If you’re looking to maximize returns on your long-term investments, The Motley Fool Stock Advisor and Action Alerts PLUS are two stock-picking services that stand out. Stock Advisor advertises returns of more than 300% since the service was founded in 2002, while Action Alerts PLUS gives you access to the portfolio of well-known trader 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 The 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.

Motley Fool Stock Advisor

Action Alerts PLUS is a subscription service created in 2001 by TheStreet.com, which is owned by Jim Cramer. The service gives you access to the investment portfolio behind Cramer’s charitable fund, allowing you to exactly follow Cramer’s own investments. Stock picks are based on a mix of fundamental and technical factors, although the fund tends to be relatively conservative in its investments.

Action Alerts Plus

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 Stock Advisor, there are only two picks per month. But, they’re each accompanied by an in-depth research report that explains exactly why the analysts at The 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 amount of alerts required to generate them.

Motley Fool Research Report

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.

Investing Style

Stock Advisor recommendations 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 just corporate earnings, but a discussion of sector trends, new product lines, or other factors that The 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. Cramer’s 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. Another difference to Action Alerts PLUS is that it relies 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.

Action Alerts Plus Portfolio

To summarize, The 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.

Pick Format

Stock Advisor issues two stock picks per month in an email to subscribers. The email contains the bottom line about the picks, along with in-depth research reports that explain the rationale about each recommendation. Outside of buying these new picks, there is very little work involved to keep up with the Stock Advisor portfolio. If you are new to investing and do not have any stocks in your portfolio, Motley Fool offers lists of “Best Stocks to Buy Now” and “Best Starter Stocks” to get you started.

Action Alerts PLUS issues buy and sell alerts on a day-to-day basis, as well as 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 Cramer’s portfolio. However, it also leaves more room for interpretation and requires more focus on the 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.

Track Record

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 500% at an average of over 16.6% per year.

Motley Fool Performance

Action Alerts PLUS, by contrast, has seen returns of just 97.5% between 2001 and 2017. That’s compared to over 200% 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.

Action Alerts Plus Performance

It should be noted that past performance is not necessarily indicative of future returns. That said, we are looking at a window of ~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 $99 for your first year.

Action Alerts PLUS is moderately priced by the standard of other stock picking services, but expensive compared to Stock Advisor. It costs $29.99 per month or $299.95 per year.

Motley Fool is

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 it. While there are other features to the service, the stock picks are the main selling point.

Action Alerts PLUS offers a lot more in addition to access to Cramer’s 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, and once per month there’s a conference call with Cramer himself to talk about the status of the portfolio and the market. These resources can form a strong foundation for fundamental investing, although there is not much technical information available with Action Alerts PLUS.

Action Alerts Educational Resources

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 beaten.

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Conclusion

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.