Motley Fool Advisor returns?

[Sojourner]

I clicked on a link that took me to an article on Motley Fool just a few minutes ago, and in the margin I saw an ad for something called the Motley Fool Stock Advisor. This is what they are claiming:

Motley Fool Advisor: Up 593%
S&P 500: Up 136%

In the small print, they imply that this is over the period Feb 2002 - July 2021. Yet, a quick back-test using Portfolio Visualizer shows that the S&P has more than quintupled (actually about 5.5x) since Feb 2002, which means it has grown by 450%. But even discounting that, it appears that they are claiming that their Advisor has been roughly 4.3x (i.e., 593 divided by 136) as profitable for investors since Feb 2002. Some snake oil, anyone?

Now here's the real kicker. They show a chart comparing the "time-weighted return" of the Advisor vs. the S&P 500 for a $10k starting investment. The growth of the S&P is fairly accurately shown as going from $10k to around $50k. But the Advisor is shown as going from $10k to over $325k! That's a 3,150% increase, equivalent to roughly 20% compound annual growth!! Over that period, the S&P 500 achieved "only" a 9.2% CAG.

I'm not sure what my question is here, other than maybe: Is there any (realistic) way this could be true, and if not, how can they get away with such blatantly misleading—or downright false—advertising? I mean, it's one thing to post an ad about, say, the metaphysical healing powers of crystals (hard to prove or disprove), but it's another whole level of deception to claim you have a stock advisor service that has outperformed the S&P by such a large margin for two whole decades!

 

[ExFlyBoy5]

I saw one of their commercials the other day and they also made a similar claim. But hey...it's *only* $99/year....what a deal!

Apparently, they have 3 commercials running currently.

https://www.ispot.tv/brands/56u/the-motley-fool

 

[38Chevy454]

The MF numbers include some 10x plus like Amazon, Chipotle, Tesla, Apple, Paypal, and some others that really boosted the results if you get in early before the stock really takes off. That is my issue, have they gotten in before any recommendations so it is a self fulfilling result at first?

 

[Sojourner]

I saw one of their commercials the other day and they also made a similar claim. But hey...it's *only* $99/year....what a deal!

Apparently, they have 3 commercials running currently.

https://www.ispot.tv/brands/56u/the-motley-fool

I think $99 is the introductory price only. Renewals are $199/year, although, of course, you could just keep signing up with a different email address to keep getting the intro price.

The thing is, if their claims are true—even remotely—it would be totally worth a couple hundred bucks a year... much more, even! But are they?? I highly doubt it.

 

[Sojourner]

The MF numbers include some 10x plus like Amazon, Chipotle, Tesla, Apple, Paypal, and some others that really boosted the results if you get in early before the stock really takes off. That is my issue, have they gotten in before any recommendations so it is a self fulfilling result at first?

How do you know which individual stocks are in their portfolio? Do they make these details public? It would be interesting to see a historical record of their recommendations, to verify they aren't playing games with the growth numbers. Or, more likely, to see how they're playing games with the numbers.

 

[2HOTinPHX]

I remember way back when they were all about index funds. I still have all the info from their website I printed out. I guess they figured out like others that you can't make a living off of pushing the same old great advise...Now it's who wants to settle for market returns when we can show you how to beat them... LOL..if their so good at it why are they telling us..they should be filthy rich and retired.

 

[ERD50]

S&P 500: Up 136%

In the small print, they imply that this is over the period Feb 2002 - July 2021. Yet, a quick back-test using Portfolio Visualizer shows that the S&P has more than quintupled (actually about 5.5x) since Feb 2002, which means it has grown by 450%. ...

Now here's the real kicker. They show a chart comparing the "time-weighted return" of the Advisor vs. the S&P 500 for a $10k starting investment. The growth of the S&P is fairly accurately shown as going from $10k to around $50k.!

I'm really interested in how they figure 136% for S&P over that time. They could use all sorts of shenanigans for their own fund, but the S&P 500 is public knowledge, and that number doesn't make sense (even if you use NAV instead of total return, and they should be using total return).

-ERD50

 

[MichealKnight]

Admitted Novice here

I've always felt a certain percentage of stock investing - is WWF wrestling, fake showmanship.

When I see stuff ike the "+593%" ...or even analysts who never ran a lemonade stand saying "Strong buy!" I just wonder.....heck, if I knew all of that would I be out telling people to buy...or would I quietly buy all I possibly can for myself? Probably the latter.

But then - many times when I look back at articles in Forbes, Fortune, Money, Barrons, whatever -- many times the 'calls' seem to be right.

So I get a bit flummoxed.

 

[garyt]

I think $99 is the introductory price only. Renewals are $199/year, although, of course, you could just keep signing up with a different email address to keep getting the intro price.

