Motley Fool Rule Breakers Review
Quality of Research
Motley Fool’s Rule Breakers program provides stock recommendations for investors aiming to diversify their portfolios. The program has consistently beaten the market for the past 15 years. Should you sign up? Read our review to learn more.
- About The Motley Fool
- Motley Fool Rule Breakers Program
- What Rule Breakers Members Get
- Rule Breakers vs. Stock Advisor
- How Credible is Motley Fool?
- Who is Rule Breakers Best For?
- Is Rule Breakers Worth the Money?
About The Motley Fool
The Motley Fool is one of the biggest financial media companies in the world. The Virginia-based company was founded in 1993 by David and Tom Gardner and now employs over 300 people. The Motley Fool, sometimes referred to as “The Fool,” provides a handful of free and premium services, all of which are related to stock news and analysis.
The main site features investment news, research, and guides for investors aiming to achieve exceptional returns. One of the most refreshing elements of The Motley Fool’s content is how focused it is. Whereas similar financial news sites venture into unrelated sub-topics of investing, The Fool stays focused on what it does best – investment advice.
Before we get started with our Rule Breakers review, let’s look at the masterminds behind the company.
Who Are David and Tom Gardner?
David Gardner and Tom Gardner are brothers and co-chairmen of The Motley Fool enterprise. In 1993, the Gardner brothers came together to create The Motley Fool website. The idea was first conceptualized by David who launched an investment newsletter that struggled to gain traction. Tom, recognizing the opportunity, jumped on board and helped promote the newsletter on America Online (AOL). The newsletter began to gain traction and the brothers continued working together in a humble office located in the shed behind David’s Virginia home.
The Gardner brothers continued to grow the newsletter by writing articles and providing market insights to average investors. Keep in mind, this was before the internet became what it is today. Whereas now, you can find millions of articles on investing, that wasn’t always the case.
Motley Fool helped pave the way for the average investor by sharing investing insights for casual investors. From day one, the Gardner brothers wanted to empower the little guy by democratizing access to investment resource. Of course, this begs the question of why Tom and David Gardner were qualified to provide investment advice in the first place.
The brothers both did well in school and both seemed to take an interest in writing, but what truly made them a force to be reckoned with was their investing prowess. The Gardner brothers started building a portfolio of stocks with a goal of beating the market. In the first year alone, their portfolio outperformed the S&P 500 by 40 points. The Gardner brothers continued to beat the market and share their insights on The Motley Fool and by 1996, their site was one of the most popular investing sites on the web.
The Motley Fool quickly developed a reputation for being a leading financial consulting service, but readers wanted more. While many readers were interested in the methodology behind the Gardner brothers’ investment strategy, some preferred more guidance. To meet this demand, The Fool launched two premium services in the early 2000’s.
The Motley Fool Stock Advisor program was launched in 2003 followed by the Motley Fool Rule Breakers program in 2004.
We reviewed the Stock Advisor program earlier this year and we’ve received many requests to review the Rule Breakers program next.
Motley Fool Rule Breakers Program
Motley Fool’s Rule Breakers program is run by David Gardner and his investment team who aim to discover the leading growth stocks.
The Fool’s team of analysts looks for “under-appreciated” companies that are set up for explosive growth in the future.
Let’s have a look at some of the details.
Rule Breakers Pricing and Discount
Right now, the Rule Breakers subscription can be purchased at a discounted rate of $19/month or $99/year. The annual subscription is backed by a 30-day money-back guarantee.
If you’re investing for the long-term, the annual subscription is recommended. You can purchase a full year of access for the same price as five months on the monthly plan, so it’s a no-brainer.
The Rule Breakers investment strategy is focused on finding hidden gems in the market. David and his team are looking for innovative growth companies that are set up for massive returns. Of course, many of these companies are undervalued by the market at the time of the stock pick recommendations, so it’s important for investors to diversify and follow strict risk management protocols.
