Supernova

Supernova 3.45/5 (69.09%) 11 votes

Motley Fool Supernova Review

Supernova is the newest premium service from Motley Fool, introduced in spring of 2012. It is a portfolio service based solely on stocks from David Gardner’s picks within his other two Motley Fool services: Stock Advisor and Rule Breakers.

There are currently two active portfolios being managed by two different teams of analysts – “Phoenix” and “Odyssey”. Phoenix is a portfolio geared towards people approaching retirement with a substantial capital base already established. Odyssey is geared towards people with a longer investment horizon who will be investing a steady amount of money each month (in other words, people still in their working years, not close to retirement). Both portfolios are long-only, buy and hold equity portfolios. David Gardner has left open the possibility that they may launch additional portfolios in the future.

As part of their subscription price, Supernova subscribers get a complementary full subscription to both Rule Breakers and Stock Advisor. This in itself is a really great benefit. There are no monthly or weekly newsletters per se, but you do receive weekly email updates. Other updates are posted regularly on the website, and there are also member-only boards where discussions take place (more of that in the My Take section below).

Members are free to follow one or both of the currently active portfolios; in any event they will have access to the entire Supernova site. Each of the two portfolios issues buy and sell recommendations on a different schedule. Supernova Odyssey issues Buy recommendations typically every 2 weeks, while Phoenix issues Buy recommendations once per month. As this is a portfolio service, each buy alert is accompanied by a recommended allocation precentage as well.

Supernova talks about these portfolios in terms of “missions” and in addition to these, there are a couple of other entertainment-oriented missions that they put on from time to time. For example, they have done a mission where members could submit the names of five stocks they thought would be the first to double in price. Your mileage on these little contests may vary – some members really enjoy them, while others such as myself, worry that they divert resources unnecessarily.


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Supernova Performance

Supernova got off to a rough start. They kicked off the service right before a market downturn, and due to the charter laid out for these portfolios they were forced to buy into a sinking market.  The performance has recently improved for both the Phoenix and Odyssey portfolio, and as of this writing, both are outperforming the S&P by single digit margins.

The Odyssey portfolio in particular started off poorly when their first pick proceeded to fall off a cliff shortly thereafter. The analyst team took a lot of criticism for that pick, and if you read other reviews on other Motley Fool review sites out there, this pick is often cited as proof of the service’s failure. But Supernova maintains the David Gardner philosophy of keeping a long term investment horizon, and so they are taking this set back in stride. APPL’s recent swoon has also been a drag on performance.

What Supernova is Not

Motley Fool Supernova is not an active trading service. David Gardner and team 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 there 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 Supernova 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 Supernova is not a valuation based service. When Buy alerts are issued, it is implied that the current stock price represents a good entry point for that stock. However, they do not issue “Buy Below” guidance nor do they give any valuations of what they think their picks are worth. The service is focused on the overall quality of the company as an investment, and specific price levels or momentum indicators are of much less importance. 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 Supernova is not a hedged portfolio, nor is it open to non-Supernova universe investments. Supernova portfolios can only invest in either Rule Breakers stocks or David Gardner’s picks from Stock Advisor (Tom Gardner’s Stock Advisor picks are off limits as well). No other equities are eligible. This also means there are no fixed income investments such as bonds or passive investment tools such as ETFs.

There is also no short selling, no option strategies, nor any other hedging mechanisms (for a service with these mechanisms, see Motley Fool Pro).

My Take

I am undecided on Motley Fool Supernova. I’ve been a member since it opened in March 2012 and it’s been interesting to see this new service developing over the course of the last year. If you would have asked me 4 months ago, I would not have recommended the service, and was very close to ending my subscription and requesting my refund. But in the last few months, I feel that Supernova has made some major improvements and is shaping up into a valuable portfolio service.