The thing is, if their claims are true—even remotely—it would be totally worth a couple hundred bucks a year... much more, even! But are they?? I highly doubt it.

If you look at one of their ads where you have to enter your email you will eventually get a deal for $49 a year. I believe renewals are the same.
I believe their returns are true, but you'd have to invest in every stock they recommend, not easy. They have ridiculously big gains on things like Amazon. I got into Netflix at $34 because of MF, You can see how that did for me. Cintas is up 1600% for me since 2009 another MF pick. MA is another big gainer. They certainly have their hits(and misses).
I hadn't subscribed in maybe 6-7 years or more but did for the $49 this year just for fun. I bought some very minor positions in some of their new picks, but I don't really have any free money to invest.

 

[garyt]

I'm not going to name the stocks but just a quick search showed these big winners through the years:
2010-1944% 1053%
2011- 1374%
2012- 10,059% 859%
2013- 1575%
2014- 959%
2015- 618%
2016- 4658% 1620%
2017- 1244% 469% 475%
2018- 1113% 758%

And lots more in the 400-600% gain range, and I didn't look through the whole list.
I don't know how they figure their returns but I did notice they sometimes recommend a stock more than once. So they recommended Netflix really early and then rec'd it again a short time later One rec shows a gain of 15,000% and the other 13,000% so that could be a way they boost returns?

 

[OverThinkMuch]

Yesterday I paid $100 for 2 years of "Motley Fool Rule Breakers". I was curious and want their help with active investing. I'm keeping most of my portfolio in passive index funds, but also exploring some of my picks, and some of theirs. I think it's fair to charge money, so I won't reveal their specific picks. But when I login, they showed this month's 2 picks, and suggested 3 other stocks. They also have their prior suggestions, each with an article.

As to their returns, this podcast from late 2018 talks about "200 months" of investment returns. They are claiming 20%/year returns by equal weighting every stock pick, and not rebalancing.

"The returns on those investments have well outpaced the broader market's gains in the ensuing 16 years. Had you acted on all of their recommendations, you'd have reaped a market-smashing 1,955% return overall."
https://www.fool.com/investing/2018/10/22/6-conclusions-weve-reached-after-200-months-of-sto.aspx

 

[Ducati52]

Short answer on the S&P 500 comparison: since the MF portfolio is purchasing and equal-dollar amount of two stocks every month, the return of their portfolio is based on the performance of each stock during the time it is held. So, the S&P return is calculated the same way - the assumption is that same dollar amount of the S&P 500 is purchased the same day as the recommended stock. In both cases, they're adding new money with each stock purchased each month. So it's not a "if you invested $10,000 in 2002 you'd have today . . . " that you see with mutual funds.

Longer answer on MF in general: I first became aware of Motley Fool back when they were on AOL. (Remeber how exiting it was when you finally connected through dial-up and heard "You've Got Mail!"?)

Back then, they were this rebellious group who told people they didn't need to pay big fees for "full-service" financial advisors, or accept under-performing and expensive managed mutual funds. They advised starting with index funds, then moving into individual stocks if you had the temperment for the risk and the willingness to study and learn. They preached reasonable diversification, holding long term, and only selling when a material change to the business warranted the sale. Back then, when your options for "fresh" business news were The Wall Street Journal and Investor's Business Daily newspapers, or "stale" news in Forbes and Business Week, they were a breath of fresh air. They definitely played up the "us against them," the "David vs. Goliath" angle, and frankly, it was a ton of fun. The ability to connect (that hosted the first investing-based forums I'd every seen) was incredible.

Since then, however, MF has essentially morphed into what they used to rebel against. They're a multi-billion dollar enterprise selling fee-based actively managed mutual funds and subscription-based services. Hell, they even have a hedge fund.

While I don't think they're front-running any of their recommendations (that would be *way* to easy for the SEC to detect), you do see the price of their recommendations start to creep up hours before they're released. They then usually immediately shoot up 10% or more.

I've invested in quite a few of their recommendations over the years, and made huge returns - 10x and above - on quite a few. But I always used their recommendations as just that - something I'd like to dig deeper into, and do my due diligence before investing. Like an IPO, I'd usually wait for the initial exuberance to die down before investing.

I still subscribe to their Rule Breakers service, and have purchased a few of their recommendations. They do quality analysis on their recommendations, and their forums are well moderated and blissfully free of the usual pump & dumpers.

 

[travelover]

I can never understand why people with such great stock picking skills spend their days trying to shill $99 newsletters.

 

[Helen]

They were touting Amazon back in the day. I wish I had listened...

 

[OverThinkMuch]

While I don't think they're front-running any of their recommendations (that would be *way* to easy for the SEC to detect), you do see the price of their recommendations start to creep up hours before they're released. They then usually immediately shoot up 10% or more.