Here are some of the elements of a good Rule Breakers stock pick:
- Innovative companies making moves in emerging industries
- Companies with competitive advantages such as momentum, intellectual property rights, respected leaders, or market share dominance
- Companies with strong management teams and supporters
- Companies with strong consumer appeal and branding
- Companies with sustainable business models and strategies
This investment strategy is best illustrated by example.
In February of 2017, The Motley Fool sent out a buy recommendation for The Trade Desk (TTD), a self-service online advertising platform. The Rule Breakers team justified the pick by pointing out that the company was a) a pioneer in the space, b) avoiding the mistakes of rival companies, and c) already profitable with growing revenue.
At the time of the recommendation, TTD’s stock price was $34. Today, the stock is priced at $233, which means the stock pick had a return of over 550% in the past few years.
This wasn’t just a lucky pick – the Rule Breakers program has a history of exceptional performance.
Motley Fool’s Track Record
One of the great things about The Motley Fool investment services is that they are transparent. After you sign up for a subscription, you can find a record of every stock pick the company has made since the inception of the program. The picks are organized in a chart with information on the stock’s risk, return, and benchmark performance.
The table includes both winning and losing stock picks and, to date, the program has a cumulative return of 167%. This is more than double the 74% return of the S&P 500 during the same time period.
Motley Fool’s record speaks for itself. For those who are hesitant, the numbers don’t lie. You can go back and review every stock pick and see when and why the particular stock was recommended. Each pick is backed by a comprehensive research report outlining the rationale behind the investing idea.
What Rule Breakers Members Get
By this point, it should be clear that The Motley Fool is a reputable investment advisor with a unique investment strategy. So, what exactly to Rule Breakers members get?
The Rule Breakers members area has a handful of features ranging from educational articles to stock trading tools, but the main stars of the service are the stock picks and research reports. Rule Breakers members get lists of the best stocks to buy every month.
Motley Fool Stock Picks
The stock picks are the star of the Rule Breakers service. Rule Breakers members get two new stock alerts every month. These stock picks are backed by comprehensive research reports (which we will discuss next).
The stock picks are diversified across a variety of sectors and there are picks for every type of investor. Looking at the last 20 recommendations, we see stocks priced anywhere from $14 to $180 with risk scores ranging from 7 to 15 (on a scale from 0-25).
As mentioned above, members also have access to a list of every stock recommendation the Rule Breakers team has ever made. I found this to be particularly beneficial because it allowed me to do a bit of my own research. The Rule Breakers team aims to find “under-appreciated” stocks, meaning it may take time for the market to recognize the true value of these companies. There can be an advantage to moving late on some of these stock picks as you may be able to buy the stocks at an even steeper discount.
Furthermore, by analyzing the Fool’s track record, you can build a diversified portfolio consisting of multiple stocks across multiple sectors. Of course, every stock is backed by a research report for diligent investors who want to understand the rationale behind the recommendation.
Company Research Reports
The Gardner brothers made their name by providing some of the best investment research and advice in the industry. The Rule Breakers program stays true to the Motley Fool mission by providing in-depth research reports for every stock pick.
Each research report has two main components: the 1-minute summary and the full research report.
The 1-minute summary is a quick breakdown of the research report (for investors in a hurry). This summary explains what the company does, what industry they operate in, and why the Fool is making a buy recommendation.
The research report provides a more detailed breakdown of this information with a well-written piece explaining the rationale behind the pick. This report has somewhat of an “expose” format, where the writer shares information on the company’s current standing, the competitive landscape, and future milestones. This research report is particularly helpful for investors who value fundamental research and may want to take a larger, long-term position in a company.
Overall, the research reports provide exactly what you need. You can get a quick summary or an in-depth research report – either way the Rule Breakers team delivers.
Rule Breakers vs. Stock Advisor
We initially wrote our Stock Advisor Review in 2018 and have since revised it multiple times. It took us almost six months to get around to reviewing the Rule Breakers program. Why the delay?
