If you’re looking to maximize returns on your long-term investments, Motley Fool Stock Advisor and Action Alerts PLUS are two stock-picking services that stand out. Stock Advisor advertises returns of more than 400% since the service was founded in 2002, while Action Alerts PLUS offers a portfolio based on the investing style of Jim Cramer.
While both services offer a range of features to help you improve your investing, the main benefit of both services is stock picking. Most members sign up to get stock trade alerts that will help them beat the market.
Which of these services is better suited for your needs? Let’s dive into a head-to-head comparison to find out.
About Motley Fool Stock Advisor and Action Alerts PLUS
Stock Advisor from The Motley Fool is a stock-picking service that looks for high-potential companies. The service recommended investing in companies like Costco and Amazon early on and has generated excellent returns for investors over the past 18 years. It’s worth noting that Stock Advisor makes recommendations almost entirely based on fundamental information and that most investments are intended to be held for several years or longer.
Action Alerts PLUS is a subscription service created in 2001 by TheStreet.com, which used to be owned by Jim Cramer. Cramer sold Action Alerts PLUS along with TheStreet.com in 2021, although it hasn’t changed much since the sale.
Action Alerts PLUS gives you access to an investment portfolio built around Cramer’s investment strategy. Stock picks are based on a mix of fundamental and technical factors, although the portfolio tends to be relatively conservative in its investments.
Similarities Between the Services
One of the important things that Stock Advisor and Action Alerts PLUS have in common is that both offer rationale behind their investment recommendations. With the Stock Advisor service, you only get two picks per month. But they’re each accompanied by an in-depth research report that explains exactly why the analysts at Motley Fool think a stock is poised for growth.
With Action Alerts PLUS, there are far more buy and sell recommendations on a day-to-day basis. However, each recommendation still comes with a paragraph or two of analysis explaining the recent news, fundamental factors, or technical factors that are prompting a trade.
The quantity of alerts won’t be a big factor in our comparison. Some investors prefer more alerts so they can be more active while others prefer fewer alerts so they can keep investing simple. For our purposes, we care more about the returns than the number of alerts required to generate them.
Stock Advisor vs. Action Alerts PLUS: Stock Picks
Beyond offering analysis, Stock Advisor and Action Alerts PLUS use very different methodologies to pick stocks. That’s led the two services to have very different returns over the nearly 20 years they’ve been competing.
Stock Advisor’s monthly stock picks are made solely on the basis of fundamental analysis. The service looks for undervalued stocks or stocks that are poised for massive growth. Typically, the in-depth research reports that accompany a stock pick cover not only corporate earnings, but also sector trends, new product lines, or other factors that Motley Fool analysts think will boost a company significantly in the near future.
Importantly, Stock Advisor only issues two stock picks per month. These picks don’t come with technical entry or exit points. Rather, you can simply buy them as soon as they’re issued. One thing to keep in mind is that most Stock Advisor picks are meant to be held for several years, so the service is definitively targeted at long-term investors.
Action Alerts PLUS uses a combination of fundamental and technical factors when making stock recommendations. The rationale for investing in a stock tends to lean more heavily on fundamentals, although technical pullbacks are often the catalyst for entering into a position. Still, it’s important to note that Action Alerts PLUS doesn’t offer technical charts or identify specific entry, exit, or stop-loss levels for any of its picks (which almost negates the value of the technical analysis used in the decision making process).
Stock picks are divided into four categories – value, growth, blend, and income (dividend) – so there is potentially more diversification of your portfolio when following this service. Action Alerts PLUS also differentiates itself by relying heavily on scaling into and out of positions. Often, the trades being recommended focus on increasing or decreasing the position in a stock that’s already in the portfolio rather than buying something entirely new. You’ll likely want to use Action Alerts PLUS in conjunction with a commission-free brokerage for this reason.
To summarize, Motley Fool looks for strong companies that are poised to be leaders in their respective industries for years to come. The Fool’s investing style is simple and easy to follow. Action Alerts utilizes a few different strategies and takes a more active approach to portfolio management. While this may be desirable for active traders, it can be overwhelming for casual retail investors.
Stock Advisor issues two stock picks per month, roughly two weeks apart. An email about each new pick contains the bottom line about the pick and a link to an in-depth research report that explains the rationale behind the recommendation. Outside of buying these new picks, there is very little work involved to keep up with the Stock Advisor portfolio.
