*** UPDATED August 8, 2020 with Stock Returns as of Friday, August 7, 2020 ***
Previously, I reviewed the Motley Fool’s Stock Advisor service and hopefully answered almost all your questions (don’t worry, you can catch it over here).
Today, I’m doing a Motley Fool Rule Breakers Review. Again, I’ll dive into the details of this “newer” service and give you exactly what you need to know about this service.
And remember, just as I did with my Motley Fool Stock Advisor subscription, in January 2016 I opened a new ETrade account dedicated to Rule Breakers and bought about $1,000 of each and every one of the Rule Breaker’s stock picks. That is 24 picks a year so as of today, August 8, 2020 I have purchased 110 stocks in that ETrade account, and sold the 5 that they recommended selling.
Finally, at the bottom, I will show you how Rule Breakers performs versus Stock Advisors.
I’ve compiled a couple of questions that I’ll answer in full detail. If I missed anything, please be sure to leave a comment so I can update it. I took questions from users and investors just like you who wanted to know more about the service.
If you are impatient and want to see the returns of the Rule Breakers, you can just scroll down to the bottom now.
So, let’s get started!
What is the Motley Fool Rule Breakers?
The Motley Fool Rule Breakers is a stock advising service that is tailored for users looking for high-growth investments. They advise 2 specific stock picks every month and provide a set of “starter stocks” as well.
As of August 8, 2020, the Rule Breaker stock picks since January 1, 2016 have given me an average return of 220% versus the market’s 39%.
Sounds GREAT, right? Let’s take a look…
Based on this chart below, their stock picks have done very well since 2009. (I don’t know why they haven’t updated the chart since 2016.) How did they do it? We analyzed their performance and found out how they have done so well for the last 10 years.
But first, how does the service work?
Every Thursday, the Fool will update their site and you will receive an e-mail with their new recommendations:
- Second Thursday of the month: They release one specific New Stock Recommendation
- Third Thursday of the month: They release their 5 Best Buys Now
- Fourth Thursday of the month: New Stock Recommendation
For every new “Best Buys Now”, users will get 5 stocks to buy now which are chosen from their previous recommendations that they feel still offer significant upside. This email looks like this:
Twice a month you will also get brand new stock recommendations.
The “New Stock Recommendation” are the days where David and his team will present a new stock pick and provide you all of their analysis. This email looks like this:
(Notice this email was sent on February 14, 2019 when the stock GH was trading around $43. At the end of the day, it closed at $48.87 so it was up $5 just because the Fool recommended it. As of August 8 2020 the stock closed at $85.61 for a gain of 75%. That is typical for their Rule Breaker stock picks.)
As with the Stock Advisor service, Thursday is the important day when you will get an email on their new stock recommendation.
Always be ready with cash in your portfolio and make the purchase as soon as they recommend it. Their is definitely a “Fool Effect” that their recommended stock immediately goes up $2-$3 within the first few hours of their picks being released.
I can assure you that the team is very consistent. They never miss a day. Much like Warren Buffet’s daily routine. Every day, Buffet goes to McDonald’s, grabs breakfast with a Coke and eats it at his desk.
So, How Have Their Stocks Performed?
As you saw from the chart above, since 2009 they have consistently outperformed the market. They have accomplished this by picking many stocks that double or triple each year. Take a look at some of their best all-time picks:
Since we are subscribers, we have full access to all of their picks.
We have confirmed these picks and the percentage returns. Intuitive Surgical has really gone up 3,200% and Baidu has really gone up 1,700% since they recommended it.
So if you had put just $1,000 in each of these 3 stocks, then that $3,000 would be worth $60,060.
So How Have Their 2019 Picks Performed?
Here are some of their 2019 picks and their performance so far (as of August 8, 2020). Note that this reflects the 30% COVID crash:
- January 2019 pick Skechers SKX is up 17% since their recommendation date.
