What is The Motley Fool’s Rule Breakers?
The Motley Fool’s Rule Breakers is a stock recommendation service focusing on disruptive growth companies. Like its counterpart, Stock Advisor, it provides two stock picks every month.
These monthly selections can be entirely new or revisited from past Rule Breakers’ recommendations. The announcements for these picks are made live at 11:00 am EST on the second and fourth Thursday of each month.
A Bit of Background
When brothers Dave and Tom Gardner started the Motley Fool in 1993, it was nothing more than an Internet newsletter featuring the brothers’ advice on picking stocks and teaching investment lessons.
Tom and David Gardner started to gain business momentum after publishing a series online in 1994. The series—which was centered around a fictional sewage company—taught readers about penny stock investiMotley Fool Rule Breakers Review 2023: Similar to Stock Advisor?Motley Fool Rule Breakers Review 2023: Similar to Stock Advisor?ng methodologies. This publication got the company noticed by the community of investors at large, as they were profiled by the New Yorker in December.
Despite a positive start, the Motley Fool was quickly criticized by more experienced investors. Tom & David Gardner’s book The Motley Fool Investment Guide became a best-selling book in 1996 but was promptly criticized by both PBS Frontline and Bloomberg. The small company was described as nothing more than an investment team of “20-somethings.”
Unperturbed, Tom & David Gardner continued to expand the company. After moving to its own independent website, the company published the Foolish Four, a trading system that they claimed offered a wide margin with massive returns over the competition.
In 2002, The Motley Fool began offering its premium services via subscriptions. They continue to offer these services to this day. Although many other innovative companies have opted to integrate artificial intelligence, the Motley Fool has kept stuck with their tried-and-true human approach.
Today, some reports indicate the Motley Fool has revenue of more than $1 billion, and it has become one of the most popular stock-picking services for retail investors.
The Motley Fool’s signature service, Stock Advisor, is its most popular subscription. Stock Advisor brags that it’s more effective than at least 95% of hedge funds in picking market-beating individual stocks. With a 500%+ return since its inception and a performance that has quadrupled the returns of the S&P 500, many clients feel that Stock Advisor is well worth the annual fee they pay for it.
But what about the Motley Fool’s second most popular subscription, Rule Breakers? Does Motley Fool Rule Breakers have market-beating returns like Stock Advisor, and should you consider getting a subscription?
Modest Money will delve into these questions and more with this Rule Breakers review. Even though Rule Breakers is priced at $299 per year, you can use this link to buy it at a third of the price, only $99 for the first year.
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External Motley Fool Rule Breakers Review & Ratings
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The Motley Fool’s Investing Philosophy
As a company, the Motley Fool offers a wide variety of subscription services. With so many active stock recommendations at one time, you might find yourself wondering if these active recommendations have anything in common. We figured this would be a good time to review the company’s investment criteria!
If you compare our Motley Fool Stock Advisor review to this article, you’ll quickly notice a difference between this yearly subscription and its sister service. Both recommend market-beating growth stocks, but one takes a more risky approach than the other. However, despite these differences, they’re both focused on long-term growth.
In general, the average stock pick you’ll see from the Motley Fool was selected for its long-term potential. While the Fool may change its mind on a stock ticker occasionally, it’s not very common: they anticipate holding onto each stock recommendation for a minimum of five years!
This long-term approach forces the Fool to be more frugal with their stock picks, which ends up offering a few competitive advantages to subscribers. Subscribers can expect to build a diversified portfolio using the Motley Fool recommendations alone (although the company does recommend adding additional stocks to your investment portfolio anyway).
The extended approach also forces the Fool to keep their overall risk rating within reason, as—unlike day or swing traders—they can’t recover quickly if an individual investment goes sour. This combination of intelligent investing strategy and straightforward recommendations means both casual investors and advanced investors alike can benefit from the Motley Fool investing philosophy!
When the Motley Fool Rule Breakers announces its monthly stock picks, you don’t just get the name of the stock so you can go out and buy it without knowing anything else. Rule Breakers live-streams an analyst explaining why he likes this stock. You get to listen to information about the company, the market, and the sector, all of which serve to help you make your decision.
As with Stock Advisor, the Motley Fool is transparent when it comes to the calculation of the Rule Breakers stock picks’ returns. Once you are a member, you will have access to the Rule Breakers Performance tab, which includes the stock, when it was picked, its current price, the end-of-day price when Rule Breakers recommended it, its return, the S&P’s returns over the same time frame, and its return vs that of the S&P 500.
