As an investor, stocks can be a valuable part of your investment portfolio. However, if you want to make the highest returns possible, you will need to actively select stocks you expect to outperform the market.
Of course, this can be daunting for almost every investor. So, this is where stock picking services come in.
That said, every stock-picking platform is unique. With that in mind, the Motley Fool is considered one of the biggest names in stock market investing. This is probably because it has a strong history of beating the market.
So, in this review, we will look at Motley Fool's Performance to help you determine if the service is really worth it.
Why Motley Fool?
You probably are wondering, why Motley Fool and not any other stock picking service? Well, it’s because, for more than a decade, the company has outperformed the broader market through its Stock Advisor and Rule Breakers services.
Yeah, you heard that right! You see, the company offers two premium services namely the Stock Advisor and Rule Breakers.
Stock Advisor was established in 2002. And since then, its average picks have outperformed those of the S&P 500 by 4-to-1.
The Rule Breakers, on the other hand, was started 2 years later after the Stock Advisor. And over the last 15 years, the service has more than tripled the S&P 500.
How Does Motley Fool Stock Advisor Work?
One of the stocks picks comes from David while the other one is from Tom and is based on their investing criteria. David’s recommendations focus on companies with “undeniable and long-term trends”.
Tom’s picks, on the other hand, focus on great companies that operate in beaten-down industries. Simply put, these are companies that are poised to make a comeback because of their strong management ownership.
Besides the two new picks, members also get 10 starter stocks along with 5 stocks which are the best timely buys. Some of the starter stocks come from past recommendations and are designed to help investors build their investment portfolios.
But what is the performance of Stock Advisor’s stock picks? Let’s dive into that right away.
Motley Fool Stock Advisor’s Track Record
According to Motley Fool, the average Stock Advisor picks have returned over 681%. And over the years, the service has more than quadrupled the S&P 500.
But how, you ask? Well, it’s probably because the team usually focuses on overlooked companies that they believe could be poised to shatter the market.
That said, let’s have a look at some of the most recent stock recommendations by Stock Advisor and their performance. This is as of November 8, 2021.
A good example is Netflix Inc which the Stock Advisor team recommended and has since grown up to 467.56 % since 2016. Another recommendation that we have seen offering huge returns is Shopify Inc. For the past year, we have witnessed Shopify grow by 69.93%.
Another Stock Advisor pick that we have seen beating the market has to be Tesla Inc (TSLA). You see, over the past 5 years, Tesla’s stocks have gained by 2,891.41%. However, if you had chosen to trade the same stocks for a single day, then you would have made a loss of 4.84%
This, therefore, explains why Motley Fool recommends buying and holding stocks for at least 5 years.
As if that’s not enough, the October 2019 pick of Zoom Video Communications Inc (ZM) is up by 319.19%. The stock had hit its peak in October 2020. Therefore, if you had chosen to close the trade in October 2020 rather than November 2021, you would have made extremely high returns.
How Does Motley Fool Rule Breakers Work?
The Rule Breakers works almost the same as Stock Advisor, but with a couple of twists. For instance, just like Stock Advisor, members also receive two new picks each month.
You also get 5 Best Buys now stocks that are selected from over 200 stocks. As if that’s not enough, the Motley Fool team provides you with up to 10 starter stocks.
But of course, there are differences between the two services. One of them is that the Rule Breakers feature picks from David Gardner alone while Stock Advisor’s picks come from both Tom and David.
Additionally, unlike the Stock Advisor service, the Rule Breakers focuses on high-growth stocks. Simply put, it is built on the conviction that investing early in high-growth companies will produce the highest returns in the long term.
Also, it is worth mentioning that the Rule Breakers focuses on companies with certain characteristics. Some of these attributes include companies with excellent consumer appeal, a strong management team, and a good historical price appreciation.