- January 2019 pick NexEra Energy NEE is up 65%
- February 2019 pick GH is up 75%
- March 2019 pick Redfin RDFN is up 118%
- March 2019 pick Roku, ROKU is up 153%
- April 2019 pick Five Below FIVE is down 23%
- April 2019 pick Shockwave Medical SWAV is up 37%
- May 2019 pick Salesforce CRM is up 28%
- May 2019 pick UBER is down 18%
- June 2019 pick NVCR is up 30%
- July 2019 pick of ROKU is up 50%
- Their August pick of FSLY is UP 223%
- Their September pick of TDOC is up 180%
- Their October pick of DDOG is up 131%
- Their November pick of ETSY is up 222%
- Their November pick of PTON is up 112%
- Their December picks are up 18 and 76%
So as you can see just from their 2019 picks, they do pick a few losers. But you can also see that the gains on their winners more than offset any losses.
This is their pattern year after year. They pick a few stocks that lose 20%, but they pick a few stocks that double or triple each year!
What about their 2018, 2017 and 2016 picks?
My results of 4.5 years of being a subscriber to the Motley Fool’ Rule Breakers service is as follows:
- Their 14 picks from 2020 are up an average of 62% compared to the SP500’s 13%
- Their 24 picks from 2019 are up an average of 68% compared to the market’s 17%
- Their 2018 picks are up an average of 92% compared to the market’s 27%
- Their 2017 picks are up an average of 230% compared to the market’s 41%
- And their 2016 picks are up an WHOPPING 492% versus the market’s 71%
That means the Rule Breakers’ service has BEAT THE MARKET BY 48, 51, 64, 189 and 420% for the last 4.5 years respectively!
So is it worth it? HELL YES! The service is doing exactly what they say they will do–find the leaders in new markets. They get these great returns by picking a few stocks each year that double or triple, and they do pick a few losers. But the winning returns far exceed the losers.
I know you are probably wondering how their 2016 picks are up an average of 492%. On February 24, 2016 they recommended SHOPIFY when it was at $21 and it is now up 4,910%. So the 50 shares I bought for $1,050 is now worth $52,000 since it closed near $1050 recently.
Rule Breakers New Subscriber Offer:
(there’s no risk, they offer 30-day money back guarantee)
So, What’s the Downside?
Just like anything in life, there are risks.
The Rule breakers service has much more volatility than the Stock Advisors service due to its focus on growth companies. When they get it right, their stocks skyrocket as you saw above.
But they also pick a few dogs each year.
In fact, we see that each year for the last 3 years, their BEST STOCK PICK percentage return is higher than the Stock Advisor’s Best Stock Pick return. BUT, we also see that Rule Breaker’s WORST STOCK PICK percentage return is worse than the Stock Advisor’s Worst Stock.
They say that they try to find companies that “are poised to become tomorrow’s market leaders”. They are usually right, but each year about 4 of their 20 stocks are losers.
Overall, however, the average return of their 24 stock picks each year is better than Stock Advisor’s.
The Rule Breaker service performs so well because it looks for stocks with six unique investing criteria:
- They look for top dogs and first movers in important emerging industries.
- They seek out companies with sustainable advantage gained through business momentum, patent protection, visionary leadership, or inept competitors.
- Hone in on strong past price appreciation, because the best growth stocks continue rising. Their advantages allow them to sustain remarkable earnings and cash flow growth and to win new converts among the ranks of investors.
- They Look for good management and smart backing.
- Hunt for strong consumer appeal, often in the way of a strong brand that can reinforce itself and make sustaining extraordinary growth that much easier.
- Zero in on stocks that are considered grossly overvalued, according to at least one significant constituent in the financial media. This is one way we weed out the “obviously great” companies that are overvalued. We love when a major media source says it doesn’t like a stock.
The Rule Breakers service pointed out a couple of stocks before they were mainly known to Wall Street investors. Here’s a couple of examples:
I started testing the platform and so far, so good. You can read more on our best stock newsletter review !
What’s included with Motley Fool Rule Breakers (platform, list of stocks)?
The platform looks almost the same as the one for their Stock Advisor service.