The question on everyone’s mind when Motley Fool Supernova first opened was what value it would add beyond the memberships to Rule Breakers and Stock Advisor that come along with the membership. In the early months there was not a lot of content or guidance coming from the analysts above and beyond a short write up for each Buy recommendation. There was no discussion of why a certain recommendation was made at that point in time. Even the discussion boards for Supernova were mostly empty because everyone posts their stock-specific updates on the individual Rule Breaker or Stock Advisor boards. For a portfolio service, there was really no education or insight into portfolio management, risk allocation, diversification, etc.

That has all started to change. To their credit, the advisors have been very responsive to the users’ feedback and have started to make some of the changes that were requested. Each pick is now usually accompanied by more discussion on how that particular pick fits into the strategy of the portfolio. The weekly updates usually include more context as well as discussion on which stocks were considered but not picked that week. The forums have also started to host some helpful discussions that you can’t find on the Rule Breaker or Stock Advisor sites.

I am still on the fence about the service, but will likely wait a few more months before making up my mind whether or not to see it through. The performance is improving and the content is definitely better than it was a year ago. However I am still not sure whether I’d be better off just following the Monthly recommendations from the stand-alone Rule Breakers and Stock Advisor sites.

However, if you are the type of investor who either doesn’t have the experience or time to build their own investment portfolio, and you have a long term buy and hold philosophy, Motley Fool Supernova may be for you. You can just buy the recommended amount on the day of the alert, and not do much else in terms of research. For that type of investor, this is the main benefit. You pay a premium for that level of service, but relative to other investment portfolio subscriptions out there, the price is very reasonable.

You of course don’t have to buy every recommendation, and just use Supernova as a curator for all the various David Gardner stocks. But that limits the value of subscribing to a portfolio service.

Motley Fool Supernova is currently closed to the public after having just accepted a new influx of members, but it is likely to open again next year. As is usual with Motley Fool newsletters, they offer a trial membership so you can test it out.

Please leave a comment and share your own thoughts on Motley Fool Supernova.

You can also read my full write-up on Motley Fool Stock Advisor and Motley Fool Rule Breakers.

Or read more about me here or see some of my favorite financial blogs and books here.


For comprehensive Motley Fool performance results, check out my Performance Insights. They're the only source for Annualized Returns, Success Rates, CAGRs, Performance by Year and Industry Whether you are already a Motley Fool member, or considering subscribing to one of their services, my Performance Insights will help you with your investing decisions.
 

Leave a Comment

{ 12 comments }

  • Todd November 20, 2013, 9:50 pm

    What is the cost of the membership in the service? (or at least the price they allowed new members into the service when you joined)

    Reply
    • Kevin November 20, 2013, 10:29 pm

      Todd – it was roughly $1900 for 3 years (so $633/year). But that was a few years ago, so prices have likely changed. They typically offer 1 year money back guarantees as well, which makes it really easy to try the services out with only the inconvenience of putting the money in up front.

      Reply
  • eric January 22, 2014, 7:41 pm

    hi Kevin, thanks for this great write-up. one thing I’m confused about– you talk about the “supernova portfolio” and how it doesn’t let you invest in equities outside of their recommendations. this makes it sound like the Fool is actually running my stock trading account– is that right? I’ve subscribed to (and loved) hidden gems and stock advisor in the past; with those, I would look at their research/recommendations and then manually go to my td ameritrade account to actually execute the trade. is that not the case with supernova?

    Reply
    • Kevin January 22, 2014, 11:19 pm

      Eric, no, Supernova doesn’t control your portfolio. Just like Hidden Gems etc. they make recommendations of a stock and the allocation and you still have complete control over whether you follow that recommendation or not.

      When I say they only “allow” investments in certain stocks I am referring to the fact that Supernova itself is only allowed to recommend stocks from David Gardners recommendations from Stock Advisor or any Rule Breakers pick. So their supernova universe as they call it is restricted to just those stocks. Hope that clarifies.

