers (we will get to this in detail later).
If you are looking for stock recommendations that beat the market, Motley Fool absolutely delivers. Feel free to sign up using the discounted link below.
If you want to learn more about the company, keep reading our Motley Fool review to learn everything you need to know. You can feel free to skip around the review to find the sections you are most interested in. If you have any additional questions, just leave a comment below.
The Gardner brothers do extensive research on the stocks they recommend. They don’t simply say “buy stock $XYZ” without any explanation. Instead, they share their research on the company and explain why they are making the recommendation. This research is thorough and includes commentary on the company, sector, and general market conditions.
While some people just want the stock picks, others prefer to understand why the stocks are being recommended. It can add some peace of mind to understand why you are buying a stock (vs. simply following a recommendation). Regardless, the newsletter caters to both groups. You don’t have to read the research reports, but they can be helpful.
The research can make you feel more confident in the stocks you add to your portfolio. The reports also shine a light on how the Motley Fool analyzes stocks, which can be an educational experience.
Subscribers have access to additional educational resources related to investing in the stock market. The members’ area contains market news as well as general investment lessons. While the stock tips are the star of the service, the educational content is a nice perk.
There are articles on the methodology the Gardner brothers use to research stocks as well as a few basic guides to investing. You can get access to investing information that may help you if you want to better understand the investment advice and stock picks you get from the company.
The members’ section offers a community forum where members are free to discuss stock picks and general investing concepts. The forum is surprisingly active and serves as a nice community to network with other investors and exchange ideas.
You’ll find members talking about stock ideas and supporting new members who have questions about the service or investing in general. The forum is a good place to go to talk shop or ask questions. You should never rely on financial advice from strangers online, but it’s nice to get feedback from an investment community from time to time.
How Good Are Motley Fool’s Stock Picks?
As mentioned above, most investors sign up for the Stock Advisor subscription to receive stock recommendations. Investors are looking to recoup the cost of the subscription through superior stock picks. As part of our Motley Fool review, we wanted to see how well these stock picks performed.
We are happy to report that, over time, the newsletter’s stock picks have outperformed the stock market. The stock recommendations are generally large-cap companies with lower risk than small caps and micro caps.
Additionally, the company provides multiple stock recommendations every month, giving investors the opportunity to choose from multiple stocks. You can find a list of all stock picks, including data about:
- The stock recommendation date
- The company ticker
- The market cap
- The risk level
- The performance since the recommendation (and relative to the S&P 500)
It’s beneficial that all stock picks are listed in a convenient table. This allows new members to analyze the performance and make decisions accordingly. Here is an example (to be fair, I’ve included historical picks instead of the most recent picks):
Some of the stock recommendations are companies you would expect to find on the list (such as Amazon and Apple), while others are hidden gems. Every stock recommendation is well-researched and backed by a full research report.
The team does a great job of presenting the “full story” in the research reports. They do not hype up positions in an attempt to get investors to buy the stock immediately. They share their bullish arguments while addressing any bearish counterarguments. Most stocks are accompanied by a risk rating to allow investors to decide whether or not the stock fits their strategy.
The company is also quick to jump on shorter-term market trends with special reports (such as their recent report on the cannabis stock boom).
Overall, the stock recommendations are well-researched. It’s important that new investors understand broader market conditions before entering a position into any of these stocks. Because most of these stocks are large caps, they tend to fluctuate relative to the broader market. While their performance is not interlinked, there is still a correlation. For example, during a strong bull market, most stocks will perform well (and the program’s picks are likely to outperform). During correctional periods, investors should be more cautious.
Motley Fool Performance 2020
At Top Trade Reviews, we pride ourselves on our thorough, up-to-date reviews of financial services. Accordingly, we wanted to provide an update on the performance of the Stock Advisor program in 2020.
2020 has been a crazy year for the stock market. We saw one of the most rapid declines in the stock market followed by one of the most rapid recoveries. So, how did Tom and David Gardner’s picks hold up during this time? Let’s take a look.
Subscribers have access to the company’s full track record. You can see every single stock recommendation and how the stock performed.
