Motley Fool puts out a couple of highly rated stock newsletters. Their Stock Advisor publication garnered our highest tier 1 classification and has received our annual award as one of the best growth stock publications in the past. It is interesting to note that less than half of their stock recommendations have beaten the returns of the S&P 500, with a multitude of them suffering significant losses.  That has been more than offset by the many stocks that have gone on to gains of 1,000% or higher.  That’s what investing in growth stocks is about.  Your losses are limited to 100% but your gains on a stock can increase by a multiple of 10 or higher if you’re lucky.

Motley Fool Rule Breakers has also done quite well lately but that’s partly due to the fact that the highly volatile, small-cap growth stocks have performed extremely well of late.  We don’t rate it as nearly as high because the stock selections are highly volatile and have suffered large losses during market downturns. To date, less than 40% of the Rule Breakers picks have beaten the returns of the S&P 500. Until the newsletter can show a little more consistency in outperforming the small-cap benchmarks over bull AND bear markets, we don’t rate it as a top pick.

Market Pass was introduced in April of 2018. The newsletter thus far is a combination of select stock picks from Stock Advisor, Rule Breaker and the editors of the now-defunct Inside Value and Hidden Gems newsletters. It’s intended to be a broader offering of stock recommendations including both growth and value. The returns so far have been disappointing in relation to the S&P 500. At a hefty annual price tag of $750 or higher (what we were offered after a 50% discount), we’re waiting to see if the results fare better going forward.

Discontinued Motley Fool Newsletters

Like Mutual Fund companies that get rid of funds that aren’t performing well, Motley Fool will discontinue newsletters that aren’t performing well.  Motley Fool Hidden Gems, Inside Value and Income Investor, were all discontinued in April of 2018.  A new product, Market Pass was introduced at that time.

This is similar to what happened to their Million Dollar Portfolio which was reset in 2015 due to poor performance.  One of the portfolio products which took its place, the Supernova 2 offering got off to a rough start in 2012 and is having trouble recovering. We would advise caution on these products until they’re able to establish a successful track record.

Portfolio Products

Due to the high subscription costs, the Supernova, Pro and Everlasting portfolio offerings are targeted towards investors with $100,000 or more to allocate to these funds.  If your account is less than that, the fees (subscription costs) will eat away at any out-performance the portfolios have offered to date. While these portfolios have performed well in the bull market, I’m withholding any ratings until they go through a bear market.  As we’ve seen in the past, Motley Fool performs extremely well in growth/momentum markets but hasn’t fared well in bear markets.  This was evident in the initial results of their Million Dollar Portfolio.  Once these offerings have gone through a complete cycle we’ll have a better grasp of what they’re able to accomplish.

Motley Fool One carries a hefty price tag which you have to consider as a fee in calculating returns.  If you have a $100,000 account and you’re paying $3,000 a year for the service, that’s a 3% fee that you have to deduct from your returns.  It’s an extremely high hurdle to overcome and much higher than that of active mutual funds. I would suggest if you go in this direction to compare your returns AFTER subscription costs  ( fee’s) to that of an Index Fund or simply subscribing to a stock newsletter and investing an equal amount in each stock.

As we have seen, Motley Fool has a tendency to re-set and re-invent their offerings after bear markets and periods of poor performance.

Positives

1) David and Tom Gardner provide insightful stock analysis along with a sound investment philosophy to follow.  Their success in helping and educating investors over the years is highly commendable.

2) Motley Fool provides a sound list of investment ideas which provide an excellent stocks to watch list.  The analysis provides a sound overview of why you should consider owning the stock along with the economic advantages the company has in their industry.  Many of the stocks you may not be familiar with.

3) They expect to hold stocks long-term which reduces capital gains taxes and minimize trading costs.  You should expect to hold stocks for a minimum of 3-5 years on average, if not for a lifetime.

4) A large number of securities held which increases diversification and decreases the amount of risk you’re taking on any one stock. Bad news in a single or handful or holdings will not devastate your portfolio.

5) As a new subscriber, they provide their list of best buys and core holdings to get you started in the right direction.  This makes it easy to scale into a working portfolio following their best selections.

6) You gain access to the Motley Fool community of subscribers through a forum where you can post questions and get them answered. This eliminates much of the useless spam you find on the message boards such as Yahoo Finance.

Negatives

1) In 2014 Motley Fool changed the way it tracked its newsletters returns, putting them in a more favorable light.  By averaging returns, their multiple recommendations of a handful of stocks, along with the outsized gains of those stocks, easily offset the many losers over the years.  For example, a 10,000% gain in Amazon will offset the 90% losses in other stocks.

