Motley Fool Pro
Motley Fool Pro is a $1 million real-money portfolio, founded in 2008, that incorporates the entire range of investment strategies in pursuit of attaining consistent positive returns while also seeking to manage risk. Although they are primarily focused on buying and holding stocks for the long term, they also utilize ETF’s, employ options strategies, and they also use hedging strategies such as shorting stocks and using options. The current lead advisor is Jeff Fischer. The subscription consists of various trade recommendations, weekly email updates and access to the members-only Motley Fool Pro website and forums. Members also receive a complimentary membership to Motley Fool Options.
Motley Fool Pro’s stated mission is to: “earn members consistent, recurring profits with a high level of accuracy. Using a combination of long and short stocks, options, and ETFs, we aim to achieve positive returns over every rolling three-year period and to double our real purchasing power every 10 years. To stay on course, we developed a guide — our North Star.”
The North Star is what they refer to as a guide for their performance, which they calculate as: Inflation + 7%. They deny it is a benchmark (because you can’t invest in the North Star as you can for example, the S&P 500, which is a common benchmark), but for all intents and purposes you can consider it to be one since they strive to match or exceed that level of performance. The important thing to note here is that since inflation + 7% is always positive, they are aiming to achieve positive results over every rolling 3-year period.
Motley Fool Pro also aims for accuracy in their investments, and hope to have 75% of their trades result in positive returns. This is in contrast to some services who are more focused on overall returns, and would not be overly concerned if 75% of their trades lost money, as long as they hit a couple of home runs to get overall positive results in their portfolio. This is all in line with Pro’s goal to provide consistent, market beating results, but while at the same time managing risk.
Members receive the following:
- Investment recommendations at varying times (may include options, stocks, ETFs)
- Regular weekly email updates
- Regular updates on all current recommendations
- A complimentary membership to Motley Fool Options
Motley Fool Pro Performance
Because Motley Fool Pro executes so many different investment and trade strategies, both short and long, it’s not easy to report on the return of all their positions, like I have done in the other service’s reviews. Nor would it be appropriate. Since they measure themselves against a very specific mark, their North Star, and target rolling 3 year periods, it makes sense to look at how they’ve performed on that basis.As of January 31st, 2014, Motley Fool Pro’s annualized return on a rolling 3 year basis is 11.1%. In that same period, the North Star returned 9.1%, which means Pro has met its target of outperforming the North Star by 2%. It’s interesting to point out however, that they underperformed the S&P in that same time by 2.8 percentage points. Regarding their aim of achieving profitable results on 75% of their trades, Pro claims to have been profitable of 80% of their trades as of June 2013. For the most recent performance results, please see the monthly performance reports I provide.
What Motley Fool Pro is Not
Motley Fool Pro is not an active trading service. This is generally true of all Motley Fool services, and despite its use of options, shorts and ETF-based hedging strategies, Pro is not a service that fires off multiple trade recommendations each week. Jeff Fischer and team still aim to hold stocks for the long-term (generally 3-5 years). They layer on their options trades and hedging strategies over that bedrock of their philosophy.
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 Motley Fool Pro 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 Pro is the closest thing to a hedge-fund that Motley Fool has. And I mean that in the classical sense and in the best possible way, for those of you who may have negative opinions of actual hedge-funds. Their use of active risk management techniques, such as shorting ETFs and employing certain options strategies, makes it unique to the Motley Fool services. Their approach is also very methodical and formulaic. Even their “North Star” guidepost of Inflation + 7% is a fairly sophisticated (it changes year to year, and is based on a government published inflation data) and formulaic goal, especially when compared to other Motley Fool services that purely try to ouperform the S&P 500.
On one hand, Motley Fool Pro is what most investors, especially novice investors, are looking for in an investment newsletter service. It provides specific investment advice in the form of price guidance for buys and sells, as well as specific allocation guidance. Pro also aims to have 75% of its picks be profitable, and most beginning investors tend to get nervous when any of their investments go into the red. And they actively manage risk, so in theory their losses will be limited. And Jeff Fischer and his team are actively involved in the community, providing ample updates via memos or responding to member questions on the boards. Their help documents are among the most helpful of any of the Motley Fool services.
But on the other hand, Pro uses a number of advanced strategies that only experienced investors will understand, let alone feel comfortable in executing and holding it in their portfolio. Shorting index ETFs and making bets on market volatility might sound exciting and like a sure fire path to investing profits in any environment, but unlike an actual hedge-fund, it’s up to you to make all those trades, and make them appropriately for your own portfolio. If you don’t follow their instructions exactly or correctly, you can quickly make a mess of your portfolio. Of course, you don’t have to follow the more advanced trades, and just do what you feel comfortable with, but if that’s the case, what’s the point of paying the premium price of the membership? That’s the situation I found myself in – even though I consider myself an advanced investor, I don’t short stocks, nor do I like to hedge my portfolio too much, and ended up only following about 50% of the investments they recommended.
I’d be remiss if I didn’t speak more about Jeff Fischer. He has a tremendous financial mind, and is a terrific lead analyst. In my opinion, he is probably the best all around professional finance expert at Motley Fool. Someone like David Gardner, who has a tremendous track record and an amazing instinct for finding great companies, still doesn’t have the overall ability for portfolio management and financial analysis that Jeff Fischer does (I say that with all respect to David Gardner, and I bet he’d admit I was right anyway). Jeff is also very dedicated to the portfolio and the membership, and it comes through in his attention to detail in his trade updates and weekly memos.
The community forums for Motley Fool Pro are also extremely helpful. There are also 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.
So I can’t recommend Motley Fool Pro for beginning investors, but if you are an experienced investor looking for a service based on risk management and solid returns, Pro might be for you. I also feel that unlike other Motley Fool services, if you want to get the full value of the service, you need to commit to following all of their trade recommendations, and not pick and choose.
Motley Fool Pro only opens for membership at select times, so follow my blog for updates, and I’ll be sure to let you know when it’s back open.
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