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Are you deciding which is better, Motley Fool or Seeking Alpha?
So, what are the key differences between Motley Fool and Seeking Alpha?
Also, can they really help you improve your investment returns?
And how do you actually decide which one is more suitable for you?
In this review, I am going to share with you everything you need to know about Motley Fool and Seeking Alpha to help you make an informed decision.
First of all, let’s look at the history of both Motley Fool and Seeking Alpha.
Founded in 2004, Seeking Alpha is a crowd-sourced content service for financial markets, with thousands of contributors publishing investing ideas every month.
Anyone can apply to be a contributor through its website.
So far, tens of thousands of people have contributed articles to Seeking Alpha.
These contributors include individuals, institutional investors, fund managers, college students, analysts, and retirees who want to share their investment insight with the Seeking Alpha community.
The articles on Seeking Alpha, written by contributors, cover a wide range of investment asset types from stocks and ETFs to commodities and cryptocurrencies.
On the other hand, the Motley Fool, founded by Tom and David Gardner, is a financial and investing advice company that has been around for almost 30 years.
As of 2020, The Motley Fool has operations in the United Kingdom, Australia, Canada, Germany, Hong Kong, and Japan.
Motley Fool is regarded as one of the leading financial websites for stock research and analysis.
All the articles on Motley Fool come from its team of professional investment analysts.
Both Motley Fool and Seeking Alpha not only provide free stock market news and stock analysis, but they also provide paid investment service.
Seeking Alpha Premium
Let’s first take a look at Seeking Alpha.
Seeking Alpha offers two types of paid investment services:
- Seeking Alpha PREMIUM
- Seeking Alpha PRO
So, what do they include?
And, what is the difference between Seeking Alpha PREMIUM and PRO?
As a Seeking Alpha PREMIUM member, you get access to unlimited premium articles, stock ratings as well as lists of top stocks to buy now.
On the other hand, Seeking Alpha PRO includes all PREMIUM features as well as Top Ideas from top-performing authors, exclusive access to short ideas, VIP service, and an ad-free experience.
The most unique feature is Seeking Alpha’s stock ratings.
There are three types of stock ratings offered by Seeking Alpha:
- Quant Rating
- Seeking Alpha Authors Rating (i.e. ratings given by Seeking Alpha article contributors)
- Wall Street Rating (i.e. ratings given by Wall Street equity analysts)
The most interesting of all is its proprietary quant rating.
It was developed by CressCap, a quantitative analytics and data platform that was acquired by Seeking Alpha.
So, what exactly is Quant Rating, and also how does it really work?
Quant rating is derived by comparing over 100 metrics for the stock to the same metrics for the other stocks in its sector.
These metrics include the company’s financial data, stock price performance, and analysts’ estimates of future revenue and earnings.
Essentially, the quant rating evaluates the stock in relations to its peers in the same sector, not the rest of the stock market as a whole.
There are five types of quant ratings:
- Very Bearish (i.e. a score of 1)
- Bearish (i.e. a score of 2)
- Neutral (i.e. a score of 3)
- Bullish (i.e. a score of 4)
- Very Bullish (i.e. a score of 5)
The advantage of this method is that you can use quant rating to find the best performer of any particular industry or sector.
But, the downside is that it DOES not help you find the best stocks in the entire stock market.
Also, you still have to figure out by yourself which sector is going to perform better in the future.
If you are not an active investor who loves to do your own sector analysis, Seeking Alpha’s Quant Rating might not be so helpful to you.
Even with the best performing stock of the sector, you could still lose lots of money if you pick the wrong sector to invest your money.
For example, if you had invested in the airline or hospitality sector before the Coronavirus crisis, you would have lost tons of money.
In addition to the Quant Rating, Seeking Alpha also grades each stock by five “factors”:
- EPS Revisions
The Factor Grade is determined by comparing the relevant metrics for the factor for the stock to those for the other stocks in the same sector.
