Which MF Service?

Investment Analysis Clubs Saul’s Investing Discussions
1

Saul, I’d be interested which Fool service has given you the most picks in your portfolio. Thanks, H

Hi H, An interesting question. Here’s the short answer:

MF Hidden Gems have recommended INFN, WAB
MF Pro has recommended SWKS
MF Rule Breakers have recommended AMBA, BOFI, CELG, INFN, SNCR
MF Stock Advisor has recommended CRTO, WAB, XPO

Note that I didn’t get Infinera from either of the recommendations but from someone introducing it here. I then went back and read the recommendations and board posts. Similarly I picked up CRTO when it was discussed on this board, and I think EPAM, XPO and INBK as well.

Now here’s the real answer: I invest mostly in MF recommended stocks because I want to be an informed investor. Other services recommend a stock because “two analysts have raised estimates this month” or “they’ve beaten estimates two quarters in a row” or some such nonsense, where I don’t think the person doing the recommendation even knows what the company does. There is little or no follow-up and no place to discuss the stock.

When there is a recommendation from MF, someone has already screened the company and written a full recommendation. That’s very important to me. Besides which there are the boards for discussion and I feel that that is a very valuable service. Very valuable! I will get important ideas pro and con, and I won’t miss important news.

You have to recognize though that all MF paid services are not the same. For example,

MF Pro is very conservative, with modest goals of beating inflation by five or seven percent per year (I don’t remember which exactly). It’s run by Jeff Fischer who is a very bright guy. They use a lot of options too. It’s a very reliable service. I think they hit an aggressive stock like SWKS almost by accident and now aren’t quite sure what to do with it. They have it rated as a Buy at $107, but with a conservative Fair Value (as he figures it) of $80 or so!?

MF Stock Advisor is split in two with David recommending aggressive stocks and Tom recommending conservative ones. Tom is pretty much tracking the S&P 500, up a total of 90% in over ten years and beating the S&P by a total of just 30% or so after more than 10 years.

MF Rule Breaker is very aggressive with the idea being to recommend overpriced story stocks with lots of future possibilities, and if 80% tank, the other 20% will be up so much that it won’t matter. It’s almost the opposite of what we do. I figure you have to pick and choose carefully. Let’s look at the last year (not counting the ones that were just recommended a day ago, which is too short a time). That’s 24 recommendations. Twelve of them actually have negative absolute retun since recommendation in this rising market. 14 of the 24 are lagging the S&P. Here are the values for the 24 stocks compared to the S&P as posted on the MF website:

101.2
96.3
21.2
19.0
16.5
13.3
9.0
5.3
2.9
2.8
-0.2
-2.4
-4.4
-6.5
-7.0
-9.0
-10.0
-13.0
-14.7
-16.6
-28.5
-35.5
-38.3
-40.5

If you add it up and average the plusses and minuses among the 24 stocks you’ll see that they are beating the S&P by 2.5% on average, and that the MF RB recommendations over the past year are thus beating the S&P by 2.5%. As you can see though, if you happened to miss either of the two that are up 100%, you’d be trailing the S&P. But there are no signposts saying “This stock is going to take off, while most of the others are going nowhere”. I guess, to be sure of hitting the two stocks out of 24 that will really move you have to buy them all (which, to be fair, is what they recommend).

I know that that works for some people and they have very small amounts of a couple of hundred stocks from past recommendations, but that’s not my way.

Hope this helps.

Saul

49 Likes
2

Thanks Saul, you’ve pretty much captured my experience too, especially regarding RB and SA, since I’ve been with these two services for several years.

What are your thoughts on SuperNova, have you looked into it or subscribed to it? I haven’t subscribed to it, just getting a whole bunch of marketing material, but it seems that they focus on RB and SA picks.
I’m less enthused about their recommendations about how much to allocate for a particular stock as opposed to when to buy a stock.

Thanks,
Kris

3

If anyone is interested in looking at the performance of the various TMF services, check out this blog here. The author gives his opinion on the various offerings and also does detailed performance tracking of each service every month:

http://motleyfoolreview.com/

7 Likes
4

Hi Saul,

Over the years I have had subscriptions to a number of the MF services but eventually dropped them all except for PRO. However, I strongly agree with you on this:

Now here’s the real answer: I invest mostly in MF recommended stocks because I want to be an informed investor. Other services recommend a stock because “two analysts have raised estimates this month” or “they’ve beaten estimates two quarters in a row” or some such nonsense, where I don’t think the person doing the recommendation even knows what the company does. There is little or no follow-up and no place to discuss the stock.

When there is a recommendation from MF, someone has already screened the company and written a full recommendation. That’s very important to me. Besides which there are the boards for discussion and I feel that that is a very valuable service. Very valuable! I will get important ideas pro and con, and I won’t miss important news.

I’ll add that PRO targets a return of inflation plus 7% under all market conditions (up, down and flat). PRO has worked well for me, particularly the educational aspects, and I plan to stick with it.

