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The Motley Fool is a popular investment newsletter publisher with several services that can be a good fit for long-term investors. Its Motley Fool Stock Advisor newsletter is well-known for recommending many high-performing companies long before they became household names. These stock picks have helped the service outperform the S&P 500 over the long term. But is The Motley Fool worth it in today’s market?
What is The Motley Fool?
The Motley Fool was founded in 1993 and has provided monthly stock stock picks for over 30 years. Over this period, there have been many successful stock picks if one is willing to hold positions for at least 3 to 5 years through the bull and bear markets. To be fair, not every model portfolio recommendation is profitable or a good fit for subscribers, so due diligence is requested.
I have been a subscriber to a few services for the past six years as I periodically buy individual stocks and like receiving insights from The Motley Fool and other contenders for the #1 investment newsletter.
What is The Motley Fool Epic Bundle?
For example, sign up for The Motley Fool Epic Bundle at a discounted rate of $198 for the first year for new members (and then renew at the current rate). Members can access four services that provide at least one monthly stock pick.
The subscription includes these platforms:
- Motley Fool Stock Advisor: The flagship newsletter is the best overall option for most investors because of its balanced investment strategy. It focuses on growth stocks with two monthly recommendations.
- Motley Fool Rule Breakers: A highly aggressive newsletter with two monthly stock picks. It recommends up-and-coming stocks that are usually too small to recommend for Motley Fool Stock Advisor as there is more volatility.
- Motley Fool Everlasting Stocks: This service has a more extended potential investment period than Motley Fool Stock Advisor to minimize portfolio turnover. It emphasizes companies with founder-leaders, a healthy company culture, and pricing power.
- Motley Fool Real Estate Winners: Receive recommendations for actual estate-related companies and REITs that can earn dividend income and have appreciating share prices.
New members pay $198 for the first year and have a 30-day Membership Fee Back Guarantee. The current renewal price is $499 per year, which can still be cheaper than subscribing to each service separately.
I also recommend trying out The Motley Fool Epic Bundle to decide which services members like best. This way, members can shift to an individual subscription that usually costs $199 per year on an ongoing basis.
The Motley Fool Investment Strategy
The Motley Fool recommends stocks that have the potential to outperform the S&P 500 over the next three to five years. The newsletters use fundamental analysis, such as financials, to decide if it’s a good time to buy. This is even if it takes several months or years for the investment thesis to play out and take profits.
I like that it pinpoints companies that tend to be leaders in their industry or have above-average growth potential compared to their competitors. The monthly stock picks can make it easier to find and research investment ideas.
Anticipate seeing recommendations from a variety of industries that usually include:
- Consumer discretionary
- Consumer staples
- E-commerce
- Financials
- Health care
- Technology
Unlike most newsletters, there are no stop losses and it’s rare to see sell alerts.
During bearish periods, it’s likely that many recent recommendations will have an unrealized loss as the current price is lower than the original recommendation price. Members must be comfortable with this possibility and proper position sizes can help manage investment risk.
If a person invests in individual stocks, I suggest considering The Motley Fool Stock Advisor as it has a broad investment strategy and the best option if one is just starting to invest in individual stocks. The publisher’s other newsletters are more specialized and great for building a diversified portfolio once a person has their core portfolio.
Consider this service if one tries to hold stocks for several years and doesn’t usually use a stop loss. This isn’t an ideal fit for those who prefer holding positions for less than 12 months or insist upon using stop losses to minimize downside risk with long-term holdings.
Historical Performance
The historical performance is available for these two newsletters* (returns as of 9/22/2023):
- The Motley Fool Stock Advisor: 463% since its 2002 inception vs. 125% for the S&P 500
- The Motley Fool Rule Breakers: 223% since its 2004 inception vs. 106% for the S&P 500
It’s vital to note that most of these returns occur during bullish periods. One of the best-performing periods is from 2020 to 2022. However, as a personal subscriber, the overall portfolio performance for a specific year can be negative or neutral. One shouldn’t anticipate getting rich quickly or guaranteed profits.
For instance, it’s not uncommon for the service to re-recommend an active recommendation at a lower price if the fundamentals present a good buying opportunity that can disappear if the share price increases.
Investing is inherently risky and requires ample diversification and a long-term strategy to weather the ups and downs.
Best The Motley Fool Perks
Here are some of the best benefits of a premium subscription to help determine if The Motley Fool is worth it.
Multiple Monthly Recommendations
Most investment newsletters only provide one new stock pick each month. Many of The Motley Fool services provide two along with recurring updates that highlight the best active recommendations to buy now.
Further, a “Foundational Stocks” list updates quarterly and features ten stocks that can be a good fit for any portfolio. The service recommends adding at least three of these stocks at any time without waiting for it to be a monthly stock pick.
Yes, some of the monthly recommendations are a repeat of a previous portfolio pick. But, sometimes, the best investment option is buying more shares of what’s already in the brokerage account.
Long-Term Investment Strategy
The adage “time in the market is better than timing the market” holds true for many individual investors who are not professional traders. This investment newsletter can help find winning stocks and has a long-term history of having profitable gains. However, model portfolio returns vary from year to year, just as the overall stock market performance.
Recommendation Screener
With nearly 200 open recommendations, there are many stocks to choose from outside of the most recent stock picks and upcoming monthly recommendations. The in-house stock screener can help find companies matching investment goals.
The Motley Fool: Pros and Cons
Here are several factors to decide if The Motley Fool is worth it.
Pros
- Many investment newsletters
- Multiple monthly stock picks
- Several research tools and community forums
- 30-day Membership Fee Back Guarantee
- Buy-and-hold investment philosophy
Cons
- Not every stock pick makes money
- May have to hold stock picks for several years to profit
- Doesn’t use stop losses
- Potentially expensive for casual investors
- Not for short-term investors and technical traders
Is The Motley Fool Worth It?
The Motley Fool is a good option for long-term investors comfortable with a multi-year holding period and no stop losses. It provides an above-average number of monthly stock picks, but one must purchase several stocks each year to justify the membership cost. Additionally, be sure to research each recommendation to decide if it’s a good fit for your portfolio and have an exit plan in case you want to sell before the service issues a sell alert.
