When it comes to picking stocks, The Motley Fool and Investor’s Business Daily (IBD) are two of the most highly respected sources out there. Stock Advisor, The Motley Fool’s flagship subscription service, focuses on identifying growth stocks early in their lifecycles and delivering long-term value. The IBD Leaderboard service, on the other hand, relies more heavily on technical analysis to find short- and medium-term profits.
So, which stock picking service is right for you? Let’s take a closer look at how The Motley Fool Stock Advisor and IBD Leaderboard stack up.
About The Motley Fool Stock Advisor and IBD Leaderboard
The Motley Fool Stock Advisor service launched in 2002 with a focus on finding potentially explosive growth stocks. Among other picks, Stock Advisor recognized the value in companies like Costco, Amazon, Priceline.com, and Gilead long before they ballooned into the mega-cap stocks they are today. All told over the past 18 years, the service’s picks have seen a total return of well over 300%.
The main thing that you get with Stock Advisor is two stock recommendations each month. That may not sound like much, but these two picks are highly researched and each come with an in-depth report into why the companies are poised for growth. Typically, Stock Advisor picks are meant to be held over the long term (for at least a few years), so the service is best suited for value investors who are looking to buy and hold.
The IBD Leaderboard has been around since 2011 and itself has a strong track record of beating the market. Stock picks are based on investor William O’Neal’s “CAN SLIM” strategy (more on that later), so they tend to be short- to medium-term picks based on a combination of fundamental and technical signals.
What you get with the IBD Leaderboard is a bit more involved than what Stock Advisor offers. The in-depth research is similar, but each pick is accompanied by annotated technical charts that illustrate entry and exit targets, stop levels, and more. The system is still easy to follow, but it requires significantly more attention on a day-to-day basis than Stock Advisor’s monthly picks.
The Motley Fool Stock Advisor and IBD Leaderboard are both stock picking services that offer detailed research in addition to picks. To some extent, both services also rely on fundamental information – although this is true to a much greater extent for Stock Advisor.
Stock Advisor vs. IBD Leaderboard: Stock Picks
Stock Advisor and IBD Leaderboard use entirely different systems for picking stocks, and so it should come as little surprise that they’ve had very different results.
The Motley Fool’s Stock Advisor service is built entirely on fundamental analysis. The analysts behind the service look through company financials, management teams, and industry trends in order to pick out companies that they think are gearing up for big growth.
Picks aren’t based on technical analysis, and Stock Advisor doesn’t issue guidance about the best intraday price at which to buy a stock. Instead, stocks tend to show up as Stock Advisor picks when they’re trading at a much lower P/E ratio compared to the rest of the sector or when there are specific catalysts like an upcoming product release. Stocks may also appear as picks without a catalyst, based on underlying trends in the domestic or global markets.
The IBD Leaderboard uses the “CAN SLIM” strategy, which is based on a combination of fundamental and technical factors:
- Current quarterly earnings
- Annual earnings growth
- New products or services
- Supply and demand
- Leader or laggard
- Institutional sponsorship
- Market direction
Generally speaking, stocks that appear on the IBD Leaderboard have some of the same fundamental qualities as stocks that could appear in Stock Advisor. They are exhibiting earnings growth or have a specific catalyst, such as a new project line, that offers reasons to be optimistic about the future of the company. But, on top of that, stocks must also have bullish technical signals to be chosen for the IBD Leaderboard.
The Motley Fool Stock Advisor has been around significantly longer than the IBD Leaderboard, so it has the longer track record. It’s also an impressive track record – Stock Advisor has generated returns of over 500% over the past 18 years.
IBD Leaderboard doesn’t publicize its returns since 2012, but claims a 77.7% return over the course of the past three years (compared to 44.3% for the S&P 500). Over that same time period, Stock Advisor has produced returns of 84.8%. So, neither of these services are slouching.
The way that Stock Advisor and IBD Leaderboard present their picks differs quite a bit as well. With Stock Advisor, subscribers get an email once per month containing summaries of the two stock picks along with in-depth research reports.
With IBD Leaderboard, you have a lot more material to keep an eye on. There are emails, an online dashboard, and a mobile app where you can monitor the latest updates to the leaderboard. Each stock pick has a short research summary accompanying it, similar to the Stock Advisor research summaries, but you also get an annotated technical chart. This is particularly useful, since it delineates entry and exit points and stop loss levels, as well as explains the strategy behind the technical pattern being pinpointed.
Motley Fool vs. IBD Pricing Comparison
Stock Advisor is significantly cheaper than IBD Leaderboard. The Motley Fool’s service costs just $199 per year (you can get your first year for 50% off). That’s compared to $69 per month for IBD Leaderboard.
Both Stock Advisor and IBD Leaderboard offer a nice array of resources. To start, each service includes research reports on each of the stocks that are recommended. These are a bit more in-depth for Stock Advisor, but IBD Leaderboard doesn’t cut corners when discussing a stock’s potential, either. Each service also includes market commentary, although this is updated more frequently for IBD Leaderboard.
Which Service is Better?
Both Stock Advisor and IBD Leaderboard are strong services with a history of beating the broader stock market. But, Stock Advisor wins handily in this comparison. It’s significantly cheaper, has a slightly better track record over the past few years, and requires less day-to-day work on the part of investors. IBD Leaderboard may be better for investors who want short-term trading action, but it’s hard to justify the high cost compared to Stock Advisor.
For the majority of investors, The Motley Fool’s Stock Advisor service is a better option than IBD Leaderboard. It’s not only significantly cheaper, but requires less day-to-day monitoring of the market and has a stronger track record over both short and long timeframes. That’s not to put IBD Leaderboard down, as it is a strong stock picking service that performs well on a mix of technical and fundamental signals. But, Stock Advisor is one of the best services available for long-term investors.