Inside Value

Inside Value
4.5 (89.23%) 13 votes

Motley Fool Inside Value

Inside Value, founded in 2004, is an investment newsletter that focuses on companies trading below their intrinsic value. The current lead advisor is Rich Greifner. The subscription consists of a monthly newsletter, weekly email updates and access to the members-only Inside Value website and forums.

Inside Value is a long-term, buy and hold long-only service. They are focused on recommending companies that are trading below their intrinsic value, which they determine using various valuation models such as Discounted Cash Flow (DCF) and Dividend Discount Method (DDM). From their website they “scour the market for companies that trade for $0.30 to $0.50 on the dollar and … seek out good companies that have had a bad quarter or two, companies that are turning around after troubled times, or cyclical companies that are moving toward the high points of their business cycles.”

Unlike many of the other Motley Fool investor newsletters (Stock Advisor, Rule Breakers, etc.), Inside Value provides both an “Intrinsic Value” for each of their recommendations, as well as a “Buy Below” price.

Members receive the following:

  • One stock pick each month, but can be announced at any time during the month.
  • 5 Best Buy Stocks: a monthly list of their highest conviction buys (including risk ratings)
  • Regular weekly email updates
  • Miscellaneous updates on the Inside Value website
  • A list of 5 “Core” stocks which they update from time to time, considered their best overall investment ideas for the long-term

Although Inside Value does base their recommendations on stock valuations, they are still a long-term buy and hold service and once a stock is recommended, rather than issue sell recommendations if a stock passes its intrinsic value, they tend to put stocks on hold.

Finally, in 2013, Inside Value was named as the Top Investment newsletter by the Hulbert Financial Digest.

Inside Value Performance

As of this writing, Inside Value is outperforming the S&P by 14% overall. Although not as flashy as the returns of other Motley Fool services like Stock Advisor and Rule Breakers, the returns tend to be more reliable. Note below that 60% of all their picks have outperformed the S&P, the best of all the Motley Fool recommendation services. You can also see below that Inside Value has a more clustered performance spread than other services, with less outsize performance in general.

Performance vs. the S&P

What Inside Value is Not

Motley Fool Inside Value is not an active trading service. Rich Greifner and team hold stocks for the long-term. If a stock issues a bad earnings report and the stock drops 7% in the morning, you will not get an immediate notification with an update and definitely no alert to sell. You can however go to the message board for that stock, and are likely to find an update from one of the knowledgeable fellow members or one of the various other analysts assigned to keep an eye on the boards. This lack of immediate guidance has at times been a source of frustration for some members who panic when they see a stock in their portfolio taking a sizable hit. However it’s important to understand that this is not what the Inside Value service is about. It’s about long-term investing, and you should be able to stomach some rocky days.

Even in cases where the stock drops on potentially alarming news like a CEO resigning or even a rumored accounting scandal, for example, they rarely will issue a Sell or Hold recommendation that day. Their tendency is to digest and analyze the news and issue a more detailed response a day or two later.

Motley Fool Inside Value is not a portfolio service either.  You do not receive any guidance on how many shares of a recommendation to buy. They also do not view their picks as being part of a holistic portfolio so if they recommend 4 pharmaceutical firms in a row, that doesn’t necessarily mean they are recommending their members go overweight on an allocation in that industry. However, they do provide a risk rating for most of their stocks, but it is up to each individual to assess how they want to build their individual portfolio.

My Take

Inside Value has a lot going for it. It doesn’t have the run away returns of the growth focused services Rule Breakers and Stock Advisor, but it does nevertheless have very strong returns (see latest performance stats for all Motley Fool Services, here), with arguably less risk.

Similar to Income Investor, Inside Value’s approach is much more quantitative-based than either Stock Advisor or Rule Breakers. By that I mean it offers both valuation and buy-below guidance, and a straightforward risk rating of High, Medium, or Low.  And while they definitely consider qualitative aspects of their recommendations as well, the well-defined numbers approach will appeal to those who seek more structure in their investment guidance.

