DISCLOSURE: THIS POST MAY CONTAIN AFFILIATE LINKS,MEANING That I GET A COMMISSION IF YOU DECIDE TO MAKE A PURCHASE THROUGH MY LINKS, AT NO COST TO YOU. PLEASE READ FULL DISCLOSURE HERE
Which is better, Motley Fool or Morningstar?
I have been using both Morningstar and Motley Fool for years, so let me share with you a very detailed comparison between Motley Fool and Morningstar to help you make an informed decision.
Motley Fool
The Motley Fool has been around for almost 30 years and is one of the leading financial publishers in the world.
It also offers a wide range of stock-picking services with its most popular one called “Motley Fool Stock Advisor”.
With Motley Fool Stock Advisor, you would get specific stock recommendations every single month with detailed analysis.
So, what investment strategy does the Motley Fool use to pick stocks?
To put it simply, they “invest in great businesses, not stock tickers”, especially great businesses that have huge growth potential and are poised to be the market leader in the future.
And they only want to invest in businesses that they think will do well in the next three to five years and beyond.
Here are just some of the criteria they look at:
- Competitive advantage
- Market Opportunity
- Strength of leadership
This is quite similar to Warren Buffet’s value investing strategy, but the Motley Fool investment team places more emphasis on the growth potential of the businesses.
So, essentially, Motley Fool’s stock recommendations are mostly value stocks with great growth potential, for example, Netflix, Amazon & Facebook.
| Motley Fool Stock Advisor | |
| Pros | Cons |
|
|
Morningstar
Now, what about Morningstar?
Morningstar has been around since 1984, and it’s a well-known investment research company that performs analysis on stocks, bonds, exchange-traded funds, and mutual funds.
For individual investors, “Morningstar Investor” gives you access to all its analysts’ ratings and estimated fair value, research reports on stocks, bonds, and funds, stock screener, portfolio management tools, and charting tools.
So, how exactly does Morningstar rate stocks?
Morningstar adopts a stock-picking approach that focuses on long-term advantages and intrinsic value.
To help you gauge whether or not a company has “long-term advantages” over its competitors, Morningstar provides you with economic moat ratings for each stock.
There are three types of economic moat ratings:
- Wide (i.e. highest moat rating)
- Narrow
- Non
What Is Economic Moat?
Economic moat refers to a business’s ability to have a sustainable competitive advantage over its competitors.
So, it will enjoy higher profits over its competitors in the long term.
A typical example of a competitive advantage is a low-cost advantage.
Due to its size and retailer strength, Walmart can undercut most of its competitors by offering a wide selection and low prices.
Companies can develop a competitive advantage through product/service differentiation as well.
This can happen only when the company has a value and unique offering that its customers want and cannot get it from somewhere else.
For example, Rolex differentiates itself by having a value brand.
And Amazon Prime uses speed as its competitive advantage.
So, companies with the highest moat rating have the most sustainable competitive advantages and, thus the greatest potential for future price appreciation.
Morningstar’s Star Rating gives you an idea of the stock’s current valuation.
In other words, it tells you whether the stock is above its fair value, below its fair value, or near fair value.
It’s calculated by comparing a stock’s current market price with Morningstar’s estimate of the stock’s fair value.
To get rated 5 stars, the stock must be trading meaningfully below the estimated fair value that is calculated by Morningstar’s analysts.
To help you understand better its rating system, a 3-star rating means the stock is trading near the estimated fair value while a 1- and 2-star rating means the stocks are trading meaningfully above the estimated fair value.
You can give Morningstar Investor a try for free for 7 days!
Also, you can take $50 OFF Morningstar Investor if you decide it’s a good fit for you.
[Limited Time Only] Claim Your $50 OFF Morningstar Premium
Morningstar also provides Fund Ratings ( ETFs and mutual Funds) for investors who want to compare and choose which fund is the most suitable one for them.
Morningstar evaluates funds based on five key pillars (i.e. Performance, Process, Price, People, and Parent) to determine if they are more likely to outperform over the long term on a risk-adjusted basis.