Does this depend on the daily trade volume?

I'm curious because I bought some stocks this week that are mostly falling. Motley Fool released a recommendation before the market opened, so I sent in a limit order to beat the rush. It worked in that my limit order filled... but the stock dropped after being recommended. The overall sentiment mattered more than the wave of Foolish buyers.

I've invested in quite a few of their recommendations over the years, and made huge returns - 10x and above - on quite a few. But I always used their recommendations as just that - something I'd like to dig deeper into, and do my due diligence before investing. Like an IPO, I'd usually wait for the initial exuberance to die down before investing.

I dumped years of recommendations into a spreadsheet, noting when it was first recommended and at what price. Lots of great returns in there, which can help absorb the mistakes that get made.

Excuse me for mentioning index funds for a moment, but I've been indexing a long time. I think the two keys for passive investing were buy & hold, and low costs. Well, no selling and $0/trade! (Admittedly only a few years old)

 

[thefist]

Ive been a subscriber to TMF premium services for a little over 10yrs. It’s has paid off nicely for me.
A couple things to understand here…
Stock Advisor and Rule Breakers are stock idea services. They provide a recc or 2 each month, and it’s up to you to act or not. The performance is calculated from date of recc and time weighted. They rarely recommend sells, but they do occasionally.

Their premium services are real money portfolios. The analysis is significantly more detailed than you receive in SA or RB. They have set in place rules for when they buy, and they are to prevent front running. As with all from TMF, their opinions, good and bad, are transparent. Their beaten to death recc is that at least 25 or more individual stocks are to be owned to reduce risk and diversify.

If you use them to pick a stock or 2 in hopes of getting rich, YMMV. If you follow their advice long term, you’ve likely done quite well. Having followed the Fool since the 90’s, I think their biggest weakness is in valuation. They are superb in identifying quality growth companies which will thrive. And their behavioral advice may be the most important thing they do. But watch those entry points…

 

[OverThinkMuch]

Yesterday Rule Breakers made a new stock recommendation, which pushed the stock up several percent, and within an hour it was back to the same place it started. Seems like I should avoid buying in that 1 hour window after the recommendation.

Ive been a subscriber to TMF premium services for a little over 10yrs. It’s has paid off nicely for me.
A couple things to understand here…
Stock Advisor and Rule Breakers are stock idea services. They provide a recc or 2 each month, and it’s up to you to act or not. The performance is calculated from date of recc and time weighted. They rarely recommend sells, but they do occasionally.

From an interview I know Rule Breakers makes 2 picks a month, where one might be a repeat. Which suggests there should be dozens of stocks per year from 2003-2009, but I only see a few each year. I've wondered what happened to the early stock picks, maybe you know the story.

 

[Floridaman10]

I entered the Fool family in 2012 with stock advisor, rule breakers and one more defunct program. I have a bucket truck of huge winners I bought from them. Netflix, Amazon, pay Pal, MELI, IRSG, I could go on and on. Not all are winners but some go up as much as 100x and make the losers virtually invisible. They do sell over time but seldom.

They do re-recommend the same stocks. They are good at picking great growth companies. David co-owner is much better than his brother Tom IMO and based on returns.

It can be hard to stick with their advise but I would have been better off if I did. I allocated a small peace of my portfolio for them in 2012, now it is a large peace!

The hardest part to understand is their returns vs the S&P but another poster explained it well, its a time weighted comparison of when they recommended the stock vs equal weighting in the S&P so you can’t just look at historic returns of the S&P.

Note that they have benefited by the growth stock phase in our economy and equity valuations, will it continue??

That being said, they are a huge company now. They blister me with adds for more services. But I believe David is the special one here.

If nothing else, the couple hundred a year is worth the litany of ideas you get. Also, the have a good free Rule-breaker podcast.

 

[ERD50]

... The hardest part to understand is their returns vs the S&P but another poster explained it well, its a time weighted comparison of when they recommended the stock vs equal weighting in the S&P so you can’t just look at historic returns of the S&P. ...

Not hard to understand at all, it sounds like a smoke and mirrors shell game (prove me wrong)!

"so you can’t just look at historic returns of the S&P." - Oh, yes I can! And do!

I think you are saying that to compare, you must match up the time/amount in market with their buy's times/amounts - same $ invested at the same time. Nope, that's where the smoke starts clouding the view.

Because for me, the alternative to some stock pickers newsletter picks is to just buy and hold. That is what I do, so that is what I compare to. Simple. Do-able. So I do it.