As of August 2020, the Motley Fool Stock Advisor service has offered 15 stock picks. You can find the full list of recommendations below (with the company names removed out of respect for paying subscribers):
This table shows the recommendation date, the recommendation price, and the stock’s return since the time of the recommendation. This is benchmarked against the performance of the S&P 500 from the date of the Fool’s recommendation. As always, you can see that the company is transparent and shows both winners and losers.
Let’s dive into these results to see how well the program’s stock picks really performed.
- The average share price of the stocks was $206.67. (Note: a stock’s share price doesn’t really matter, but some people like to know this)
- Of the 15 stock picks, there were 10 winners and 5 losers
- The average return of a winning stock pick is 70%
- The average return of a losing stock pick is -25% (Note: this is weighed down heavily by one really poor stock pick that had a -94.1% return)
- The average return overall is 38%
- The average return of the S&P 500 is 11.75% (using the same “buy” dates as the stock picks)
What does this mean for your portfolio?
Let’s assume you put $1,000 into each stock pick for a total investment of $15,000 throughout 2020.
- As of today, your $15,000 investment in Motley Fool stock picks would be worth $20,740, representing a profit of $5,740.
- If you had invested that same $15,000 in the S&P 500, it would be worth $16,762, representing a profit of $1,762.
Motley Fool stock picks would have made you an extra ~$4,000 over the year.
If you only put $100 into each stock pick for a total investment of $1,500, here’s what the results would look like:
- Motley Fool Stock Picks: $574 profit
- S&P 500: $176 profit
Even with a small $1,500 portfolio, the Fool’s picks would have made ~$400 compared to investing in the S&P 500.
This is quite an impressive feat. Even with small accounts, it’s relatively easy to recoup the $99/year membership fee.
Motley Fool’s Investment Strategies
Some investors simply want to know what stocks to buy and at what times. Other investors prefer to learn more about the rationale behind the financial advice they receive. There’s a wide range of investing strategies, such as momentum, value, and growth. So, how do David and Tom Gardner choose their stocks?
The company takes a well-rounded approach to their investment research. They account for broader market factors, sector trends, and the overall health of the companies they recommend. Fundamental research plays a major role in the decision-making process. The research team tends to assign a weight to both value and momentum plays. They seek to identify undervalued companies with positive catalysts on the horizon.
Personally, I find this to be a favorable strategy as it provides the best of both worlds. Investors can take advantage of undervalued stocks without waiting years for the markets to recognize the companies’ true values. While the stock picks are designed for long-term investors, they can also yield exceptional returns in the short run if you would like to take profits early.
The stock picks of this investment newsletter are time-tested. The company has been researching stocks for over two decades.
Here’s a great video of the company’s co-founder, David Gardner, explaining his process in more depth:
Is The Motley Fool Legit?
Motley Fool brings to mind different things for different investors. For investors who have been around for over a decade, Motley Fool is the reliable stock picker for maverick investors. For newer investors, the investment media giant is more known for “double down stock picks” and “triple buy alerts.” So, which side is more accurate? Is the company a legitimate stock picker or simply a promoter?
In short, The Motley Fool is absolutely legit.
While the Motley Fool has become more aggressive with its marketing over the past few years, the company’s core services remain the same. The Stock Advisor program is still as effective as ever, and it remains one of the best-priced programs on the market. There is one caveat, though.
You need to be able to look past the hype and avoid FOMO (fear of missing out). In our Motley Fool Review, we were focused on the quality of the Stock Advisor program. We ignored the hype and focused on the quality of the information and stock picks from this program alone.
Motley Fool will try to upsell you on certain services through marketing emails and promotions. While you’re welcome to explore these other Motley Fool services, I recommend sticking with the Stock Advisor service. It’s simple and effective. Plus, how many stock alerts do you really need? If you build a portfolio with a few great stock picks, you will be good to go. You don’t need to sign up for a bunch of different investing services to make money in the markets. While the company offers a lot of great services (like Motley Fool Options), don’t get carried away with the hype. Focus on getting the investment advice you actually need.
Is the Stock Advisor Program Worth the Money?