2) The results of Tom Gardner lag that of David Gardner. After fees, the results of Tom Gardner are not much better than an index fund.   If you stick with the stock picks of Tom Gardner you can potentially increase your returns substantially.

3) One or two stocks are selected each month regardless of current market conditions.  This is in keeping with their investment philosophy of always being invested in the best stocks that the market has to offer at all times.

The problem with this philosophy is that it doesn’t take advantage of extreme market conditions. There’s a lot more value and upside potential in stocks after market downturns, such as the years 2003 and 2009. Likewise, your stock selections can become very overvalued during the later stages of bull markets as we saw in 1999 and 2007.

4) Because the Motley Fool has such a large following it’s often hard to replicate their stock newsletters published performance results. If you receive the newsletter after other subscribers, many of their recommendations have already popped in price on a buy recommendation or dropped on a sell recommendation, leaving you out of the party.

5) The number of winning stocks has averaged only 55-65% over time depending on the newsletter. A few big winners, notably multiple recommendations of Amazon, Priceline, Apple, and Netflix among a couple others, account for the majority of their market-beating gains. If you’re not in those stocks at the right time you can greatly under-perform published results.

6) The Motley Fool newsletters, in general, are not valuation based. In other words, they don’t tell you at what price to buy or sell a stock, only which ones to invest in. They do occasionally provide sell recommendations but these are typically after a stock has already suffered a large loss. This is one of the main complaints of their subscribers.

 Motley Fool Newsletter Reviews

The Motley Fool is an online multi-media financial investment and planning stock market newsletter giant. Their philosophy is simple: “To educate, amuse & enrich.” Their goal is to provide consumers with valuable financial planning resources without boring them to distraction in the process.

Motley Fool follows a similar format for their Stock Advisor, Rule Breakers, Insider and Hidden Gems newsletters. Each month you receive 1-2 stock recommendations, a list of 5-10 core stocks and 5-10 of the best stocks to buy now. In addition, you receive email updates and access to their member’s only website.

All selections are deemed to be a buy at the current price. This is due to their investing philosophy – because you can’t time the market it’s best to always be invested in the best companies that the market has to offer.

One of the chief complaints of Motley Fool subscribers is that they don’t provide guidance on when to buy or sell a stock. The biggest source of frustration is the lack of immediate guidance on what to do with a stock that runs into problems or suffers large losses.

The response of the newsletter editors is that they will typically take a day or two to digest what the news means and then provide a hold or sell recommendation. Although this can be frustrating to investors, it’s prudent because they don’t overreact to bad news and make the same mistakes that hurt many novice investors.

On the other hand,  nothing prevents subscribers from investing in overvalued stocks or being fully invested during brutal market downturns and suffering large losses.

Additional Resources

The Motley Fool features page after page of valuable financial insights. This is one of the quirkier stock market newsletters, but that shouldn’t throw off visitors. In fact, it is quite refreshing. The information is well organized into clickable links and presented in a way that anyone can understand it, even if they are clueless about investing.

In addition to stock advice, users will enjoy access to several financial planning tools that will calculate everything from figuring out how much you need in savings to deciding if it makes better financial sense for a college student to live at home, on campus, or rent an apartment.

Getting back to the heart of their stock investment newsletters, Motley Fool offers everything investors need to make and monitor their investments. News stories that affect stocks are presented in a very readable format along with tips about how this current event could affect investments. You’ll learn the basics of investing including how to invest, when to invest, and why to invest. Every stock investment option available is presented at this stock market newsletter’s website.

What Do Subscribers Think?

Judging from the looks of it, Motley Fool is one of the most loved online stock market newsletters, if for nothing other than their fun attitude toward trading. Motley Fool receives a 4 out of 5-star rating by its users with many of them expressing their joy over finally being able to understand the complex world of stock trading. One testament after another tells about their excellent performance. Just take a look at some of these quotes:

• “Reassuring and welcoming to the first-timer!”

• “If you know a company’s stock symbol, there’s very little reason you’ll ever have to leave the Fool to do research. You can find balance sheets, cash flow, and income statements, and Security and Exchange Commission filings, as well as recent news.”

• “The Fool is about educating people on how to properly manage their whole financial lives, not just stocks.”

• “Here’s the Motley Fools (good) advice in a nutshell – 1. Save money. 2. Avoid taxes. 3. Look out for fees. 4. Don’t try to beat the market, since you probably can’t.”

It looks like that of all the stock market newsletters out there, Motley Fool may be the best place for investors new to the world of stock trading who also want to take hold of the rest of their financial situation.