Also, I thought you had a position in FB? If so, it was and still is a PRO recommendation.

Thank you,
Chris

1 Like
5

I just came across a little Fool public article (just published) http://newsletters.fool.com/18/coverage/updates/2015/05/26/i…

It points out how hard it is to invest in consumer tech, and acknowledges that David G’s consumer tech picks have lagged the S&P by an average of 11%. (That’s a lot).

To me, any indication that the Fool is actually finally evaluating their past picks in a real way, and is willing to acknowledge areas of failure, has to be good news, and will lead to better picks for us all in the future!

Saul

6 Likes
6

An interesting thing about that link is David’s Stock Advisor returns

Most of the gain is from one stock, AAPL. If you didn’t buy that one stock your portfolio didn’t do well.

The other thing is about cutting losses. Which David doesn’t seem to do so well. Because there must have been warnings in those losers long before they got to be big losers. Selling is harder than buying.

I think of it like a horse race, except you get to bet anytime from the start to the finish line. If your horse is last with a furlong to go, it is very unlikely he will be a winner.

1 Like
7

An interesting thing about that link is David’s Stock Advisor returns. Most of the gain is from one stock, AAPL. If you didn’t buy that one stock your portfolio didn’t do well.

Hi Mauser, as the article pointed out, even with Apple he didn’t do well, and trailed the S&P by 11% on average. If you remove Apple, David’s picks trailed the S&P by 30.5% on average.

I agree with you that a big problem is that he stayed too long with losers. How does a stock get to trail the S&P by 170%(!) and you are still holding it as a Buy? It must have been evident when it was trailing by 70% that this was an idea that wasn’t panning out.

Best

Saul

1 Like
8

I suppose the hardest thing is admitting that the market isn’t wrong , you are wrong. Nobody can expect all their ideas to turn out well (or maybe even most of them) so you need to be ready to admit that the bad ones are just that, and exit. OTOH selling because of some temporary blip is not a smart idea, because in most portfolios you have a chance at having one or more 10 bagger. One 10 bagger can cover a lot of 20% losers.

Measuring by the SP 500 is the usual thing, but assuming you have all the money you need to support your life style what really matters is that your investments earn enough to keep up with inflation. Because you don’t know what indices are going to do in advance.

Buy and Hold may not be as good as it used to be

http://www.valuewalk.com/2014/10/ron-baron-q3-2014-sharehold…

Few businesses many think are “built to last” actually do. In 1958, the lifespan of a Fortune 500 company was 61 years. It is now 15 years. Less than half the “Nifty Fifty” of the‘60s and‘70s remain. It is often a failure of management’s vision to create consistent values and culture that causes businesses to fail. Making sure products and services are attractive and relevant … comes from the values and culture of a business.

BTW they think Tesla is a survivor
In fairness a lot of these companies were bought out. One of the results of the computer revolution has been the ability to communicate inside large organizations has improved a lot… In the past after a certain size companies tended to drown in their own paperwork.

6 Likes
9

Today (5/30) I received some promotional material for Supernova via snail mail. To quote directly from the materials:

“He [David Gardner] has directed members of his Motley Fool Stock Advisor and Rules Breakers services to two 50+ baggers… four 25+ baggers… three 20+ baggers and ten 11+ baggers - all in the last 13 years.”

You must remember that The Motley Fool is first and foremost a business. The entire business is built on the “Buy and Hold” mantra. The number of multi-bag stocks is one of the key measures they use to demonstrate the validity of this simple investment philosophy. David even uses the moniker “Spiffy-Pop” (defined as a one day gain in excess of the price paid at time of acquisition).

Saul has a different set of measurements. He measures overall performance of his portfolio over time. He does not compare his results to the various indices - well actually he does upon occasion, but he does not use the indices as a performance goal. He has his own internal goal of 30% improvement per year. Actually, a much more challenging goal than beating the S&P annually (which seems to be very important to TMF).

I don’t make these observations as a way of denigrating TMF. I have been helped a lot by their services, I continue to subscribe to SA, RB and HG. And here we all are sharing information and observations on a TMF board. If it weren’t for TMF, I seriously doubt that we would have found a forum for these discussions. I seriously doubt that we would have found each other for these discussions.

In addition, Saul has noted that almost every stock in his portfolio has been recommended by one or another TMF service. So TMF provides a terrific screen - sure, we have missed some good investment opportunities, but there is no way to take advantage of every good opportunity, we don’t need to be invested in every one of them.

7 Likes
10

It points out how hard it is to invest in consumer tech, and acknowledges that David G’s consumer tech picks have lagged the S&P by an average of 11%. (That’s a lot).

Saul:

I’d just like to point out that the author uses a somewhat odd definition of consumer tech - he didn’t include ATVI, NFLX or TSLA, which would have changed the picture considerably. (ATVI and NFLX were included in Media, not sure where TSLA has been grouped.)

John

2 Likes