While Stock Advisor looks more at fundamental analysis, Rule Breakers mainly picks industry disrupters. These tend to be heavily tech-focused growth stocks from companies pioneering new business practices. For more information on the differences between the Motley Fool Stock Advisor and Rule Breakers, you can check out our comparison post looking at the similarities and differences between the two companies.
Rule Breakers chooses these stocks based on these six perceived qualities:
- Top dog and a first mover in an emerging industry
- Sustainable advantage
- Strong price appreciation
- Good management
- Strong consumer appeal
- Grossly overvalued according to financial media
Most of these make intuitive sense, except for the last quality. Why would anyone buy a growth stock that most financial analysts claim to be overvalued? The idea is that Rule Breakers is going out on a limb and theorizing analysts have underestimated these stocks. A classic example is Tesla, which since being a Rule Breakers pick, has appreciated to the tune of some 16,000%.
Motley Fool’s Rule Breakers also publishes an annual list of nine foundational stocks that you should keep in your portfolio, a great way to start diversifying when you are starting out with the service. These Rule Breakers stock picks are published in the March/April timeframe each year.
Foundational stocks were formerly known as Starter Stocks if you’ve read previous reviews or invested in Rule Breakers in the past. These foundational/starter stocks also tend to be growth stocks but are chosen based on their ability to round out your Rule Breakers portfolio.
Best Buys Now
Around the middle of each month, Rule Breakers publishes its Best Buys Now investment newsletter. Selected from among Rule Breakers’ previous recommendations, these are stocks that Rule Breakers should consider adding to or increasing their stake in for one reason or another.
The Motley Fool Rule Breakers also has a tab of bonus reports that focus on sectors they perceive as having high growth potential, highlighting additional information on the Rule Breakers’ picks in these sectors.
Premium Live Content
When you sign up for the Motley Fool Rule Breakers or any other Motley Fool premium subscription, you get access to live streams of shows with the Motley Fool analysts. These shows are an hour long each and available Monday through Friday during trading hours. You can also listen to archives of the shows.
These videos (you can also listen to an audio feed) focus on various aspects of the current investment market, from cryptocurrency analysis to semiconductor-focused stocks and any other investment topic you can imagine.
Next-Gen Supercycle and Trend Spotters
The Motley Fool’s Rule Breakers is not to be confused with Rule Breakers: Next-Gen Supercycle and Rule Breakers: Trend Spotters. These services cost $1,999 each and provide advanced analysis on 5G stocks (Next-Gen Supercycle) and new early-stage trends (Trend Spottters).
Every week, The Motley Fool Rule Breakers team refreshes their website, and subscribers get an email detailing the latest insights.
On the first Thursday, there’s a discussion that offers a broad market overview and revisits the recent stock suggestions. The second Thursday brings a new stock pick to the forefront.
By the third Thursday, they highlight their top 10 stock alerts for potential buys. Finally, the month wraps up with another unique stock recommendation on the fourth Thursday.
Does The Motley Fool Rule Breakers Beat the Market?
Claims that Motley Fool’s Stock Advisor posts market-beating returns have been independently verified. So how does Rule Breakers compare to Stock Advisor? Does it also achieve a 500% return?
Throughout its inception, Rule Breakers has achieved an average return of around 300%. That works out to twice the return of the S&P 500, which is around 120%.
Given that Stock Advisor costs $100 less and achieves returns of 200% more, it seems like a no-brainer to avoid Rule Breakers and stick with Stock Advisor, right?
Not necessarily. Rule Breakers has only been around since the end of 2004, which is one limitation it has compared to Stock Advisor, which has been around for almost three years longer.
A second reason why Rule Breakers might lag Stock Advisor in terms of performance is that many of its picks have not yet reached their potential, meaning there could be a lot of upside return left in these stocks.
Investors also have the option of purchasing the Fool’s “Epic Bundle,” which offers both services—plus two additional subscriptions—for $198 for the first year.
Recent Rule Breakers Winning Picks
MercadoLibre is an online marketplace that has been part of the Rule Breakers portfolio for a long time. Since its inclusion, its value has increased by 5,750%.
Another e-commerce giant, Shopify, was recommended when its shares were priced at $17. Since then, even after a 2022 stock split, it trades at around $270, marking an increase of 1,180%.
Tesla is a standout performer and a long-time favorite of Rule Breakers. From an initial, split-adjusted price of $6.29, its value has surged by 12,551%. It’s worth noting that Motley Fool had also picked Tesla before its stock split, during which it saw a growth of 398%.
Intuitive Surgical is a healthcare stock that has experienced substantial growth. After being recommended by Rule Breakers, its share price increased 39 times.