Motley Fool Rule Breakers Track Record
Now, you are probably wondering, what is the performance of Rule Breakers’ stock recommendations? Well, according to the official website, the average stock picks rate of return is over 376%.
But what is the performance of Rule Breakers’ recent stock picks? Let’s take a closer look and find out.
If we look at the stocks of Novocure Ltd (NVCR), their value was $53.12 in June 2019. However, as of now, the stock's value has risen up to $107.42 which is double the amount.
Another example of recent Rule Breakers recommendations is from Quidel Corporation. Their stocks as of November 2016 to November 2021 have outperformed the market by a whopping 472.71%.
Additionally, the November 2019 pick of Etsy Inc. (ETSY) is up over 100%. As of November 1st, the stocks were valued at 45.66 USD. Right now, the stock’s value is 260.86 USD.
That’s a massive gain, right? Therefore, it makes a lot of sense to buy and hold stocks which is Motley Fool’s investment rule.
What Is the S&P 500?
So, how does Motley Fool compare to S&P 500 TR? Well, before we jump into that, let’s first find out what exactly is the S&P 500.
Also referred to as the Standard & Poor’s 500 or “the market”, the S&P 500 is a stock indicator. It is used to measure the value of the 500 largest companies in the United States.
Compared to other stock market indexes, it is considered the most stable metric for measuring how the US stocks are performing.
Some of the companies in the S&P 500 include Johnson & Johnson, Microsoft Corporation, Amazon.com Inc., Apple Inc., and Tesla Inc.
And to invest in the S&P 500 index, you can choose to buy shares of all the 500 individual companies. You may also buy an exchange-traded fund or a mutual fund that tracks the market.
Motley Fool Stock Advisor Performance vs. S&P 500 Total Return
Now that you know what S&P 500 is, let’s see how it compares to Motley Fool’s Stock Advisor and Rule Breakers services.
According to Motley Fool, Stock Advisor’s picks have beaten the market for the past 19 years. They also claim that Stock Advisor recommendations are up 680% dwarfing the S&P 500’return of 146%.
A good example is if you invested $10,000 in 2002 via Stock Advisor, as of October 2021, you would have over $350,000.
But what if you invested the same money in 2002 through S&P 500 TR? Well, as of October 1, 2021, your returns would be just a little over $50,000 when calculated by time-weighted return.
So, while S&P 500 returns are decent, they are not that great compared to those of Stock Advisor. This is probably because the S&P 500 index is so diversified.
The Stock Advisor service, on the other hand, only recommends stock with the potential of enormous growth. Not to mention, it comprises professional analysts who are always quick to notice market trends.
And compared to the S&P 500, Stock Advisor considers companies of all market capitalization and even industries. This explains why it’s able to beat the market by a huge margin.
Motley Fool Rule Breakers Performance vs. S&P 500 TR
The Rule Breakers does not offer as huge returns as Stock Advisor when compared to the S&P 500. Nevertheless, the returns are significant in comparison with those of the market.
You see, Motley Fool claims that Rule Breakers’ returns are 378% versus the S&P 500, which has returned 126%. So, we can say that Rule Breakers has more than tripled the S&P 500 TR.
This means that if you invested $10,000 in 2004 via Rule Breakers, you would be having over $120,000 as of October 2021.
However, with S&P 500, you would receive slightly over $50,000 as of October 2021. As you can see, the difference in returns is quite huge.
Therefore, it would only be fair to say that Rule Breakers’ performance is far better than that of the market.
Overall, if you're looking to maximize your market returns, the Motley Fool service is worth considering. After all, it has proven to outperform the market over and over again.
That said, it is worth mentioning that not every one of their picks is profitable. On top of that, their recommendations may sometimes take a few months before they start moving up. Therefore, you need to be patient.
Nevertheless, a few of their picks over the last 5 years have more than doubled and others tripled. So, when it comes to Motley Fool's performance, we can say it is excellent, especially when compared to the S&P 500 TR.
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