If you invest in individual stocks, you most likely know about The Motley Fool. They offer lots of free stock research. At the bottom of each report is a plug for the premium Stock Advisor service. When you subscribe you get two new stock picks each month and a list of the Fool “Top 10 Starter Stocks.” But, is Stock Advisor worth it?
In this Motley Fool Stock Advisor review, I share my experience with the platform–yes, I’m a paid-up subscriber. You can decide if Stock Advisor is one of the best stock newsletters for your investing style.
One of the common Stock Advisor teasers at the end of a free Motley Fool research article.
Three Things Stock Advisor Doesn’t Do
These are three things you won’t see in Stock Advisor’s recommendations:
- Buy-up-to prices (i.e., only buy this stock if it trades for $25 or less)
- Stop losses (i.e., sell the stock the next day if it closes 25% below your purchase price)
- Shorting stocks (i.e., you make money when a stock share price goes down)
Stock Advisor isn’t for you if you want to swing trade or short stocks.
You won’t see any stop losses instructing you to see if the share prices drops a certain percentage. For example, if your down 20% on the original investment, Stock Advisor may not advise you to sell unless the company fundamentals change.
Essentially, only plan on selling when the company or market fundamentals change such as a merger or the long-term industry outlook changes. Motley Fool recommends stocks they believe will outperform the market for the next 3 to 5 years.
Motley Fool Stock Advisor: What To Expect
What should you expect from Motley Fool Stock Advisor?
Here’s a brief rundown:
- 2 New Monthly Stock Picks
- 12 Best “Buy Now” Stock Picks (Updated Weekly)
- 10 Starter Stocks (Stocks you can own long-term…these tend to be more stable than other stock picks)
There are more stock recommendations than you can invest in at one time. Instead of becoming paralyzed by so many choices, look at their top recommendations. See if you understand the business and buy if you think the company can diversify your portfolio.
What I like most about Stock Advisor is that it’s designed for buy and hold investors.
Buy and Hold Stocks
Motley Fool recommends stocks they believe will outperform the overall market for the next 3-5 years. That means you won’t sell just because a stock dips 25% and hits its stop loss.
Speaking from personal experience, this can make you feel dizzy at times when you’re used to “honoring your stops.”
Also, most of the stocks that Stock Advisor recommends aren’t overly risky or speculative. Although you will invest in technology, medical, and SaaS (Software as a Service) type companies that are riskier than, say, Proctor & Gamble.
Not every stock pick is going to be a winner but you avoid gut-wrenching volatility that other stock investing newsletters may bring. You won’t be investing in commodity stocks or penny stocks which can be highly volatile.
If you read Kiplinger’s Personal Finance for investing advice, Stock Advisor offers similar recommendations. Except, you have more frequent recommendations to choose from. And, you can also read a longer writeup for why you should buy and when to sell a certain stock.
Even with the recent “coronavirus market correction,” Stock Advisor isn’t taking gains off the table. Below is a glimpse at when Stock Advisor may recommend a sell.
No ETFs, Mutual Funds, or Commodity Stocks
You won’t see ETF or mutual fund recommendations in Stock Advisor. This service is to buy unique high-quality stocks for their industry sector. These picks help supplement the index funds you may already own.
You also won’t see recommendations for commodity stocks or gold miners that are “speculative” investments or require you to report a K-1 form when you file your taxes.
If you want to invest in individual stocks, Stock Advisor is my favorite entry-level investing newsletter that recommends highly liquid stocks that trade on the U.S. stock exchanges. The primary reason is the multiple suggestions each month. If the current “best suggestion” doesn’t fit your style, maybe the next one will.
Whether you’re an investing rookie or having been picking your own stocks for 20 years, you can benefit from Stock Advisor’s insights. As a father of three, I no longer have the time to research stocks like I once did. Motley Fool Stock Advisor greatly reduces my research time.
Stock Advisor Investment Philosophy
You get two new stock picks each month. The recommendations model the investing style of brothers and Fool co-founders David and Tom Gardner.