Meanwhile, Netflix, a popular streaming service, gave returns of 68% after its recommendation.
Lastly, Shopify, which was also highlighted by Motley Fool during the pandemic’s lows, rebounded by 197%.
Understanding the Rule Breakers Approach
The service is built on a unique investment philosophy which can be categorized into a few key principles:
- Focus on Disruptive Innovation: Seeking out companies that are not only growing rapidly but also innovating and disrupting their industries. They often look at sectors like technology, healthcare, and consumer goods where advancements are happening rapidly. The belief is that these disruptive companies have the potential to deliver outsized returns over the long term.
- Buy and Hold Strategy: A key characteristic is their emphasis on the long-term perspective. They advocate for buying shares in high-quality companies and holding onto them for the long haul, often for a minimum of five years. This approach is based on the principle that wealth is created over time, and short-term market fluctuations should not sway your investment decisions.
- Embrace Volatility: They acknowledge that investing in disruptive, high-growth companies often involves a higher level of volatility compared to investing in more stable, mature companies. They see volatility not as a risk, but as an opportunity. The service encourages investors to use market downturns as opportunities to buy more of their favorite stocks at a discounted price.
- Diversification: To manage risk, Rule Breakers recommends a diversified portfolio. By spreading your investments across various sectors and companies of different sizes, you can protect your portfolio from the poor performance of any single investment.
- Regular Analysis and Updates: Subscribers receive regular updates and analysis on previous and new stock recommendations. This continual flow of information keeps investors informed about their investments and the overall market, allowing them to make educated decisions.
Additional Tools and Resources
Apart from the stock recommendations and insightful analysis, Rule Breakers also provides you with access to a wealth of other resources. These include:
Membership gives you access to the Motley Fool’s community boards. These boards are active, vibrant, and offer a wealth of investment advice and tips from other Rule Breakers members and Motley Fool experts. If you have questions or need advice, this community can be an invaluable resource. It also offers a chance to engage with like-minded investors and discuss ideas, trends, and investment strategies.
The Motley Fool has always been committed to investor education, and Rule Breakers is no exception. As a subscriber, you get access to a library of articles, guides, and other resources designed to help you become a better investor. Whether you’re just starting or have been investing for years, you’ll find content that’s relevant to your situation.
News and Updates
You’ll also receive regular updates on the companies you’re invested in. You’ll get quarterly earnings updates, important news items, and even buy/sell alerts if the team changes their stance on a stock. This can be incredibly valuable in keeping you informed about your investments and helping you make timely decisions.
If you run into any issues or have questions about your subscription, The Motley Fool has a dedicated customer service team available to assist. This support can be a significant advantage, particularly for those new to investing or unfamiliar with using online investment platforms.
Access to Special Reports
From time to time, the Rule Breakers team publishes special reports on various topics. These might include deep dives into specific sectors, detailed analyses of emerging trends, or in-depth looks at particular companies. These reports can offer a wealth of information and insights, and as a subscriber, you get free access to all of them.
The Rule Breakers service provides a lot more than just stock picks. It’s a comprehensive suite of tools, resources, and advice designed to help you succeed in the world of investing. While it does come with risks, as all investing does, the potential rewards can make it a valuable part of your investing toolkit.
The Motley Fool Rule Breakers Investing Podcast
The Motley Fool Rule Breakers Investing podcast is hosted by David Gardner, the co-founder of Motley Fool. Each week, he discusses current trends in finance, focusing on innovative companies and offers advice based on his “Rule Breakers Investing” principles. It’s a useful resource for both new and experienced investors looking to understand the market better.
- Stock Stories, Vol. 8: The Dividends of Patience
- August 2023 Mailbag: Investing Lessons from August Authors
- Authors in August: How Not to be Wrong with Jordan Ellenberg
- Authors in August: Selling Your Business with Sunny Vanderbeck
- Crypto, Meme Stocks, and Movies with James Surowiecki
- Mental Tips, Tricks & Lifehacks, Vol. 8
Pros and Cons of the Motley Fool Rule Breakers
Here is a breakdown.
- Good Supporting Evidence – Unlike some stock picking services, Rule Breakers does an excellent job explaining their investment thesis (the six qualifications listed above) and providing supporting evidence to back that up. They also offer contrarian points of view on their recommendations, so you can see the case from both sides.
- Reasonable Price – While paying $299 per year might make you balk, with the first-year discounts (buying it as an add-on to the deeply discounted Stock Advisor), you are paying far less than you would for any other research firm that consistently provides market-beating returns.