Morningstar gives funds one of the following Medalist Ratings:
- Gold
- Silver
- Bronze
- Neutral
- Negative
If a fund receives a Gold, Silver, or Bronze rating, that means they expect the fund to perform better than similar funds in the next five years at least.
However, I would recommend you STAY AWAY FROM mutual funds.
Here’s why.
Mutual funds are generally professionally managed by fund managers.
And research has shown that more than 90% of fund managers CAN NOT beat the stock market index return.
| Morningstar | |
| Pros | Cons |
|
|
Motley Fool Vs Morningstar: Product
What is the key difference between the Motley Fool Stock Advisor and Morningstar Investor?
Motley Fool Stock Advisor gives specific stock recommendations while Morningstar is a stock research and analysis platform to help you find stock ideas and also research stocks by providing you with its proprietary stock ratings and analyst’s independent research reports on stocks, bonds, ETFs, and mutual funds.
Here’s exactly what you get as a Motley Fool Stock Advisor member:
- You will receive two stock recommendations every month (one stock recommendation on the first Thursday and the other one on the third Thursday of the month). Each new stock recommendation comes with a full analysis of the opportunities and risks
- The current Top 10 Favorite Investment Opportunities are released on the second Thursday of every month
- 10 Foundational Stocks for new investors (regularly updated)
- 5 Exchange-Traded-Funds
- 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 past Motley Fool’s Stock Advisor recommendations
All their stock picks come with a detailed analysis of why they are optimistic about the stock and also point out the potential risks.
Also, you will get real-time alerts on when to sell if they think the stock is no longer a good stock to hold in your portfolio.
For all their past stock recommendations, they will send out the updates and their latest take on them if there is any news or abnormal price movement.
So, you won’t be left wondering when to sell or what to do whenever there is news on the stock.
On the other hand, Morningstar provides you with tools to help you find undervalued stocks and research and analyze stocks that you are interested in.
Personally, I like to use Morningstar to find stocks that have a Wide-Moat and are currently undervalued.
Using the Morningstar Investor stock screener as shown below, you can choose a Wide Moat Rating and a Star Rating of 5 stars under “Ratings”.
There are other criteria such as Industry, Sector, Market Cap, Valuation, Profitability, and Dividend that you can customize.
But, it’s quite limited compared to Stock Rover‘s fundamental stock screener.
Basically, I only find Morningstar ratings very useful.
On top of that, you can also use the Morningstar platform to research and analyze stocks.
For example, if Meta is one of the stocks on your watchlist, it would be helpful to know what Meta’s current estimated fair value is, how its business is doing, and potential risks.
Morningstar does NOT tell you exactly what stocks to buy and when to buy and when to sell, but you can use its stock ratings and analysts’ research reports to help you make investment decisions.
Since they give you an estimated fair value for every stock, it’s reasonable to assume that it would give you a good margin of safety as long as the current share price is below the estimated fair value.
Lastly, if you are interested in investing in mutual funds and ETFs, Morningstar helps you choose the most suitable ones by providing you with ratings.
Motley Fool Vs Morningstar: Performance
In terms of the past performance of stock recommendations, Motley Fool Stock Advisor has a proven track record with its stock picks outperforming the S&P 500 for the same time period since its inception.
First of all, let’s take a look at their track record as of 26 June 2024.
Below is the performance comparison between Motley Fool Stock Advisor and S&P 500 between 2002 and 26 June 2024.
As of 26 June 2024, average Motley Fool Stock Advisor recommendations have returned over 756% since inception while the S&P 500 has returned 161%.
In short, the Motley Fool Stock Advisor has outperformed the market 4 to 1.
But, what about its individual stock picks?
Below is a table that shows you the performance of individual stock picks over the years.
As of 6th September 2023, Motley Fool Stock Advisor has had 173 stock recommendations with 100%+ returns.
[Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]
On the other hand, Morningstar does not give stock picks, so there’s no way to measure its performance.
Will the Motley Fool Stock Advisor always be right about their stock recommendations?
No, because no one can be right about their stock picks 100% of the time.
Let me sidetrack a bit here.