Both platforms are friendly and easy to use. You will mainly use the “Home” tab, which presents all the updates and active stock recommendations.
The “Home” page also has key information such as the overall performance of the service, the upcoming schedule for stock picks, the latest articles, etc.
“But… what if I want to know more on one of these stocks?” Glad you asked.
If you would like to more about a company and why it was recommended, you can simply click on the stock’s logo.
You will be re-directed to the Fool’s Premium analysis page. Fool users get a detailed analysis of all the suggested stocks going from the fundamentals to ratios & charts.
Note that you have an option to “Choose what you want to do with this stock”. This feature will allow you to receive notifications whenever the Rule Breakers team recommends buying or selling the stock.
Next, we have the “My Favorites” page, which is used to track stocks that you are interested in. You’ll receive alerts whenever the team suggests a buy or sell. This is a very interesting feature because you will be notified whenever:
- They have a new buy alert
- It is time to sell
- Large price fluctuations.
This feature is exactly the same as the one presented in our review of the Stock Advisor service. However, I felt it was good circling back on this due to its efficiency on receiving alerts on your favorite stocks.
The “Rule Breakers” performance page displays ALL the stocks that were recommended. The table goes all the way to inception in 2004. You can click on any ticker to see the coverage on the stock.
You can even add these stocks to your favorites so that you will be alerted if there is any news on the stock. Finally, you can also view their ratings in terms of risk and how they measure risk.
The thing I respect the most about the Motley Fool and their services is that they are fully transparent on their stock recommendations.
They disclose their open and closed recommendations on their site for viewing. Whether the stock was closed with a gain or loss, they will disclose the complete list of Rule Breakers stock picks.
Going down the list, we can see some large digits over time.
Can you imagine if you placed $5,000 on NetEase back in 2004? 14 years later, you would have gained nearly $5,000 * 1615.8% = $80,790! (Cha-ching!)
Ok, now back to reality.
I only wish I was smart enough to make that trade in back in 2014.
However, I do have many of my own winning trades thanks to Rule Breakers. (Can anyone say Baidu? 🙂
The fact that you are reading this article means there’s still a chance to hop in and get in on the action.
Now, of course I must point out that there is a couple of stocks with negative returns. As usual, my personal advice would be to set up stop orders so that you can moderate your losses appropriately.
However, i do believe that Rule Breakers does provide good stock recommendations for the long-term.
Other Noteworthy Features
The “Research” section contains reports and articles that you can read to have a better understanding on investing themes such as technology.
For example, a lot of Apple analysts are seeing a growing demand for Apple iPhones. Just a quick observation around us can support this opinion.
Just today I was walking near a high school and saw almost all the kids texting with the latest iPhones. Did you know that there is even a dog that owned 8 iPhone 7s back in 2016?
Although the Fool is recommending Apple in many of their services, they also offered other stocks that will be indirectly impacted by the sales of iPhones. Buying these stocks will create a strategy that is more under the radar and indirect rather than buying shares of AAPL.
The “Rule Breakers Community” page allows you to communicate and share ideas with other Fool members. Like you, these members all have a general ambition to invest, better. To make things easier, the site has company-based discussion boards. This is exclusively available for premium Motley Fool members, which includes subscribers of Rule breakers and Stock Advisor, for example.
The “About Rule Breakers” page contains all the resources to get the most out of the Motley Fool’s Rule breakers. As an example, you can find more information on their risk ratings and how their it is defined.
What are Rule Breakers current top stock picks?
Unfortunately, i’m not allowed to share this month’s information publicly. It’s against the Fool’s policy. But if you keep reading, you will see some of their 2019 stock picks below.
However, I can tell you that the service usually costs $299 a year, but right now they will let you try the service for only $19. I don’t know how long this promo will last, so …
Rule Breakers New Subscriber Offer:
(there’s no risk, they offer 30-day money back guarantee)
What is the Motley Fool Rule Breakers podcast? But wait… what is a podcast?
Good question. A podcast is a series of digital audio or video files that a user can download and listen to.