- Great Long-Term Winners – If you follow their recommendations, you are bound to eventually get in on the ground floor of an industry disrupter that turns out to be a huge growth stock, assuming Rule Breakers’ future performance matches its past results.
- Volatility – The stocks that Rule Breakers picks are virtually guaranteed to have significantly more volatility than those chosen by Stock Advisor and certainly much more than the market does as a whole. To counter the possible adverse effects of this, you need to follow Motley Fool’s recommendation of holding at least 25 stocks at a time and keeping each stock for at least five years unless Motley Fool publishes a sell notice on that stock. This process of portfolio diversification, a key component of modern portfolio theory, will help insulate you from the effects of market and company volatility.
- Website – We may be alone in this, but Modest Money found a bit of a learning curve in navigating the Motley Fool website, specifically toggling between several premium subscriptions and the Motley Fool’s free articles.
What is The Difference Between Rule Breakers and Stock Advisor?
Both Rule Breakers and Stock Advisor are trusted investment resources by Motley Fool. To better understand the differences between these popular platforms, lets compare some of their basic features:
Date of Inception: Stock Advisor has been around since 2002, giving it a two-year head start over Rule Breakers, which began in 2004.
Approach & Returns: Stock Advisor targets stable companies with steady growth potential. Over the last two decades, it has tripled the S&P 500’s returns, boasting a staggering 169 stock recommendations that surged over 100%. In contrast, Rule Breakers leans towards stocks in emerging industries, aiming for higher growth. This strategy has led to an impressive average return of over 202% in the last 17 years, more than doubling the S&P 500. Based on historical performance, Stock Advisor has a slight edge in overall performance compared to Rule Breakers.
Type of Picks: Stock Advisor’s choices, like Netflix and Disney, have been well-established companies that have shown remarkable success. On the other hand, Rule Breakers is more adventurous, vouching for riskier stocks they believe have immense growth potential.
Subscription Costs: Stock Advisor is priced at $199 annually, while Rule Breakers comes in a bit steeper at $299 per year. Both offer discounts for new subscribers and provide a 30-day money-back guarantee.
Ideal For: Stock Advisor is tailored for beginner to intermediate investors who prefer stability and have a moderate risk appetite. Rule Breakers, with its focus on high-growth stocks, is best suited for those who are experienced and can tolerate higher market volatility.
Investment Strategy: While Stock Advisor emphasizes fundamental analysis to gauge future company success, Rule Breakers is on the lookout for future industry leaders, making it a growth-oriented pick.
The Motley Fool Rule Breakers Review: The Bottom Line
Modest Money assesses Rule Breakers to be a valuable subscription, especially when considered as an add-on to its more successful and less volatile older brother, Stock Advisor. With Rule Breakers, you incur greater risk, but you also will experience a chance to get a grand-slam hyper-growth stock into your portfolio.
Here are some investors who will benefit most from buying the Rule Breakers subscription:
- Active investors looking for stock advice and qualitative investment strategy
- Tech-focused investors
- Investors with a higher risk tolerance
- Well-diversified investors
- Investors who also use Stock Advisors
- Investors who want to buy companies, not just stocks
- Investors looking for high growth stocks, not dividend stocks
- Investors who make well-researched and reasoned decisions
This last quality is perhaps the most important of all. Rule Breakers works best if you study and believe in the company you choose to invest in instead of blindly throwing your money at what Rule Breakers is telling you to buy. Rule Breakers provides this research to you in a convenient format.
Another point to remember is that whether you go with Stock Advisor or Rule Breakers, or any other stock-picking service out there, you don’t have to invest in every pick. At first, you might want to, but if you listen to the Rule Breakers analysis on a stock and it doesn’t make sense to you, then maybe double down on a Foundational Stock or choose one of their Best Buys Now. If the analysis doesn’t make sense, don’t buy the stock.
If Rule Breakers sounds like the right research service for you, remember to use this link to get 67% off the first year. You’ll get the Rule Breakers subscription, normally priced at $299 for only $99.
The Motley Fool backs all its subscriptions with its 30-day money-back refund program, which is essentially your chance to try both services for free. If you find out neither subscription suits you, just remember to cancel before the end of the introductory period.
The Motley Fool offers sound, qualitative investing analysis advice. For beginner, intermediate, and even advanced investors, the Motley Fool portfolio of stock picks is more than worth it, just look at their track record.
The Rule Breakers service might be a more volatile investing style than Stock Advisor, but in the long term, you have a higher chance of picking at least one game-changing stock despite the potential risks.
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