If any stock picking service tells you that they have a close to 100% success rate on their stock picks and can guarantee you high investment returns, you should definitely stay away.
Even Warren Buffet has loss-making stocks in his portfolio, but he still achieves above-average returns because a few big gainers in the portfolio can make up for the under-performers.
What I like about the Motley Fool Stock Advisor is that they are very open and transparent about their bad investments.
As a member, I can see the performance of ALL its past and current stock recommendations (even for closed positions).
Some other stock-picking services that I’ve tried, don’t publish the performance of all their past and current stock recommendations, so it’s not easy for you to find out their true track record.
So, if you are thinking of getting into stock investing, I highly recommend the Motley Fool Stock Advisor because I think there are a lot of well-researched stock recommendations with long-term growth potential.
By the way, I don’t buy every single stock recommendation by Motley Fool Stock Advisor.
I mainly used Motley Fool Stock Advisor to get stock ideas because they have a track record of finding multi-baggers.
For example, it first recommended Nvidia back in 2005, then again in 2009, then again in 2017.
It first recommended The Trade Desk in 2017, and has recommended it multiple times over the years as shown below.
It first discovered Netflix back in 2003 and has recommended it multiple times over the years as shown below.
So, I like to use the Motley Fool Stock Advisor as an important source of investment ideas.
I will read their research team’s analysis and then also do my own independent research on platforms such as Stock Rover and Morningstar before I decide whether or not I want to invest in the stock.
Motley Fool vs. Morningstar: Pricing
In terms of pricing, both Morningstar Premium and Motley Fool Stock Advisor are quite affordable.
Both Motley Fool Stock Advisor and Morningstar Premium cost about $199 a year,
For Morningstar Premium, there is a 7-day FREE trial, which means you can test-drive its product and services risk-free for one week.
Also, you can take $50 OFF Morningstar Premium if you decide it’s a good fit for you.
So, how much does Motley Fool Stock Advisor cost?
Usually, its annual subscription is $199.
Right now, there’s a special limited-time 50% OFF offer* for new members for the first year when you click the link here to try it out. (*Billed annually. Introductory price for the first year for new members only. First-year bills at $99 and renews at $199)
So, for $99 a year- that’s just $1.80 a week – you can gain unlimited access to their library of expert stock recommendations which are carefully selected to help you grow your wealth.
What’s more, you are protected by The Motley Fool‘s 30-day membership fee-back guarantee.
What this means is that if you decide Motley Fool Stock Advisor isn’t for you, simply cancel your 1-year subscription within the first 30 days (it’s quick and easy to cancel), and you’ll be promptly refunded 100% of your membership fee with no questions asked.
What’s more, everything you see during those 30 days – the expert stock picks, the best buys now, the premium research and reports – are yours to save and keep.
Limited Time: Claim Your 50% OFF Stock Advisor Introductory Offer For New Members
Which Is More Suitable For You?
So, which is more suitable for you, Motley Fool or Morningstar?
That really depends on what type of investor you are.
But, if you are a beginner or experienced investor who is looking for stock recommendations and wants to leverage the expertise and experience of a team of stock analysts, then I recommend Motley Fool Stock Advisor.
Personally, I have been a Motley Fool Stock Advisor member for years.
Here are a few reasons why I subscribed to Motley Fool Stock Advisor.
First of all, there are thousands of stocks listed on the stock market.
It’s impossible for me to research and monitor every single one of them.
Secondly, there are many different industries such as technology, healthcare, financials, real estate, travel, and retail.
Yes, I might know one or two industries well enough to help me pick the right investments.
But, I don’t have the industry knowledge and expertise for every single industry.
That’s why I want to leverage the knowledge of Motley Fool’s team of investment experts, so I don’t miss out on some great investment opportunities in the emerging industry as well as industries that I am not familiar with.
On the other hand, if you are an active investor who likes to do your own stock research and analysis and believes in value investing, then I highly recommend Morningstar.
I personally use Morningstar’s independent stock research and their Moat Ratings and Star Ratings to find good undervalued stocks.
[Limited Time Only] Claim Your $50 OFF Morningstar Investor
Leave a Reply