For example, to determine the grade for the “Growth” factor, metrics such as past sales growth, projected earnings growth and stock price performance for the stock will be compared to the same metrics for the other stocks in the same sector.
Then, each factor is assigned a grade, from A+ to F.
Grade A+ means that the stock has the highest growth potential compared to its peers in the same sector.
On the other hand, a grade F means that the stock has the lowest growth potential compared to its peers in the same sector.
So, how do you use Seeking Alpha’s Factore Grades?
The value, growth and profitability grades give you a snapshot of the stock’s fundamentals, while the momentum and EPS revisions grades tell you if the stock is gaining momentum.
So, if you are looking for value stocks, you just filter out all the stocks with a “Value” Grade of A or A+.
After that, you further research analyze these value stocks one by one.
The advantage of Factor Grade is that you get a very quick idea of what type of stock it is. (e.g. a value stock? a growth stock? momentum stock?)
The downside is that this only gives you a simple characterization of the stock and you still have to do your own further research and analysis to make your investment decision.
This is because you need to know what specific stocks you want to buy, when to buy, and also when to sell.
All the Seeking Alpha’s ratings and grades don’t tell you that.
Basically, it is kind of “a stock screening tool” that helps you find which stocks you want to research further.
Below is an example of what you will see inside Seeking Alpha Premium.
Seeking Alpha’s Quant Rating updates once a day before the market open.
Also, its Quant Ratings and Factor Grades currently cover about 5,600 stocks.
They do not cover stocks that Wall Street analysts don’t cover because they need the analysts’ estimates as one of the inputs to calculate the quant rating and factor grades.
Just to summarize, Seeking Alpha Premium is more like a stock market research and analysis platform where you get stock ideas and analysis from its contributors, use its Quant ratings and factor grade to filter out stocks that suit your investment objectives, and also use the past years’ financial data provided to do your own research.
Motley Fool Stock Advisor
Now, let’s look at Motley Fool’s investment service.
Motley Fool provides a wide range of stock picking services.
So, what are Stock Advisor and Rule Breakers?
And what can you get from them?
Stock Advisor is created to help you find good companies that offer long term potential for investors.
Its investment philosophy is to play the long game.
So, for all their stock recommendations, they recommend you to buy and hold them for at least 3 to 5 years.
New Recommendations: Every month, Motley Fool co-founders Tom and David Gardner each make one stock recommendation. Each new recommendation comes with a full analysis and risk profile.
Best Buys Now: you will also get 10 Best Buys Now every month which they think are the most timely opportunities.
Starter Stock: you will also get the top 5 Starter Stocks that features the ideal stocks that should be the foundation of new investor’s portfolios.
If there is a price fluctuation of 10% or more on any of the stock recommendations, you can expect a report that explains such a big price move.
Lastly, you will also receive a real-time email notification when it’s time to sell, so you are never left wondering what to do.
In essence, you get specific stock recommendations that not only tell you when to buy but also when to sell.
Now, what about Rule Breakers?
And how is Rule Breakers different from Stock Advisor?
Its investment strategy is focused on uncovering the hidden gems in the stock market.
So, it’s not the mainstream stocks (i.e. Apple and Facebook) that everyone is following right now, but little known stocks that have great potential to be the market leader in the future.
Think “Amazon” and “Netflix” that were recommended by Motley Fool Rule Breakers many years ago.
Basically, the main difference between Rule Breakers and Stock Advisor is that the stock recommendations inside Stock Advisor are less volatile than those inside Rule Breakers.
But, the upside potential of Rule Breakers stock picks is much greater than that of Stock Advisor stock picks.
With that, let’s take a closer look at the performance of Motley Fool Stock Advisor and Rule Breakers, and compare it with that of Seeking Alpha Premium.
Motley Fool Track Record
First of all, let’s look at Motley Fool Stock Advisor’s track record as of January 2021.
As of 1st January 2021, average Motley Fool Stock Advisor recommendations have returned over 555.8% since inception while S&P 500 has returned 114.9%
So, what does that mean?