David tends to be more aggressive (growth investing) with his picks and Tom tends to be the more conservative ( value investing) of the two.
Tom’s new monthly pick releases on the first Thursday. David’s pick releases on the third Thursday.
With each stock, Tom and David assign a risk rating to help you get a better idea of the company’s volatility.
You can also review these three rules Tom and David use to find investment opportunities:
Tom’s Investing Rules
- Find a great company in a beaten-down but a relevant industry.
- Look for solid financials and a proven, efficient business model.
- Seek shareholder-friendly management teams with ownership stakes.
David’s Investing Rules
- Invest in companies with unquantifiable greatness; a secret sauce that gives them an edge.
- Choose companies that will benefit from undeniable, long-term trends.
- Get in early on a great business and don’t haggle on the price.
Tip: If you’re an aggressive investor who loves David’s style, you can also consider his Rule Breakers newsletter. You get one pick each month that’s different and more aggressive than his Stock Advisor recommendation.
For example, Rule Breakers recommendation may not become known to the Stock Advisor community until 2 or 3 years later after many of the large and early gains already happen.
Choosing Stock Advisor Stock Picks
Stock Advisor updates their best recommendations every Thursday at 1 p.m. Eastern Time. You can even enroll in text message alerts so you can be the first to see the latest reports.
Stock Advisor recommends more stocks than you can realistically buy. Don’t be afraid to be selective about what you invest in.
A list of their open recommendations still shows some positions from 2002 (i.e. Costco, Activision Blizzard, Amazon). If you bought and held these stocks through the ups and downs in the last 16 years, you will have made a lot of money.
To help you avoid “paralysis by analysis,” Motley Fool divides their best recommendations into two options:
- Starter Stocks
- Best Buys Now
If you have cash that needs investing today, these are the 22 stocks the Stock Advisor team believes have the best edge over the broad market. For example, you can create a pie on M1 Finance to buy fractional shares of each stock.
Let’s dive into both of these lists further.
Stock Advisor Starter Stocks
If you’re a first-time investor, you head first to Stock Advisor’s top 10 starter stocks. Yes, this is the most common teaser you see at the bottom of Motley Fool articles. Or, you might see their ads on other investing sites.
Each year, Stock Advisor picks 10 stocks that can be the foundation of your stock portfolio.
Here’s how Stock Advisor defines a “Starter Stock:”
Our list of Starter Stocks is our annual attempt to answer a simple question: “Where do I go first?” If you’re a new member, pick three Starter Stocks that interest you, and use them to help build out a portfolio of at least 15 stocks. And if you’ve been with us a while, we think these stocks have what it takes to strengthen any portfolio.
Starter Stocks embody David’s and Tom’s investment philosophies. You should feel comfortable holding these stocks for the long haul; not only do they have the strength to ride out downturns, but they’re also built for powerful growth. (Emphasis added mine)
Both Tom and David each recommend five starter stocks that fit their three investing rules. I’m sure you will be familiar with most of these names and you might patronize these businesses regularly.
While I’m not going to give away the list (since that’s the privilege of a paid subscription), two starter stocks that are “open secrets” are Amazon and Shopify.
Tom and David recommend investing in at least three of these stocks as these companies are established and should be around for many years. “Peak growth” for most of these companies might be over. But, you should still be able to earn steady growth (and sometimes dividends) with fewer ups and downs.
Best Buys Now
Each Thursday, the Best Buys Now list updates. Some of these stocks can be a Starter and Best Buy stock at the same time. Some of these stocks can be volatile and have lots of ups and downs.
Although the recommendations change with the market conditions, many of these stocks tend to be growth stocks. They probably won’t be a dividend, but have good growth potential. You earn your passive income with rising share prices.
As you can see below, you might own all, some, or none of these stocks. Remember to maintain a diversified portfolio and do your own due diligence and not trading blindly.
Each Thursday at 1 p.m. Eastern, Stock Advisor updates the 12 best active recommendations you can buy today. This batch is from one week in December. This is five of the best buys for one week.