      Reply
      • eric January 23, 2014, 3:17 pm

        ahh, that makes sense, thanks. It’s SO difficult to tell exactly what you get from the Supernova sales letter… it looks like you get the two newsletter subscriptions, access to a special members-only forum, invitations to supernova live events, and of course the main supernova “newsletter” (picks). I can’t see much else that makes it worth the deal. considering they pull from stock advisor and rule breakers, it seems like I could save a ton of money by just subscribing to one or both of those (as I have in the past) and make my own picks/investments from there. am I missing something? :-)

        Reply
        • Kevin January 23, 2014, 8:31 pm

          I had the same thought re: just pick from Stock Advisor and Rule Breakers. And that may work for you. But what Supernova offers above and beyond that is an allocation target with each pick as well as extended coverage of their picks (including insight into why they picked any given stock, and just as interesting, insight into stocks they didn’t pick that week). But what I like about Supernova, is that it focus in on hopefully the best stocks out of the 170+ stocks currently in the “Supernova Universe” – it functions like a curation service in that sense.

          Supernova is most helpful for those who are looking for a little more hand-holding or reassurance in building their portfolios. It gives you an allocation amount, which the standard monthly pick newsletters (like SA and HG) don’t provide.

          And they are building out other “missions” (like the new Explorer 1 mission I covered here) which help with investor education in a fun, informative way.

          If you are unsure if Supernova is what you are looking for, sign up for a trial membership and kick the tires a little bit.

          Reply
          • Kris January 29, 2014, 11:23 am

            Kevin,
            What kind of money would a typical Supernova member need to have access to in order to make it “worth it?”

            Are we talking about members who are investing tens of thousands of dollars into a portfolio based around these Supernova picks?

            Or would this also be appropriate for a retail investor with say an extra $5-10k and are willing to take an extra risk in the stock market, but don’t want to just investing in random stocks (or don’t want to research it all themselves)? Would the potential returns outweigh the steep cost of the service?

            Thanks,
            Kris

          • Kevin January 29, 2014, 8:14 pm

            Kris, I think other members run the gamut from probably having only $10-15k to invest to those with $1mm portfolios. Also keep in mind that the Odyssey portfolio invests $1000 every 2 weeks and is geared toward regular investing of “small” amounts of money. But I know a lot of members don’t have that much money so they scale it back to whatever they can afford on a regular basis.

            The Phoenix portfolio is geared toward people near retirement and so tend to have a bigger accumulated nest egg.

            But nothing prevents you from picking and choosing investments as you see fit (as I do).

            But if you want to limit the cost of membership to under 3% of your portfolio you you’d likely want more like 50k to invest (but don’t forget to include any money you will invest going forward when you do the math).

  • brien smith February 6, 2014, 5:01 pm

    help! I signed in3 days ago and can’t figure anything out to set up a portfolio, system doesn’t ask me questions to classify me, etc. Now you have a third portfolio, Explorer? I have 100,000 Canadian, and I am totally lost. {Solarcity sounds risky}

    Reply
    • Kevin February 6, 2014, 7:38 pm

      Brien – you should contact Motley Fool customer support if you are having issues using the service or post a message on one of the boards.

      Reply
  • glen jeckel March 26, 2014, 1:08 pm

    I assume that when one of your loved ones drops a lot, like BOFI, that I should be happy to buy it because I’m looking at the 3 year outcome, not any short term variations. Be that true? Thanks for your comments.
    Glen Jeckel

    Reply
    • Kevin March 27, 2014, 8:09 pm

      Glen, just to clarify that I am not officially connected to Motley Fool, so the coverage here is all my own personal opinion. As it relates to their pick of BOFI in a couple of their services, yes, I’m sure they would say focus on the long term, not a temporary drop. Unless of course you think something fundamental has changed about the business – in which case, you should sell. But a pull back in and of itself is not necessarily something to get too scared about. I think they would say the same about any sudden rise in price as well – if the stock goes up 10% in a week for no obvious reason, don’t get too excited about that either.

      Reply