To be frank, The Stock Advisor Program is Motley Fool’s flagship offering. If you’re torn between the two services, the Stock Advisor subscription is your best bet. You get investment advice from both brothers (vs. David only) and the stock picks have generated returns of 379% since inception (vs. Rule Breakers 89%). With these numbers in mind, it would seem like only a fool (pun intended) would choose the Rule Breakers program over the Stock Advisor program, but that’s not the case.
While we recommend the Stock Advisor program over the Rule Breakers program, the services shouldn’t be looked at as alternatives for each other. In fact, the services are complementary and it can make sense to sign up for both.
Both programs are rooted in the same principles and utilize the same platform, but they rely on different investing methodologies. Whereas the Stock Advisor program is simply focused on finding the best stocks to buy at any given moment, the Rule Breakers program is focused on a very specific type of stock (as we discussed in the “Investing Style” section). There’s little-to-no overlap in the picks made by both services.
If you’re just looking for a few stock picks, Stock Advisor (SA) is your best bet. If you’re looking to expand and diversify your portfolio with a broader range of unique companies, the Rule Breakers subscription can unlock a lot of opportunities that you won’t have access to with the SA subscription alone.
Whichever program you choose, you can find solace in the fact that it is backed by a team of experts, which leads to our discussion of the Fool’s credibility.
How Credible is Motley Fool?
The internet is teeming with scams and so-called “experts” who want to sell you something. It can be difficult to separate the wheat from the chaff.
The stakes are even higher in the world of investing. If you pay for advice from the wrong expert, you can lose money two different ways. First, you wasted money paying for useless advice. Second, you could lose money from the advice you’ve been provided. A bad stock pick has the potential to cost you a lot of money.
Fortunately, the Gardner brothers and The Motley Fool team are credible. This isn’t some pop-up service from a couple of brothers who had a good year in the market. The Fool has been beating the stock market for over 25 years, and they’ve been doing it publicly. There’s a record of every stock pick they’ve ever made, and this record paints the picture of an exceptional trading strategy.
Of course, new investors shouldn’t get carried away and expect to find overnight wealth. Not every pick is a winner, and not every winner is a home run. While the Motley Fool has made some picks that have yielded returns upwards of 1000%, these are the outliers and not the norm.
We analyzed the returns of every Rule Breakers pick over the past year and found that the average return was 24%. During that same time period, the S&P 500 had a return of roughly 8%, meaning the program beat the market by 16%. This is what traders should expect from Rule Breakers. You won’t get rich overnight, but you will have the potential to beat the market year-over-year by tapping into an investment strategy that has a proven track record of success.
Who is Rule Breakers Best For?
There is no universal investment strategy that is ideal for every investor. We all have different investment strategies, goals, and risk thresholds. We also think in different ways. Whereas some investors want to be told what to do, others prefer to do their own research. For this reason, we always like to discuss who a service is best for.
Rule Breakers is best for intermediate investors who are looking to diversify their portfolios and tap into new investment opportunities. If you’re just getting started and need a few stock picks, stick with a service like the Stock Advisor. If you’ve already built a portfolio and would like to add outperforming stocks every month, the Rule Breakers program is a great option.
Is Rule Breakers Worth the Money?
In the world of investing services, “value” is based on the price of the service itself as well as the impact of the service on an investor’s returns. Cheap isn’t always cheap and expensive isn’t always expensive. A seemingly cheap service can leave your portfolio in the gutter and a seemingly expensive service can return the cost of the subscription and then some.
Motley Fool’s Rule Breakers provides the best of both worlds. At $99/year, it’s hard to find a more cost-effective investment advisory service. Furthermore, you get access to stock picks from some of the best minds in finance.
We can easily say that the Rule Breakers program is well worth the subscription price. You could make back the cost on a single stock recommendation, as many members have reported.
- 15 year history of beating the stock market
- Two new stock picks every month
- Exceptional research reports
- Transparent track record
- Low subscription cost
- Lower lifetime returns than the Stock Advisor program