What Stock Advisor Research Looks Like
If you’ve looked for stock tips in the past, the Stock Advisor writeup has a similar feel. You can read the detailed writeup that tells you that covers these topics:
- A brief company history
- The business model
- Financials and Valuation
- People (Company leaders and maybe primary clients/competitors)
- Risks and When We’d Sell
If you’re revisiting a writeup or only want the highlights, there’s a 1-minute bullet point summary that covers these topics:
- What It Does
- Why You Should Buy
- Buyer’s Guide and Key Data (Basic company information you can find on Yahoo Finance, etc.)
Compared to a few other investing newsletters, I like Stock Advisor because the review is straightforward. You don’t have to cut through three pages of fluff to see “the stock of the month” and why you should buy it today.
Below is the layout of what a “Buy Now” report looks like:
Other Cool Stock Advisor Tools
Stock Advisor earns its keep with the twice-monthly stock recommendations. Plus, the starter stocks and best buys now can help you pick better “diamonds” with over 16 years of active recommendations to pick from.
These other tools are nice and can help add value to your Stock Advisor subscription. But, you don’t need to use them to invest using Stock Advisor.
Like your broker’s stock, ETF, or mutual fund screener, Motley Fool has a decent stock screener. You can use it to filter through the 16 years of open and closed recommendations.
It lists the stocks they cover in recommendations. So, you will find ratings for companies like CVS or Amazon, but not for Chesapeake Energy or Eagle Bulk Shipping.
And, they cover Union Pacific Railroad, but not their main competitors: CSX or Norfolk Southern.
You can sort different stocks by these options:
- Conviction Ratings (High, Positive, Neutral, Negative)
- Company Size
- Industry Sector
- Dividend Yield
This can be quicker than scrolling through the many open recommendations.
If you’re like me, you have more stocks on your watchlist than you actually own. What I like about Motley Fool is that you can “favorite” a stock and they track the performance from the time you add it to your list.
This convenience can be a quick alternative to paper trading. You can track these four stats in your watchlist:
- Current share price
- Share performance since being added
- S&P 500 performance since being added
- Share returns vs. S&P 500 returns
You can choose to follow specific stock recommendations. If important news or large share price movements occur, Stock Advisor releases a brief writeup.
I particularly like their “10% Promise” articles that explain why a stock pick rises or drops 10% in a single trading session.
You can also get investment ideas from the community forums. I’ve been on here some, but I don’t take the time to visit regularly. Like any forum, you can find good threads and bad threads.
I know some current Fool employees have been hired from being active forum members. So, you might try looking for their handles. Or, share your own two cents.
One forum member a lot of Fool members follow for investment advice is a person named Saul.
In-Depth Videos for New Stocks
Stock Advisor is now releasing short in-depth commentary videos for each monthly recommendation. These videos go more into more detail about the company is now part of the Stock Advisor portfolio. The Fool analyst team, including podcast host Chris Hill, anchors these videos.
You might see an email stating…”Get to Know David’s Latest Pick.” This email isn’t a marketing pitch to upsell you on a more expensive product. Instead, it’s an exclusive video only available for Stock Advisor members.
Some of these reports are handy. Especially if you haven’t traded stocks before and want to learn some Investing 101.
Other reports are themed (i.e. trading cannabis, self-driving cars, etc.). You can get some ideas from these reports plus some company’s that Stock Advisor believes are positioned for success.
Take a look and maybe you’ll find something you’re looking for.
Free Podcasts and Articles
You don’t need a Stock Advisor subscription to access this content. But, I encourage you to read and listen to this content too. In fact, Motley Fool has some of my favorite investing podcasts. You can find daily market and industry sector analysis.
And, you can see their free articles on their main website (Fool.com). These articles cover market news and topics like these:
- 3 Dividend Stocks That You Better Than Coca-Cola Does
- Tim Cook Doesn’t Get How Serious the iPhone Slowdown Really Is
You don’t have to read every article. But, they are a good way to get your mind thinking. And, they can supplement the premium Stock Advisor content.