Probably the two biggest benefits of the service are the sell/hold recommendations and the education you can gain around valuation based investing. This is the quintessential investment approach of modeling how much a company is worth, and then determining what stock price represents a good investment.

The sell recommendations come as a result of the stock price greatly exceeding the expected value of the company. Figuring out when to sell a stock is arguably more difficult than deciding when to buy it. Investors have a tendency to sell too soon (and usually at a loss, if they start to panic) or too late, riding a stock down into the dirt, again often for a loss. Having someone advise you on when to sell, can be very reassuring and helpful if you lack the discipline or investing knowledge yourself.

The community forums for Inside Value are also very helpful. There are some very knowledgeable members of the community who provide professional caliber analysis and commentary not just on individual companies but investing in general.  Investors of any experience level will learn something here. In particular, if you are a novice investor, you will find many fellow members, in addition to the Motley Fool analysts, that will be happy to provide helpful and in-depth guidance and answers to your questions. There is also a lot to be learned on these boards as it relates to company valuation and that approach to investing.

Consistent with the other Motley Fool premium subscription boards, the Inside Value forums are a very friendly and supportive environment. There are rarely any “pump and dump”-type posters like you see on other public boards, and rarely do you encounter any overly aggressive or obnoxious posts either. Any perpetrators of these offenses are usually quickly called out.

One thing that is important to point out is that Rich Greifner became lead advisor in October, 2014. Before that it was Joe Magyer, and in my previous review of Inside Value I stated:

And finally, Joe Magyer is a tremendous analyst, probably one of the best from all of the Motley Fool services. Him and his team do a great job and add a lot of value to the service. If he were to leave, it would detract from the newsletter.

So with Rich taking over, I’m keeping an eye on the service to see if performance suffers at all, or if the quality of the service in general changes. I’m happy to report that so far, so good, and it seems that Rich has stepped competently into Joe’s big shoes. That said, investing is a long term game, and so I’ll check in periodically on this.

Motley Fool Inside Value is currently available at the price of $199/year, and you can find their sign up page here. You can also sign up for a 30-day trial, during which time you will have access to the entire site, including the full archive of prior issues and updates. My suggestion, if you are interested in trying out Inside Value, is to sign up for the trial when you know you’ll have some free time to dive into all the different areas of the site.

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Leave a Comment

{ 4 comments }

  • Doug Miller March 10, 2014, 2:11 pm

    Kevin,
    I have been a Fool subscriber since 2004. I currently subscribe to MDP 360, which gives me access to all of the basic newsletters (excluding Options, which I am not interested in). Inside Value is far and away the easiest for most investors to use. If you look at the entire history of every recommendation, only a small percentage have actually lost money. This means the average investor can invest in few or many of the picks, and likely succeed. The stocks picked also have much lower volatility than, say, David’s picks in RB and SA. Also, much of the returns in SA or RB have come from a relatively few excellent picks. Miss those and you are not going to get the advertised returns. Many the folks I see posting on the RB boards are obviously not suited to be investing in RB type stocks. Panic over a 5% drop in a stock indicates you probably need to be in CDs, not RBs. According to Hulbert, IV has achieved something like 14.7% annual return. That almost quadruples your money over 10 years. (I was a founding IV member, and a founding RB member. The service was originally run by Phillip Durrell, who is still part of the team).

    Reply
  • Ed March 14, 2016, 1:33 am

    Like some of the other services, they often offer this one for $49 a year, still with the 30 day guarantee.

    Reply
  • Craig October 8, 2016, 11:32 pm

    Another VERY good job in overviewing IV, Kevin. Many thanks from those of us who need and appreciate your advice!

    Reply
  • Clayre Haft December 11, 2016, 12:06 am

    Interested in a five year summary of Inside Value .

    Reply