Motley Fool'sStock Advisor
What’s the Motley Fool
Founded in 1993 by two brothers Tom and David Gardner, Motley Fool is one of the most popular companies in the financial arena. They employ over 400 people offering stock recommendations to their 700,000+ subscribers. Each month the brothers Gardner gives out 2 stock recommendations. First one is from Jim Gardner and two week later David Gardner offers his selection.
If you’ve ever been on any financial websites then you’ve probably seen The Motley Fools advert for their stock picking service proclaiming to outperform the market by a margin of over 5 to 1. On October 10 this year I decided to see for myself if their outlandish claims are true. I purchased a subscription to their service so I can investigate the veracity of their stock picking service from the inside.
They have posted the record of every one of their stock selections going back 18 years to 2002. This is the exact information that is need to see for myself how their selections have performed over time. Their very first selection starting in April of 2002 was Costco COST at $30.32 and if held to now it’s up 1,079%. Their fifth selection on Sept. 6, 2000 was Amazon AMZN at $15.31 and if held to now is up 19,731%. Their biggest winner was selected two years later on Dec. 17, 2004 was Netflix NFLX at $1.85 and if held to now is up an astounding 25,556%. To put it in real dollar terms, if you had invested $1,000 on Netflix when today you would be smiling at $260,994.
I have posted below a spreadsheet of all their stock selections for the last 18 years so you can see their performance for yourself. It’s a work in progress as it will take time to input data for over 400 stock transactions into the spreadsheet.
As of Dec. 31, 2020 out of the most recent 71 selections going back to the beginning of 2018, 56 are profitable and 14 are in the red for a success rate of 80%. Total return for the 3 years 266%.
3/19/2020 Zoom Video +234%
1/2/2020 Tesla +480%
2/7/2019 Appian +248%
1/3/2019 Twilio +264%
4/19/2018 Shopify +662%
1/25/2018 Paycom +330%
1/11/2018 Okta +697%
Most stock system developers perform back testing to determine the viability of a system. I’m going to do better than that. I will conduct a forward test of The Motley Fool’s Stock Advisor by purchasing at least $1,000 worth of shares in each of their stock picks going forward. I can think of no better way to test the real performance other than by putting real money on the selections as they are given out every two weeks. The spreadsheet for the forward testing is posted below.
We will also do a comparison between the performance of an investor who purchases an index fund and the Stock Advisor investor. We will use the Nasdaq as the benchmark representing the market. I’ve created a spreadsheet for the index investor purchasing $24,000 of the QQQ on the first trading day of 2020. A spreadsheet is also created for the Stock Advisor investor who will purchase $1,000 worth of each stock selection and by the end of the year will have also invested $24,000. Both spreadsheets are shown below.
For the year 2020 total return of the Stock Advisor is 92% compare to the QQQ return of 46%. In dollar terms, $19,476 profit versus $11,126. Out of 24 selections 21 winners and 3 losers for a win rate of 87%. Four of the selections were up over 100% led by TSLA 720%
The forward test which began on Oct. 27, 2020 with purchase of ADSK, it returned 34% in a little over 2 months.
For the year 2020, the Stock Advisor investor has earned $19,476 and the index investor $11,126. The SA investor has earned $8,350 or 42% more than the index investor.
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