My Thoughts About Stock Advisor
I’ve been investing in individual stocks for about 10 years and started during the Great Recession. Before Stock Advisor, I got most of my leads from publications like Kiplinger’s, Barron’s, and (now defunct) Smart Money. The last decade has been good for active and passive investing, but I’ve had a few losers with these publications and Stock Advisor.
Overall, I’m happy with Stock Advisor and I plan using them for the foreseeable future.
So, I’ll share my likes and dislikes about Stock Advisor.
Here’s what I like about Stock Advisor:
- Two new stock ideas each month
- List of 10 Starter Stocks and 12 Best Buys Now
- Recommended stocks are highly liquid
- Stock Screener and Watchlist make finding future stocks easier
- Competitive prices with other “entry-level” investing newsletters ($99 first year than $199)
Another reason I like Stock Advisor is that the Motley Fool team buys some of these recommendations. Other investing newsletters prohibit the authors from investing in the stocks they tell you to buy. There are pros and cons to either policy, but it’s nice to know that the Fool staff has long-term skin in the game.
I’m a happy Stock Advisor subscriber, to say the least.
For the “Stock Advisor Cons,” I’m going to list my qualms in a little more detail.
Research Is Limited to Stock Advisor Recommendations
If you have Fidelity, Schwab, E*TRADE, or TD Ameritrade as your broker, their research tools can still be better than Motley Fool. But, for a stock newsletter, they have more extensive research than other investing newsletters because they have a research terminal.
To do your due diligence before investing, research a stock further on your broker and other online websites.
For fairness, Motley Fool’s follow-up research is still unique to the industry newsletter which doesn’t follow-up on recommendations as much as the Fool does.
No Buy-Up-To Price for Beginner Investors
Because Motley Fool takes a long-term buy and hold approach, they ignore the current share price value most of the time. I can attest this approach can be challenging during a stock market downturn, but the long-term results can be worth it if you don’t need to tap your cash in the next few years.
You won’t see an “only buy this stock when it trades for less than $x.00” in Stock Advisor. This can be frustrating with volatile growth stocks that can go up or down in value 5 to 10% on any given day. But, you won’t try to time the market at least.
So, you should use the stock screener to find high conviction ideas or use the Starter Stock/Best Buys Now as a baseline as these stocks have the best potential (according to Stock Advisor) at the moment. Also, it can be a good idea to look at the historical trading price to see if the stock’s in an uptrend, downtrend, or potentially oversold/overbought.
But, if Motley Fool ranks the stock as a buy, they believe it’s still poised to outperform the market over the next three to five years.
Email Pitches to Subscribe to More Expensive Services
Every investing newsletter and magazine is guilty of this to one extent or another. Stock Advisor is an “entry-level” (I call it a “gateway newsletter”) product that puts you on the list for more expensive research products.
If they can get you to spend $99 to join Stock Advisor, maybe you’ll spend even more to join an elite service.
Ignore these emails. You will get invites to watch a one day only video about once or twice a quarter for a new product like Marijuana Masters, Long-Short, Global Masters, or whatever the latest investing trend is. The story and videos are compelling, but you’re going to spend between $2,000 and $5,000 to join these platforms.
If you’re like me, you don’t have the money to spend on more advisory services to invest in riskier, unknown stocks. Not yet at least.
Is Motley Fool Stock Advisor Worth It?
The annual price for Motley Fool Stock Advisor is $199 if you join directly through the Fool homepage.
Stock Advisor is competitively priced with other entry-level investing newsletters. Between $150 and $199 is the going rate for most publications. Most newsletters only recommend one new pick each month. I’ve made money from these letters as well.
With Stock Advisor, you get two monthly suggestions. And, you can use the Starter Stocks and “Best Buys Now” to find good investing ideas.
If you Beat Wall Street At Their Own Game it’s possible with Stock Advisor. But, you have to be willing to ride the ups and downs and buy several ideas.
And, you have a 30-day risk-free trial to decide in case you don’t like it.
Who Should Join?