If you had invested $10,000 in the stocks recommended by Motley Fool Stock Advisor, your investment portfolio would be worth about $300,000.
On the other hand, if you had invested $10,000 in S&P 500 index funds, your portfolio would be worth about $50,000.
In short, the Motley Fool Stock Advisor has beat the market 5 to 1.
Now, what about the performance comparison between Motley Fool Stock Advisor and S&P 500 for the past 5 years?
|Year||Stock Advisor||S&P 500|
So, in terms of overall performance, the Motley Fool Stock Advisor has beat the market every single year for the past 5 years.
But, what about its individual stock picks?
This metric is important because you might not be buying every single stock recommendation made by Stock Advisor.
Below is a table that shows you the performance of individual stock picks over the years.
As of December 2020, Motley Fool Stock Advisor has had 183 stock recommendations with 100%+returns.
What that means is that you would have easily doubled your money if you had invested in any of the 183 stock picks by Motley Fool Stock Advisor.
Now, let’s look at the performance of Rule Breakers.
As of 1st January 2021, average Motley Fool Rule Breakers recommendations have returned over 327.9% since inception while S&P 500 has returned 97.9%.
Overall, Rule Breakers beat the market by about 3 times.
So, you can see that both Stock Advisor and Rule Breakers stock picks have very impressive returns.
Would you get the same stock picks from Stock Advisor and Rule Breakers?
For example, if you are a Rule Breakers subscriber, you would get the stock recommendation “MercadoLibre” as early as 2009.
At that time, the stock price was $14.58.
Guess what the stock price is right now (Jan 2021)?
That’s up 10,860%.
If you missed it the first time, Rule Breakers actually recommended it again on 01/24/2012 (buy at $86.09), 12/22/2014 (buy at $125.11), and 04/25/2017 (buy at $227.91).
In fact, they have been recommending its Rule Breakers members to hold it even till now.
If you had invested $1,000 when they first recommended it inside Rule Breakers, your $1,000 investment would be worth about $108,000.
On the other hand, Stock Advisor subscribers don’t get this high growth stock pick– MercadoLibre, because high growth stocks are more volatile and risky although they have much greater upside potential.
So, if you are comfortable with taking a bit of risk and are looking for the next 10-bagger (or even 50-bagger) stocks, Rule Breakers would be a good option.
Here are some other examples of Rule Breakers stock recommendations:
- Amazon: it’s up 15,295%
- Netflix: it’s up 18,410%
- MercadoLibre: it’s up 10,923%
- Shopify: it’s up 4,914%
- Tesla: it’s up 9,424%
- Intuitive Surgical: it’s up 3,553%
- Salesforce: it’s up 3,176%
So, just to summarize, both Motley Fool Stock Advisor and Rule Breakers have a very impressive track record of beating the market by a very large margin.
Seeking Alpha Performance
Now, what about Seeking Alpha’s track record?
First of all, unlike Motley Fool, Seeking Alpha DOES NOT have a long history of proven track record because it does not make specific stock recommendations with exact entry and exit.
So, there was no way to measure its performance.
In June 2019, Seeking Alpha launched Quant Rating that rates stocks from Very Bullish, Bullish, Neutral, Bearish to Very Bearish.
On its website, it published the backtesting results of a hypothetical portfolio consisting of all the daily “Very Bullish” recommendations from 31 Dec 2009 to 17th July 2020.
Here’s what happens in the backtest.
It assumes that you buy all the daily “Very Bullish” stock picks with equal weighting and re-balances it on a daily basis with zero transaction costs.
As it never specifically says exactly when the stocks are sold in the backtest, I assume that the stocks are sold when it’s no longer rated “Very Bullish”.
So, what is the backtesting result of this strategy?
It shows that Quant Rating has a total return of 1,060.5% while S&P 500 has a total return of 321.0% over the same time period.
This is quite impressive.
However, I still have some concerns.
First of all, it’s not real and it’s only the BACKTESTING results of a hypothetical portfolio.