The Motley Fool Stock Advisor Program is one of the most fairly priced programs available. Some research services charge hundreds of dollars per month for their stock recommendations, but Motley Fool is affordable. One of the things we were most impressed with during our Motley Fool review was the pricing.
A Stock Advisor subscription can be purchased for $19 per month or $99 per year. Both plans renew automatically unless canceled.
At this rate, the Stock Advisor service is absolutely worth the money. At only $99 per year, Motley Fool Stock Advisor is easily our top rated stock picking service. A single stock recommendation can make back the cost of the subscription ten-fold.
I recommend going for the annual subscription for a few reasons. First, it is a way better price. You can purchase a full year of access for the price of five months on the monthly plan.
Second, the annual subscription is backed by a 30-day money-back guarantee. If you are unhappy with the service within the first 30 days, you can reach out to the customer service team to request a full refund. The 30-day money-back guarantee allows customers to take advantage of the better annual pricing without getting locked into a subscription they don’t want.
Lastly, you really need access to a Stock Advisor subscription for more than a month to get the true value out of it. The company makes two new stock picks per month and members are encouraged to build a diversified stock portfolio. It is recommended that you sign up for a full year to get the most value out of the service. If you only join for a month, you may miss out on some of the year’s best picks.
How to Make the Most of the Service
I have been a member of the Stock Advisor service for the past few years. If you want to make the most of the service, here are some insights.
Diversify Your Portfolio
In the stock market, diversification can help you minimize your potential risk. By building a diversified portfolio with multiple stocks, you will not be exposed to too much risk from a single company. If you look at the Fool’s track record, you will see that the portfolio succeeds in part by diversification. There are both winning and losing positions, but the winners far outnumber (and outpeform) the losers. This is achieved by spreading risk across a variety of different investments vs heavily weighting a portfolio on a single stock. Here is the portfolio allocation the company recommends for your brokerage account:
If you are new to investing, start by checking out the Fool’s starter stocks and best buys now so you can build a strong foundation. From there, you can continue to add new stocks as the company issues new alerts.
Focus on the Long-Term
If you are investing in the stock market, you need to to focus on the long-term. Day-to-day price fluctuations are just noise and, as an investor, you need to be able to handle them. Just take a look at the S&P 500 chart from the past 50+ years:
The market dropped almost 50% during the 2008 recession before nearly quadrupling into 2020. At the time, investors were panicking. In retrospect, we can see that the market recovered as always. Investors experienced a similar shock in early 2020 when the market dropped ~35% in a month. Here we are in October of 2020 and the market has already recovered.
When you invest in Motley Fool stock picks, focus on the bigger picture. Decide how long you want to hold the stocks for and then leave them alone. If you are particularly risk averse, set stop losses wherever you are comfortable (i.e. 10%).
If you’re still unsure about using Motley Fool’s Stock Advisor program, see how it compares to similar investment services below. We’ve reviewed all of the top stock advisory services, and these are our insights.
Motley Fool Stock Advisor vs. Rule Breakers
The Motley Fool offers a handful of premium investment services, but the most popular are the Stock Advisor program and the Rule Breakers program. Many investors are torn between the two, so we felt it necessary to make a quick comparison. You can read our full Motley Fool Rule Breakers review here.
Both programs have the same membership fee of 99/year or $19/month. The main difference between the services is the investment methodology used to pick the stocks.
The Stock Advisor program is the company’s flagship service. This service offers stock picks based around the methodology that made Tom and David Gardner renowned figureheads in the world of investing. Rule Breakers is a follow-up service primarily built on David Gardner’s methodology.
Both programs seek to identify stocks poised for exceptional long-term returns. However, Rule Breakers is more focused on growth stocks. In this sense, Rule Breakers is just a more narrowly-focused stock picking service.
We believe that the Stock Advisor program is more favorable to Rule Breakers for a couple of reasons. First, you get access to more stock picks and resources. Second, the Stock Advisor program is clearly the flagship service. It’s the service that made the Fool famous, and it even contains a lot of the elements of the Rule Breakers service.
When in doubt, you can’t go wrong with the Stock Advisor program.