What I like about podcasts is that if you’re subscribed to them, they can be automatically downloaded to your computer and/or your mobile device when a new episode is available.
This is useful if you maxed out your data and you’re in for a very long bus ride. But ultimately, it is very valuable if you want to listen to insights and learn more on things that interests you.
For example, Terry Crews often starts his day by training and listening to podcasts/audiobooks at the same time. Now I’m not saying that you’ll get jacked like Terry, but you’ll definitely enjoy and learn with podcasts!
The Motley Fool’s Rule Breaker Investing podcast is a series of audio episodes with David Gardner, co-founder of the Fool. David is a very successful stock picker and is notoriously known in the finance community. Every week, David shares his ideas on today’s most innovative and disruptive public companies. He also advises on how to profit from them using his “Rule Breaker Investing” principles.
In David’s most recent podcast (< https://www.fool.com/podcasts/rule-breaker-investing/2018-10-31-october-mailbag-it-s-all-treats/>.), he opens with a Halloween story from his youth and explains some tricks on how to tackle the current scary market. He routinely responds to tweets that are posted on the podcast’s twitter page (@RBIPodcast).
For example, David is known to say, “let your winners run”. He’s also known for saying “please take this moment to make sure that your portfolio is diversified enough that no one stock’s bad day will not keep you up at night”. A user asked David to explain how an Investor can apply both these two concepts because they seem contradicting. David clarified that investors need to find a compromise between these two concepts and shared with us some of his past experiences. For example, he recalled AOL’s glorious days and what happened in the early 2000s. For more information on what he learned by investing in AOL, click here.
What does Reddit say about the Fool’s Rule Breakers?
There’s many Reddits and SubReddits that discusses the Motley Fool’s Rule Breakers. I’ll try to resume the most popular ones and be fully transparent as well.
- What’s the conclusion?
- A lot of users think it’s a scam.
- Their assumption is that if someone holds private information that a specific stock should blow up, they shouldn’t sell that knowledge. Also, there was a user who argued that even the most knowledgeable investors cannot reliably beat the market.
- What do I think about this?
- I must admit I was a bit skeptical before signing up with the Motley Fool. As I am testing and paper trading their recommendations, I am now confident the Fool is not a scam but rather an affordable and efficient personal stock advisor.
- I believe they have the total right to believe this. I mean if I knew Stock ABC was going to the moon, I probably would have kept it for myself. It’s also true that no one can perfectly time the market:
However, the world of investing can be rough, especially when you do not know where to start. It is usually best to have a starting point so that you will be able to find your own path as time goes on. I believe the Motley Fool fits right into this niche market where they are one of most profitable and leading advisory services for the everyday investor.
- What’s the conclusion?
- The feeling is negative, and users suggest that there’s no value to it and it would be better to apply your own critical thinking on other free sites’ content. There was a lot a user who replied that all three Motley Fool services (Inside value, Rule Breakers and Stock Advisor) are all top ranked in Hulbert Financial Digest’s rankings of investment advisory services: http://www.wsj.com/articles/SB10001424127887323997004578642030536573020
- What do I think about this?
- I think it is a good idea to apply your own critical thinking and collect your own data from different reliable sources. However, how would you do this if you are busy and working in a field that is not related to investment advising or trading? What companies should you focus on? What’s the catalysis for Stock XYZ? Where should you start looking for data? For these questions, I think the Fool’s subscription services will have the right answers and get you started on the right foot. We are not suggesting that ALL the stock picks are great. But you will have better insights and have the option to pinpoint the companies to focus on to start your own due-diligence.
How are the stock picks of Rule Breakers performing? Is it worth it?
OK, thanks for reading this far. I will now tell you want you really want to know.
For the past 5 years, I’ve been a paid subscriber to both Rule Breakers and Stock Advisor.
I started out buying the 2 specific stock recommendations in a virtual trading account. From the initial results I saw, I was so impressed that in 2016 I started buying $1000 of each of their stock picks in my real ETrade account.