Secondly, the chosen time period for the backtesting is from 31st Dec 2009 to 17th July 2020. As you all know, that is right after the 2008 market crash and the stock market has been on a strong bull ever since.
So, I would really love to see the backtesting results that include the 2008 market crash.
During a bull market, anyone can make money by buying stocks almost blindly because most of the stocks are going up.
But, the real test is the bear market.
Can your stock investment strategy withstand the test of a severe market crash like 2008?
Lastly, there are quite a few issues when it comes to backtesting and performance results.
For example, some stocks might get delisted during this time period.
This is called Survivorship bias.
Also, Quant Ratings need a lot of financial metrics and data as its input to arrive at a final rating.
So, these financial metrics might be adjusted later on (i.e. Restatement Bias) or might not be available at the time (i.e. Look Ahead Bias).
All these will inevitably affect the backtesting results, although Seeking Alpha claims that it tried its best to eliminate these issues.
Now, let’s take a look at the pricing comparison between Motley Fool and Seeking Alpha.
Motley Fool Stock Advisor Pricing
So, how much does Motley Fool Stock Advisor cost?
Before that, let’s first look at what you get from your Motley Fool Stock Advisor subscription:
- You will receive two stock recommendations every month, as well as their monthly “Best Buys Now” from legendary investors Tom and David Gardner:
- On the first Thursday of the month, you will receive Tom Gardner’s stock recommendation
- On the second Thursday, you will receive Tom’s 5 New Best Buys Now
- On the third Thursday, you will receive David Gardner’s stock recommendation
- and on the fourth Thursday, you will receive David’s 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 past Motley Fool’s Stock Advisor recommendations
- You gain instant access to all of their stock reports
- The Motley Fool’s Top 10 Best Stock to Buy RIGHT Now report that features some of their recent picks that still offer the best potential return.
- The Motley Fool’s Top 5 Starter Stock features the ideal stocks that should be the foundation of new investor’s portfolios.
Now, consider the fact that many investors have made many profitable investments by following their stock advice, how much would they value Motley Fool Stock Advisor subscription?
If they have made tens of thousands of dollars based on their stock tips and recommendations, would they mind paying them hundreds of dollars or even thousands of dollars for their knowledge and expertise?
They most probably won’t mind at all.
Here’s the fact.
Motley Fool Stock Advisor does not cost thousands of dollars.
It does not even cost you a few hundred dollars.
So, how much does Motley Fool Stock Advisor cost?
Its annual membership is only priced at $199 a year.
Right now, there’s a special discount of 50% OFF on the annual membership for NEW members when you click the link here to try it out for 30 days 100% risk-free.
So, for $99 a year- that’s just $1.90 a week – you can gain unlimited access to their library of expert stock recommendations which are carefully selected to help you grow your wealth.
Seeking Alpha Premium Pricing
Now, how much does Seeking Alpha Premium cost?
It offers both an annual subscription and a monthly subscription.
If you buy the annual subscription, it’s $239/year (i.e. $19.99/month).
But, if you go with the monthly subscription, it’s $29.90/month, which works out to be $359.88/year.
As you can see, the Motley Fool Stock Advisor is much more affordable compared to Seeking Alpha.
Which One Is Better For You?
So, how do you choose between Motley Fool and Seeking Alpha?
If you are an active investor who is looking for a “stock screening tool” in the form of Quant Rating, Author Rating and Analyst Rating to help you with your own stock research and analysis, then Seeking Alpha might be a good option.
However, if you are an investor who wants specific stock recommendations and analysis for long term investments and also wants to leverage the expertise of experienced investment experts with a proven track record, then I highly recommend Motley Fool Stock Advisor.
If you are an investor who has extra funds and is looking for the next 10-bagger or even 50-bagger high growth stocks, then I will recommend Motley Fool Rule Breakers.
Usually, it costs about $299/year to join Rule Breakers, but here’s the link to a special offer of only $99/year for NEW members.