If you sign up for the Motley Fool Stock Advisor service and find that you want even more stock picks, you can check out the Rule Breakers program. These programs actually work out very well together.
Motley Fool vs. Zacks
It’s hard to make an “apples to apples” comparison between Motley Fool and Zacks. While the services share similarities, they are also very distinct. Zacks is best for investors who want to combine their own research with Zacks’ proprietary tools. For example, Zacks gives every stock and automatic “Zacks Rank” rating. This rating is convenient when doing research on a lot of stocks. However, it can also make it difficult to narrow down the best stocks.
Motley Fool takes a different approach. The stock advisor program is a true “hands-off” approach to investing. The Fool’s team does the research, and all you need to do is follow the stock alerts. Of course, you should do some of your own research as well, but you don’t need to waste time filtering through a bunch of stocks. Motley Fool is an easy-to-use stock picking service that gives you investment advice that is easy to follow.
Zacks is best for investors who do in-depth research, whereas Motley Fool is best for investors who want to be given stock picks.
Motley Fool vs. Jim Cramer
Motley Fool and Jim Cramer are easily some of the most well-recognized stock pickers. Tom and David Gardner run Motley Fool, whereas Jim Cramer runs Action Alerts Plus. We thoroughly reviewed and compared both programs to see what the absolute best stock picking service was. After our Motley Fool review and Action Alerts review, we came to a clear conclusion.
We found that Motley Fool’s Stock Advisor program was better than Action Alerts Plus in almost every category. Both services provide stock pick alerts, but we much preferred everything about the Stock Advisor program. The Stock Advisor program is more diverse, easier to use, and costs less money.
Motley Fool vs. Robo-Advisors
Robo advisors have become increasingly popular over the past few years. Services like Betterment and Wealthfront allow investors to create customized portfolios in a matter of minutes. Essentially, robo-advisors simplify investing for casual investors. Instead of choosing individual stocks, investors can choose their investment goals, and risk thresholds and the robo-advisory program will automatically create a portfolio (mostly consisting of ETFs).
While both The Motley Fool and robo-advisors cater to investors who want help building their portfolios, the two services are very different. Robo-advisor portfolios consist primarily of ETFs (funds), whereas the Stock Advisor program recommends individual stocks. Accordingly, this is not an “apples to apples” comparison.
Automated portfolios tend to mitigate risk through diversification, whereas individual stock picks aim to beat the market returns exponentially. You shouldn’t expect to see annual returns of over 20% on a robo-advisor portfolio, whereas those returns are entirely possible with an individual stock pick.
So, which one is right for you?
If you want a “set and forget” investing option, robo-advisors may be a good fit. If you want to beat the market and achieve exceptional returns, the Stock Advisor program is a better bet. You need to be able to monitor and manage your positions, but the potential upside is much higher.
Motley Fool vs. The S&P 500
Many investors are aware of the fact that the majority of funds do not beat the S&P 500 (also referred to as “the market,” “market index,” or “broad market”). This is generally the case with robo-advisors as well (which we discussed above).
In most cases, if you are looking at diversified portfolios and/or mutual funds, you’d be better of going with a broad market S&P 500 ETF, such as the SPY. Historically, these broad market funds and ETFs beat diversified and specialized funds. That said, the Stock Advisor program is not a fund.
The Gardner Brothers who run the SA service aim to find stocks that beat the market and achieve exceptional returns – and they’ve been doing just that since 2002. They have a proven record of beating the market by a considerable margin. Since the launch of the Stock Advisor program, the Fool’s stock picks have yielded returns of ~374%, whereas the S&P 500 yielded returns of ~100%.
Final Thoughts on Motley Fool Stock Advisor
The Motley Fool Stock Advisor program is ideal for investors with long-term horizons. Over time, these stock recommendations have outperformed the market and provided exceptional returns. Motley Fool stock recommendations have beaten the stock market by over 400% since inception and the company has been at it for over 15 years. That’s really all you need to know. We were pleasantly surprised with everything we uncovered during our Motley Fool review.
At only $99 per year, you can’t go wrong with the Stock Advisor service. You will get excellent stock advice, great long-term stock recommendations backed by research, and two new stock picks per month.