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David Gardner is one of the founders of Motley Fool.
He started one of Motley Fool’s most popular stock picking services, Motley Fool Rule Breakers, in 2004.
David Gardner also wrote an investing book called “The Motley Fool’s Rule Breakers, Rule Makers : The Foolish Guide to Picking Stocks.”
In 2021, he has left Motley Fool and is not involved in any of Motley Fool stock picking services any more.
So, this article is focused on Motley Fools Rule Breakers stock picks as well as its stock picking principles.
Rule Breakers Stock Picking Principles
So, how does the team of analysts at Motley Fool pick stocks?
What investment principles do they follow?
When it comes to stock investing, they always goes for companies that have huge growth potential and may be the market leader in the next 10 years.
Yes, they recommend investing for the long term because that’s how the best investors such as Peter Lynch make money through investing.
So, you probably won’t see them sell the stocks after it has gone up 20% or 30% percentage in one year, you might probably not see them sell the stocks even after its price has gone up by 100% as long as they believe in the business’s fundamentals.
Now, let’s see what they are looking for in a company before investing in it.
Key Trait #1: Top dog & First Mover In Important Emerging Industry
The Motley Fool believes that you should always look for companies that are market leaders (based on market cap or revenue) in important emerging industries.
As the biggest player in the industry, a company has a lot of natural advantages over its competitors.
For example, a company has more pricing power because of its market share and also tends to have more capital to help it ride through the economic downturn better than smaller players in the same industry.
Now, what are the emerging industries?
And why emerging industries?
Emerging industries are new industrial sectors that are growing at a rate faster than the overall economy.
Such industries usually come into being when customers need change, new technologies replace older ones, or when new socio-economic conditions emerge.
Here are some examples of emerging industries in the world right now:
- Artificial Intelligence
- Blockchain technology
- 3D printing
The Motley Fool prefers emerging industries because it has the highest potential to give you massive returns in the long term.
About 10 to 15 years ago, e-commerce was a completely new and emerging industry.
Key Trait #2: Sustainable Advantage ( Patent Protection, Visionary Leadership, etc)
It must have sustainable competitive advantages over its competitors.
Sustainable competitive advantages are company assets, attributes, or abilities that are hard to surpass, and therefore puts the company in a favorable long term position over competitors.
So, what are some examples of sustainable advantage?
Visionary leadership is one good example.
Apple is what it’s today all thanks to the visionary Steve Jobs who revolutionized six industries:
- Personal computers
- Animated movies
- Tablet computing
- Digital publishing
Other examples include patents, branding and cost-efficiency.
Key Traits #3: Good Management Team
When you invest in a business, you want to make sure that the business is run by competent people.
Because they are the decision-makers of the company and runs the day to day business.
For example, what new products should they launch?
How do they position their products?
How do they distribute the products?
How do they price their products?
There are so many important business decisions for them to make.
At the end of the day, whether or not the business will do well, it very much depends on those business decisions.
Key Traits #4: Businesses that solve real-world problems at scale
It also must help solve real-world problems and do it at scale.
One good example is Apple.
It consistently comes up with great products to help make people’s lives better.
In the case of the iPhone, it’s so much easier to use and very fast to load.
It also allows you to stay connected with family and friends through FaceTime.
With iTunes, people can listen to their favorite music on the go.
So far, Apple has sold over 1.3 billion iPhones all over the world since its launch in 2007.
Since 2001, Apple’s stock price has grown by 15,000% making the company worth $1 trillion.
That’s why you should always invest in businesses that can scale.
Rule Breakers Stock Picks For The Bear Market
Now, let’s look at some of Motley Fool’s stock picks in the past.
In 2018 after the market has been on a bull run for almost 10 years, Motley Fool Rule Breakers picked 5 stocks to help investors prepare for the bear market.
Here are Rule Breakers’ five stock picks:
- Novo Nordisk
All of these five stocks are big-cap companies and industry leaders with a competitive edge in their respective industries.
The reason behind these stock picks is that big cap market leaders with a very strong balance sheet and a lot of cash are better positioned to weather any economic slowdown.
Now, let’s see how these five stocks performed during the Coronavirus crisis.
Alphabet: It has gone up by about 40%* since it was recommended in 2018.
Apple: it has gone up by close to 100%* since it was recommended in 2018.
Novo Nordisk: it has gone up by about 50%* since it was recommended in 2018.
Tencent: It went down initially but it has since gone up to close to its peak in 2018.
Amazon: It has gone up by about 60%* since it was recommended in 2018.
[*Returns as of 1st June 2020. Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]
Out of the five stocks recommended by the Motley Fool for the bear market, four have gone up by more than 40% and the remaining one still stayed around where it was in 2018.
Rule Breakers’ Best Stock Picks
Now, what are Rule Breakers’ best stock picks?
Motley Fool Rule Breakers, one of Motley Fool’s most popular stock picking services, was started in 2004 by David Gardner to help stock investors find market-beating growth stocks.
Here are just some of the best stock picks:
- MercadoLibre: 5,589%*
- Tesla: 14,656 %*
- Shopify: 39,116%*
- The Trade Desk: 16,918%*
- Intuitive Surgical: 5,232%*
- Meta (Previously Facebook): 1,143%*
- Etsy: 979%*
- Hubspot: 514%*
- Monster Beverage: 1,441%*
- Universal Display: 1,464 %*
[*Returns as of 27th Jan 2022 since it was first recommended. Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]
As you can see, Rule Breakers’ best growth stock picks are not just 10-bagger stocks but also 50-bagger stocks and 100-baggers stocks.
