Motley Fool Stock Advisor Review
Stock Advisor is Motley Fool’s flagship investment newsletter service, started in 2002. The subscription consists of a monthly newsletter, weekly email updates and access to the members-only Stock Advisor website and forums.
Stock Advisor is a long-term, buy and hold long-only service. Members receive 2 stock picks each month, typically on the 3rd Friday of each month at noon. Team David and Team Tom each picks one, independently of each other. You also get a list of 10 Best Buy stocks each month (5 from Team David and 5 from Team Tom). There are regular weekly email updates, and the Stock Advisor website will have miscellaneous updates on a regular basis. They also publish a list of 10 “Core” stocks (5 from both Tom and David), that they update on an annual basis, and consider their best overall investment ideas.
Stock Advisor analysts will also issue “Hold” or “Sell” recommendations on stocks when they deem appropriate. But given the long-term, buy and hold philosophy of the service, Hold and Sell recommendations are unusual.
Stock Advisor Performance
You can view up to date overall Stock Advisor performance, along with all other Motley Fool services, here. Team David’s average total returns are 269% vs. 56% for the S&P. Tom’s performance was 78% in the same time frame. Those overall results are very strong but a lot of that performance, particularly for Team David, is driven by a small number of monster picks like Amazon that have crushed the market over the service’s lifetime.
The charts below demonstrate some of that. Notice that for Stock Advisor, 57% of all their picks have actually underperformed the S&P. Yet a total of 46 picks have outperformed by 100% or more, including 11 that have outperformed by 1000% or more, which raises the service’s overall average returns.
Performance vs. the S&P
What Stock Advisor is Not
Motley Fool Stock Advisor is not an active trading service. David and Tom Gardner view their investing horizon as at least 3-5 years, and they 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 Stock Advisor service is about. It’s about long-term investing, and you should be able to stomach some rocky days.
However, if a stock moves up or down by 10% or more, the advisors will post an official “10% Promise” response in which they will give their analysis on the reason for the movement in the stock price.
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 Stock Advisor is not a valuation based service. You get the Monthly Recommendations and you get the monthly Best Buys, but they do not tell you when to buy the stock, and more importantly, nor do they tell you at what price to buy them. They do not issue “Buy Below” guidance nor do they give any valuations of what they think their picks are worth. It is implied that when a stock is selected as a Monthly Recommendation or a Best Buy that the price represents a good entry point, but the service focuses on the overall quality of the company as an investment, and not on specific price levels or momentum indicators. There have been many instances where the a stock drops significantly shortly after being recommended, which again can cause some frustration, but unless there is a substantial change to the investment thesis, Motley Fool’s general view is that they are investing for the long-term and if the stock pick plays out as expected, a small dip in price will not matter in the long-term.
Motley Fool Stock Advisor 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, which are of debatable value, but it is up to each individual to assess for themselves how they want to build their portfolio.
In my opinion Motley Fool Stock Advisor is an excellent investment newsletter for any investor with a long-term investment horizon. And by long-term I mean 3-5 years.
At its core, Motley Fool Stock Advisor is an idea generation service. Their monthly stock recommendations are chosen because they are deemed great companies with superior long-term growth prospects. If you are looking to make money overnight, this is not the service for you. If you are looking for a service that will tell you exactly which stock to buy, at exactly what price, and exactly when to sell it, this service is not for you either. If you are not either financially or mentally prepared to hold a stock that may drop up to 20% in the short-term – again, Stock Advisor is not for you.
However, if you are looking for generally high-quality investment ideas and an outstanding community, you will find value here.
Even though the performance of the service itself is enviable, probably the most valuable aspect of the service is the forums. There are some very active and 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.
Consistent with the other Motley Fool premium subscription boards, the Stock Advisor 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 the former or latter offenses are usually quickly called out.
David and Tom are excellent analysts, particularly David Gardner as evidenced by his results. And although Tom is rarely present on the boards, you will see David responding to some posts, despite what must be a very busy schedule. The other Motley Fool Stock Advisor analysts are also generally very present on the boards as well.
Motley Fool Stock Advisor 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 for those interested in trying out Stock Advisor, 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. And make sure to visit the boards and post a question or two to test out this vital part of the service.
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