Action Alerts PLUS issues buy and sell alerts on a day-to-day basis, and it assigns each stock in the portfolio a buy/sell rating on a scale from one to four. This leaves more room for individual investors to do their own research and deviate from the service’s portfolio. However, it also leaves more room for interpretation and requires more focus on the stock market on a day-to-day basis. At the end of each week, Action Alerts PLUS sends out an email that goes into more detail about each of the stocks in the portfolio.
Now it’s time to get to the most important part of the Action Alerts and Motley Fool comparison. Which service has the better stock picks?
There are a lot of different ways we can compare the services, but at the end of the day, it’s fair to say that portfolio returns are the most important factor. Simply put, which service can make you more money?
Stock Advisor’s track record far outpaces that of Action Alerts PLUS. Since 2002, picks have returned more than 400% at an average of over 16.6% per year.
Action Alerts PLUS, by contrast, has seen returns of just 190.0% between 2001 and 2020. The service stopped publishing its performance data after Cramer sold it. That’s compared to nearly 350% for the S&P 500 over that time period. The only consolation is that losses around the 2008 financial crisis were less extreme in the Action Alerts PLUS portfolio compared to the broader market. This makes some sense given that this fund is meant to be managed somewhat conservatively.
It should be noted that past performance is not necessarily indicative of future returns. That said, we are looking at a window of around 20 years so it’s fair to say that the performance of both companies is representative of their abilities. With that said, Stock Advisor is the clear winner in this area.
Motley Fool vs. Action Alerts: Pricing Comparison
It’s hard to beat Stock Advisor on price. It nominally costs $199 per year, but it’s easy to find discounts to bring the cost down to just $79 for your first year.
Action Alerts PLUS is priced competitively with Stock Advisor. It costs $29.99 per month or $199.99 per year.
Which Service Offers Better Resources?
One major limitation to Stock Advisor is that you don’t get much beyond analysis of the stocks at hand. The monthly newsletter briefly discusses the rest of the portfolio, but there is no broader market analysis included. The service is designed to be simple. You get two new stock picks every month and that’s nearly it.
That said, if you are new to investing or have some money to invest between new picks, Stock Advisor can also help with that. The service offers a list of top-ranked stocks already in the portfolio that you can double-down on. It also has a list of starter stocks that Motley Fool analysts think every investor should own.
Action Alerts PLUS offers a lot more in addition to access to the portfolio. The service comes with daily market news updates and analysis and an online forum for subscribers. There’s a more in-depth market analysis distributed at the end of each week, plus in-depth articles and videos analyzing specific stocks. These resources can form a strong foundation for fundamental investing, although there is not much technical information available with Action Alerts PLUS.
Stock Advisor vs. Action Alerts Plus: Which is Better?
For the majority of investors, Stock Advisor is a more attractive option than Action Alerts PLUS.
While the two services have been around for nearly the same amount of time, the Stock Advisor portfolio has far outpaced the Action Alerts PLUS portfolio in returns (not to mention the S&P 500).
The service also requires less day-to-day focus on the market and costs significantly less.
At only $99/year for new members, Motley Fool’s Stock Advisor can’t be beat.
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Alternatives to Stock Advisor and Action Alerts PLUS
Perhaps the biggest drawback to Stock Advisor and Action Alerts PLUS is that neither service offers a huge amount of research for self-motivated investors. You mainly get information about the stocks being recommended, not about other stocks on the market.
One alternative for investors who prefer to do their own research is Zacks Premium. You get detailed fundamental research and analyst reports on thousands of stocks, plus a list of around 100 top-ranked investment ideas to consider. At $249 per year, Zacks Premium is slightly more expensive than Stock Advisor and Action Alerts PLUS.
Another option is Seeking Alpha. This service offers in-depth stock research along with a powerful stock screener and lists of top-rated stocks to buy right now. Seeking Alpha presents valuation analysis from analysts, financial bloggers, and others, so you can get a lot of different opinions about a company before investing. Seeking Alpha Premium costs $239 per year.
Both The Motley Fool Stock Advisor and Action Alerts PLUS are good options for getting help with picking stocks. However, between the two services, it’s hard not to prefer Stock Advisor. It’s much less expensive, has a much better track record, and requires less work to follow along with the portfolio. Action Alerts PLUS is mostly suitable if you want market-wide research in addition to stock picks, as this is something Stock Advisor doesn’t offer.