Just imagine that you invest $5,000 in one of the 10-bagger stocks, your $5,000 investment would be worth more than $50,000 today.
If you had followed this recommendation in one of the 50-bagger stocks, your $5,000 investment would be worth more than $250,000.
These are the high-growth stocks that you want to include in your stock portfolios if you want to exponentially grow your money.
Rule Breakers’ Latest Stock Picks
Now, let’s look at some of the latest Rule Breakers’ stock picks and their performance.
Inside Motley Fool Rule Breakers, their analysts make two stock recommendations on the first Thursday and the third Thursday of every month.
As it’s against the member’s policy to disclose the latest stock picks, I will just highlight the performance of all the 2020 stock picks as of 17th Feb 2021.
|Rule Breakers’ 1st Stock Pick||Rule Breakers’ 2nd Stock Pick|
[*Returns as of 17th Feb 2021. Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]
In 2020, there were 23 winning stocks out of a total of 24 stock picks from Motley Fool Rule Breakers.
That’s an impressive win ratio of 95.83%.
Also, there are 7 stock picks that more than double in price, and two stock picks more than tripled in price.
If you had invested just $1,000 in each of Rule Breakers’ stock picks in 2020, your $24,000 investment would be worth $46,745, up 94.77 % as of Feb 2021.
On the other hand, if you had invested the same $24,000 in the S&P 500 on 1st Jan 2020, your investment would be $28,790, up 19.96% as of Feb 2021.
As you can see that, Motley Fool Rule Breakers beat the market by almost 370% because it is specifically focused on picking high growth stocks with massive upside potential.
Rule Breakers’ Stock Picks VS S&P 500
So, how have Rule Breakers’ stock picks performed over the years?
How does it compare with the S&P 500?
As of December 2020, the stock picks in Motley Fool Rule Breakers have achieved a total return of 312.1% since its inception while S&P 500 had a 95.2% return over the same time period.
What about performance comparison year by year for the past 5 years?
(Note: Performance is calculated from the start of each year to 5th Feb 2021)
|Year||Rule Breakers||S&P 500|
So, you can see that Rule Breakers’ stock picks have beaten the market every single year by a very large margin for the past five years.
[*Returns as of 5th Feb 2021. Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]
How To Get The Latest Stock Picks
If you want to get all the latest stock picks, joining Motley Fool Rule Breakers is the best way.
By the way, I’ve been a Rule Breakers member for years.
So, why did I join Motley Fool Rule Breakers?
One of the main reasons is that I wanted to get some exposure to high growth stocks that could be the next ten-bagger stocks (i.e. the next Amazon, the next Apple, the next Google, etc)
These are the kind of stocks that could really exponentially grow your investment portfolio.
Just imagine that your $10,000 investment in Amazon stocks 10 years ago (as recommended by Motley Fool) would be worth more than $200,000 right now.
Motley Fool’s stock-picking service, Rule Breakers’, is EXACTLY what I was looking for.
Could I have done all the stock research myself?
I highly doubt so.
First, there are more than 3000 stocks in the US stock market alone.
Secondly, I cannot do this full-time. (Even if I could, it would also be impossible for me to research every single one.)
Lastly, I don’t have the industry knowledge to know which stock is better.
By leveraging on Motley Fool’s team of experienced investment professionals, I not only save a lot of time on stock research but I also get the best stock picks that I might otherwise have missed.
So, what’s exactly included in your Motley Fool Rule Breakers’ subscription?
Below is what you will get:
- You will receive two stock recommendations every month, as well as their monthly “Best, Buys Now“:
- On the first Thursday of the month, you will receive a new stock recommendation
- and on the second Thursday, you will receive 5 New Best Buys Now
- On the third Thursday, you will receive a new stock recommendation
- and on the fourth Thursday, you will receive another 5 New Best Buys Now
- You will receive a real-time email notification when it’s time to sell, so you are never left wondering what to do
- You gain instant access to all the previous Motley Fool Rule Breaker recommendations
- The Motley Fool’s Best Buy Now
- The Motley Fool’s Starter Stocks (which is great for new investors who are looking for stock ideas to build their investment portfolio)
For all their stock recommendations, they will walk you through the buying case for a stock, spelling out exactly why a company might be a good addition to your portfolio, as well as the potential risks.
On top of that, they will continue to monitor and track the recommended stocks and send you updates whenever there is any.
When they decide that it’s no longer a stock that is worth holding, they will send you a “Sell” alert as well.
So, how much does it cost?
Motley Fool Rule Breaker‘s annual subscription usually costs about $199 a year.
Right now, if you subscribe to it using this link here, you can enjoy a 50% special discount for new members and get a one-year Motley Fool Rule Breaker’s subscription for only $99 which is just $1.90 a week.
What’s more, there is a 30-day membership fee-back guarantee.
What that means is that If you decide Motley Fool Rule Breaker isn’t for you, simply cancel your 1-year subscription within the first 30 days, and you’ll be refunded 100% of your membership fee immediately.
Both Rule Breakers and Stock Advisor have recommended Amazon before.
The difference is that Rule Breakers recommended Amazon much much earlier than Stock Advisor when Amazon was still in its early growth stage and when e-commerce was just starting to gain popularity.
But, both Rule Breaker and Motley Fool Stock Advisor‘s members who took their stock advice have made a lot of money if they hold it until now with Rule Breaker subscribers seeing much greater returns with their investment.