As of August 8, 2020 here are my results:
- Overall, for the 24 picks a year times 4 years (2016-2019), the Rule Breakers average stock pick is up 220% compared to 146% for Stock Advisors
- That means that RB has beaten the SP500 by 181% and SA by 74%.
- The 24 stocks picks from Rule Breakers from 2016 are up 492% compared to Stock Advisors 272%.
- The 24 stock picks from Rule Breakers from 2017 are up 230% compared to Stock Advisors 107%.
- For 2018, Rule Breakers picks are up 92% vs 144% for Stock Advisor.
- For 2019, Rule Breakers picks are up 68% compared to Stock Advisors 62%.
So why does Stock Advisor get all the attention? Because overall Stock Advisor’s returns and stock picks are more consistent. Stock Advisors had more winners and fewer losers, but Rule Breakers winners were really winners. For example, one of Rule Breakers 2019 picks is already up 223%; two of their 2018 picks are up 405 and 519%; 3 of their 2017 picks are already up 1,337 and 412 and 245%; and as I already mentioned their top stock SHOPIFY of 2016 is already up 4,910%.
This means that if you had missed out on buying just 2 of these top performers over the last 4 years, your Rule Breakers results would be in line with Stock Advisors.
How much does the Motley Fool Rule Breakers cost?
The Motley Fool dropped the price of this subscription in 2019. I paid $299 a year for it in 2017 and 2018, and it is currently listed as $199 a year.
BUT, if you are new subscriber, they frequently run specials like “50% OFF” or “TRY IT FOR JUST $19.”
Motley Fool Rule Breakers vs Stock Advisor. How do they compare?
The overall platform is quite similar for both services. However, there is a couple of crucial differences that depends on the Investor’s preferences
The overall percentage returns of the Rule Breakers picks is higher than the Stock Advisors picks for the last 3 years. But while Rule Breakers did pick some stocks that are up 1100% and 500%, then also pick bigger losers than Stock Advisors. This caused the variance of each of the stock picks to be higher, which most investors don’t want. The risk with Rule Breakers is that if you aren’t disciplined, don’t have the cash, and don’t buy every stock when the they recommend it, you might miss out on a few of their best picks. Missing out on just 3 stocks over the 3 years could have brought the performance back in line with Stock Advisors’ return.
The Stock Advisor service is more focused on well-known stocks and is more oriented for investors who prefers lower volatility. On the other hand, the Rule Breakers service has much more volatility and is focused on companies with high growth potential.
The Stock Advisor service offers 12 stocks per month and the Rule Breakers offers 12 stocks per month. It is also important to note that two teams are part of the Stock Advisor service. Both co-founders Tom and David Gardner offers recommendations in the Stock Advisor service. The Rule Breakers team is overseen by David Gardner only, who is the main advisor of the service.
Conclusion of this Motley Fool Rule Breakers Review
Like the Stock Advisor service, I believe the Rule Breakers is a useful tool to have as an investor. From the weekly podcasts to their stock recommendations, the Rule Breakers team always had interesting insights and ideas to present to their subscribers.
If you are a long term investor with cash to invest each month, then you should prefer Rule Breakers over Stock Advisor. This service’s stock picks are beating the market as follows: their 2016 picks are beating the market by 420%, their 2017 picks by 189%, their 2018 picks by 64% and their 2019 picks by 51%.
In order to get those returns, you MUST buy every single stock they recommend because in each year there is always one or two stocks that are up 400-1000% after 2 years. If you missed just one stock, you might not have had the same results.
As I mentioned in my review for the Stock Advisor service, an Investor must always do their own due-diligence. You should always do your own research to understand what the assumptions were behind a statement. You will learn not only how to analyze stocks, but also develop your own trading strategies. With that being said, I would suggest signing up for the trial and see for yourself how they perform. During the process, you will understand what to look for in an investment and ultimately, invest better.
If you have any comments or questions, please leave them below! Click here if you want to learn more about the Rule Breakers Service.
Also, if you want more information on the Stock Advisor’s service, read my full review on the Stock Advisor service.