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The MotleyFool.com site is run by investors and promotes itself as being THE source of information for the individual investor. I used to read the articles religiously. But after a year or two, I started to notice that the articles were all the same with one stock symbol swapped out for another.
The analysis seemed good, but there was never any definitive answer to anything. They also used to have writers go head-to-head about why something was worth buying and why that same thing wasn't worth buying. Some might argue that the writers are just trying to present a balanced view with the intention of allowing the reader to make their own decision. A more cynical sort might think the readers were floundering just like most other amateur investors. Sure they made a good pick here and there, but they didn't have anything more going for them than any other newsletter.
I even tried out two of their fee-based services. I had particularly high hopes for the Hidden Gems service. The purpose of this program was to identify small, up and coming companies that had the potential to double in three years. At first, the service made some phenomenal picks. Those picks happened to coincide with the period in which small caps were outperforming other areas of the stock market. And sure enough, subsequent stock picks didn't do as well.
But what really bothered me was that the creators of the Hidden Gems service somehow thought it made sense to compare the returns of the S&P 500 to the Hidden Gems returns. This makes no sense! The gems were, by definition, small cap stocks. How is it appropriate to compare returns of small cap stocks to a large cap index? Especially when there's a much more appropriate small cap index, the S&P 600.
So eventually my subscription ended and I felt no need to renew it.
Entries (RSS)
August 4th, 2006 at 12:21 am
The S&P 500 is the "index to beat" and is a comparison for any investing strategy. ("Why pick stocks or funds when few beat the S&P 500…") That's why.
August 4th, 2006 at 9:06 pm
Fund managers aim to beat a representative index. That isn't always the S&P 500. For instance, bond funds don't measure their success against the S&P 500.
Hence my argument that since there is an index created (S&P 600) using the same methodology as the S&P 500 then it makes more sense to compare an investment strategy based on small-cap stocks on this index.
April 25th, 2007 at 4:56 pm
At least the Motley Fool offers SOME data to support their opinions…
April 25th, 2007 at 6:20 pm
Hi Greg,
While I agree that providing data is a good thing, the Motley Fool folks are good at putting whatever spin they want on a stock. Proof of this exists whenever they do their "why you should by xyz" article followed by another author's "why you should NOT buy xyz". Anyway, my point with their analysis is not that the data is missing, but that they're using the wrong data.
August 10th, 2007 at 11:41 am
ETF guy,
What Greg was trying to say that Motley Fool supports their opinions with actual data, from financial statements, it points out what their future expectation is based on the most current data vs historical data.
Yes, it is just a guess on their part, however, it is an EDUCATIONAL guess.
I used to be a subscriber to Motley Fool, but cancelled because I didn't have enough Investments to warrant the $200 cost. However, I feel that the news letters does provide a lot of support for their picks.
Personally, I feel that they provide a lot more factual information then the likes of Cramer or others, but that's only me.
Will
August 10th, 2007 at 12:13 pm
Will,
Point taken!
As for Cramer, I too wouldn't act on anything he says. Which isn't to say that he doesn't know what he's doing, but rather I find his show better suited to distracting me while I'm on the treadmill at the gym.
November 7th, 2007 at 11:40 am
I've been an HG subscriber for a couple years now and have had mixed results. I think my HG picks have marginally outperformed the S&P500. I definitely have my complaints with HG. HG seems to work best for:
1) people who are lucky, or
2) people who are already fairly good at investing, or,
3) people who have the time and money to invest in every pick.
The reason I write this is because many of the HG picks suffer significant loss and if a subscriber chooses a disproportionate number of these, the results won't look much like the advertised returns of the scorecard.
November 7th, 2007 at 12:06 pm
Hi Ken,
Have you compared your returns to the S&P 600 index? There's an ETF that tracks it with the symbol of IJR. Part of my issue with HG is that the picks aren't compared to an index that is representative of their market capitalization. I'd be particularly interested to know how HG is doing in the current market that favors large companies.
April 23rd, 2008 at 9:53 pm
almost seems that the hidden gems "guru" bastards are a pump and dump type operation. typical bull shit guru that sell expensive advice then leave you.
April 24th, 2008 at 7:46 pm
i rescind last night's comment. i have been burned, royally in the past by poor advice and broker acting like "i know" which cost me a lot. i just have a low tolerance factor for advice. motley seems to be more concerned with the average ignorant/inexperienced investor like myself. a retirement fund just informed me that they want to play in derivatives and commodities and who knows what else. what is the matter with everyone? they want to gamble with my retirement and deal in the things that are messing up the economy and driving up everyday items into the stratosphere.