OK, I think you refer to post # 12, which does seem to match my description. So if their buy/sell/buy/sell S&P under-performed a buy & hold S&P, that just helps confirm that buy & hold the S&P is better than any timing (although their timing wasn't aimed at maximizing S&P, but still). Those kinds of shenanigan comparisons also have me doubting their performance numbers as well:

... Short answer on the S&P 500 comparison: since the MF portfolio is purchasing and equal-dollar amount of two stocks every month, the return of their portfolio is based on the performance of each stock during the time it is held. So, the S&P return is calculated the same way - the assumption is that same dollar amount of the S&P 500 is purchased the same day as the recommended stock. In both cases, they're adding new money with each stock purchased each month. So it's not a "if you invested $10,000 in 2002 you'd have today . . . " that you see with mutual funds. ..

Another way to view it: If I didn't buy their newsletter, I wouldn't know their timing to buy/sell the S&P, so I wouldn't be able to compare anyhow! It's a totally bogus, adulterated 'benchmark'. Adds to my skepticism.

-ERD50

 

[thefist]

From an interview I know Rule Breakers makes 2 picks a month, where one might be a repeat. Which suggests there should be dozens of stocks per year from 2003-2009, but I only see a few each year. I've wondered what happened to the early stock picks, maybe you know the story.

Happy Thanksgiving!

I checked the RB performance page. All active recc’s from December 2004 are there. Naturally, this is available for subscribers.

 

[Exchme]

The claim in the add about the S&P since Feb 2002 looks false to me. The Yahoo S&P 500 Total Return calculation shows the S&P returned 591% from End of January 2002 through end of July 2021 (use Total Return to get the effect of dividends). So even though the Motley Fool folks got to cherry pick the time period, it offered no advantage. Sure there are big winners now and then, but also losers too. If you buy the index, you also get a share of the winners and losers.

Advisors often leave out their own fees too, so not even sure the claims of their gains are real.

Note that if true that they beating the index on a time weighted basis, that's another way of saying they're trailing the index in recent years, since performance is equal by the end.

 

[garyt]

I can never understand why people with such great stock picking skills spend their days trying to shill $99 newsletters.

That's such a tired, weak take. If they have 100,000 subscribers (which I would think is conservative)that's an extra $10 million a year. Who wouldn't want that? And many of their services cost more, a lot more.
Plus, you can have all the great stock picks in the world but if you don't have the money to invest what good is it?
Not to mention 100,000 people faithfully purchasing your recommendations should have a positive effect on your stock pick prices, where's the downside?
You don't like investment newsletters, I get it. But to suggest they shouldn't monetize their skill is just really silly.

 

[OverThinkMuch]

Happy Thanksgiving!

I checked the RB performance page. All active recc’s from December 2004 are there. Naturally, this is available for subscribers.

Happy Thanksgiving to you, too.

I login to "Rule Breakers", click "Buy Recommendations", then click page [10]. That last page shows me a stock from Oct 2013, and one from Sept 2013. I don't see anything before Sept 2013.

 

[OverThinkMuch]

Because for me, the alternative to some stock pickers newsletter picks is to just buy and hold. That is what I do, so that is what I compare to. Simple. Do-able. So I do it.

That's what Motley Fool does as well - recommend stocks to buy and hold for years. They ask new members to hold stocks at least 5 years. You can pick stocks, and still practice buy & hold.

OK, I think you refer to post # 12, which does seem to match my description. So if their buy/sell/buy/sell S&P under-performed a buy & hold S&P, that just helps confirm that buy & hold the S&P is better than any timing (although their timing wasn't aimed at maximizing S&P, but still). Those kinds of shenanigan comparisons also have me doubting their performance numbers as well:

Post #12 mentioned stocks with 10x return. I don't follow how you draw the conclusion they don't beat the S&P 500 with those kind of returns. Did you mean this section of post #12?

I've invested in quite a few of their recommendations over the years, and made huge returns - 10x and above - on quite a few. But I always used their recommendations as just that - something I'd like to dig deeper into, and do my due diligence before investing. Like an IPO, I'd usually wait for the initial exuberance to die down before investing.

 

[travelover]

That's such a tired, weak take. If they have 100,000 subscribers (which I would think is conservative)that's an extra $10 million a year. Who wouldn't want that? And many of their services cost more, a lot more.
Plus, you can have all the great stock picks in the world but if you don't have the money to invest what good is it?
Not to mention 100,000 people faithfully purchasing your recommendations should have a positive effect on your stock pick prices, where's the downside?
You don't like investment newsletters, I get it. But to suggest they shouldn't monetize their skill is just really silly.

That is such ridiculous logic.

Seriously, you ask what if they don't have any money to invest? Who takes advice from someone too poor to invest?

Yes, they are monetizing their skills, but their skills are convincing people that they have insight that they lack. Pickpockets monetize their skills.

PT Barnum was right.


Oh, and Happy Thanksgiving!