- First-time stock buyers (after you have a diversified portfolio of ETFs and mutual funds)
- Experienced stock pickers
- Casual investors
- Investors with a 3+ year investing timeline
Who Shouldn’t Join?
- Momentum traders
- People who only want to invest in ETFs and index funds
- Investors with investing timeline less than 3-5 years
Summary: Motley Fool Stock Advisor Review
Stock Advisor is a breath of fresh air compared to other investment newsletters I’ve tried. Their interactive platform is a positive. And, they invest in fairly well-established stocks that still have plenty of growth potential. Not every stock is going to be like “the next Amazon or Netflix” but Stock Advisor is a lot more effective than simply buying stocks of brands you use or watching CNBC for the current flavor of the day.
Related Article: Use a stock-friendly investing app to buy Stock Advisor picks
Motley Fool Stock Advisor vs. Rule Breakers
For more aggressive ideas, David also runs Rule Breakers which focuses on more volatile companies that aren’t proven winners yet. For instance, Arista Networks was first recommended in Rule Breakers in 2014, but Stock Advisor subscribers first saw it in 2018. In that time, ANET’s stock price climbed from $55 to $217 per share.
These are more speculative positions, so you might consider this option if you want something that’s riskier than Stock Advisor. You can make more money, but you’re more likely to lose money in Rule Breakers too. So, only consider Rule Breakers if you can commit to buying most of the recommendations. With Rule Breakers, one new stock gets released monthly.
Some of these are companies you’re familiar with like JD.com or Adidas. And others might be recent IPOs are relative unknowns like Upwork or MongoDB.
Read my Motley Fool Rule Breakers review to get a full look at this more aggressive investing newsletter.
How Many Stock Advisor Stocks Should You Own?
Stock Advisor recommends you own around 15 individual stocks. Of course, you can gradually build up to that amount by investing in new companies as your portfolio size grows.
With each stock position you buy, Motley Fool suggests that a single position doesn’t consume more than 5% of your total portfolio size. Following this rule, you invest $500 in each stock for every $10,000 in your portfolio.
Unless you do fractional share investing with M1 Finance, you probably won’t have enough free cash to invest in every single idea. So, don’t feel bad if you don’t invest in something new each month. In some cases, the brothers might re-recommend a previous stock. This can happen if the fundamentals improve.
While you get two new picks, you don’t have to invest in both or either of them. One reason why is that you don’t agree with the business model of each business. In some cases, you might not understand how the business makes money long-term.
For example, I’m not going to invest in the active recommendation for Tesla. I’m in the camp that’s against this polarizing company.
Can you get Motley Fool Stock Advisor free?
There’s not a way to get Motley Fool’s Stock Advisor for 100% free (unless you have special inside connections). However, you can try Motley Fool free for 30 days.
You will need to cancel your trial subscription within a month to avoid paying the $99 for the first year. This can be enough time to determine if Stock Advisor is worth it.
One indirect way to get Motley Fool premium services for free is to look for special emails. You might be able to buy a multi-year subscription after that effectively gives you a free year in the future. This strategy depends on Motley Fool’s latest marketing plan. I personally haven’t seen this yet for Stock Advisor…but I recently snatched a two-year Rule Breakers offers for the price of one year.
Is Stock Advisor the best Motley Fool service?
- Low annual cost (it’s easier to recoup your annual subscription with potential gains)
- Two new monthly picks
- Stocks picks are relatively less volatile than the “micro-investing newsletters
- Solid suggestions for new investors and experienced investors
I personally don’t invest enough in individual stocks to pay $1000+ per year for a single newsletter subscription. You may not be able to request a refund in case you don’t like the product or get buyer’s remorse.
These pricey products can be worth it if you’re an accredited investor, have financial independence, or have a high risk tolerance and comfortable investing in stocks that are volatile but have high growth potential as they are not household names yet (i.e., you’re hoping to invest in the next Microsoft, Amazon, or Apple).
You can browse the other Motley Fool Premium products here.
Note: Some of these high-end products might be closed to new investors.