Better Late Than Never: Special Ops and MDP Deep Value to Shut Down

Better Late Than Never: Special Ops and MDP Deep Value to Shut Down
5 (100%) 2 votes

After years of dismal performance, the Motley Fool has announced that it is shutting down both their Special Ops and MDP Deep Value services.

It’s about time.

I’ve been calling for them to give Special Ops and MDP DV the “old yeller” treatment for a while now. I think I first officially put them on a death watch back in February of 2014. Then in January 2015 they announced some big changes at Special Ops (and the removal of Ron Gross from the Million Dollar Portfolio lead advisor role) which I likened to rearranging chairs on the Titanic.

A scant 20 months later, they are pulling the trigger.

The announcement email sites poor performance and declining member participation, and the shut down will occur in the next few weeks:

In the coming weeks, we’ll be shuttering the dedicated websites for these services, including their discussion boards and coverage, and the advisors will no longer be making real-time trade alerts or maintaining the services’ online portfolios.

Performance has definitely been terrible. When I first mentioned the death watch for Special Ops in 2014, their average total returns were trailing the S&P by -68%. Little did I know that would be their high-water mark, and performance only got worse from there. When they announced their changes a year later, it had fallen to -87%. For the last 5 months (and 8 of the last 10), they’ve been below 100%. In their most recent month, they hit an all time low of -110% below the S&P. Even worse than their performance relative to the S&P was the fact that their absolute average returns were negative or near 0 for 10 of the last 12 months.

MDP Deep Value followed a similar death spiral with February 2014 performance vs. the S&P at -27% also their high-water mark, and their most recent month at -90%. While the absolute returns were strongly positive, in the last 12 months those returns plummeted to the single digits.

Beyond performance, I think the biggest problem is that the methodologies of these 2 services were entirely outside the strengths of the Motley Fool philosophy, which is basically different flavors of long term buy and hold investing. As I said in my prior post back in January 2015:

I think that’s the problem with this type of investing. In theory these severely undervalued or misunderstood investments will one day unlock their value and you’ll make a lot of money. The problem is that hedge funds and private equity firms have armies of high paid analysts searching for the same opportunities. I don’t think the Motley Fool can consistently compete with those types of resources on this playing field where it’s not about long term, buy and hold investing, where you can beat the hedge funds just by holding on longer. This is about identifying the opportunities early and getting in on the investments before every one else catches on. How many times can Motley Fool do that – enough to produce that long term accuracy they are now focusing on? I’m not convinced they can.

Seems that I was right (if only I could have this kind of foresight with all my investing!).

Motley Fool One members will continue to have limited access to the services via the MF One Fool IQ tool, which is their in-house stock screening tool and will allow them to see what stocks those advisors are watching or recommending, as well as updates on the active recommendations in both Special Ops and MDP DV. In my view this is really just a way to quietly wind the services down entirely, and throw a bone to the high-paying One members who might have been following those services.

Although I’m sure a shock to the small number of fans of this service, this is absolutely the right decision. Hopefully, Motley Fool will instead focus on their strengths, and better utilize the resources that were dedicated to these two services. For anyone looking for a replacement for these services, I would suggest Inside Value, which also follows a value-investing approach, but actually performs consistently well.

{ 7 comments… add one }
  • Steve October 12, 2016, 7:57 pm

    This was a truly awful service. I cancelled it years ago. They made some horrendous recommendations in the energy sector that got pounded when oil prices dropped. See UPL, SCPZF, CHK, Double Eagle Petroleum (can’t find the ticker) and Heckmann Water. Moreover, they sold some (like CRL and DENN) that did very well afterwards. I think one of the analysts there is now in charge of the Income Investor.

    Reply
  • Julie October 28, 2016, 10:28 pm

    I followed Sarepta for a long time and you kept saying to sell it when I finally did not too long it later it went up 80% in one day I don’t believe what you say anymore. You’re only taking a guess just like me and I’m sorry that you were wrong

    Reply

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