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Investment Research: Motley Fool vs Zacks

Both Motley Fool and Zacks are great resources for new and experienced investors.


With the span and scope of stock research resources available, a new investor can be easily forgiven for not knowing where to start. One reliable thread exists though – some stock research resources are better than others.

Sure, innumerable free options exist, and some are great. But most of the legitimate ones presume you’re coming to the game with a knowledge base. So, if you can’t interpret financial ratios or know the difference between beta and alpha, they might not be useful to you.

Conversely, free options that prescribe picks are often costly in their own way. Often, they serve as a funnel for an eventual paid option or, worse, serve to artificially inflate a stock before the advocate cashes out in a classic pump and dump scheme.

Luckily, two of the industry’s longstanding resources are available and accessible for all investing styles and experience levels.

But which is better – Motley Fool or Zack’s?

 

Overview

Before we dive into the offerings of each, as well as the final comparison, let’s look at a snapshot of each:

 

Motley Fool

Motley Fool is one of the longest-running and best stock analysis websites available. Motley Fool’s original paid research and service, Stock Advisor, provides specific stock picks they see as viable candidates for holding over time. While the average investor can choose to purchase the recommendations, there is value in Motley Fool’s underlying justification for selection.

By seeing and understanding the what and why behind the professionals’ stock selections, you can begin to see what works… and doesn’t. This will help guide your investing journey as you develop your strategy. Motley Fool also exercises transparency and publishes contrary analyst opinions to their selection to give you the full range of information.

Suppose you’re newer to the market and investing. In that case, Motley Fool also offers many educational resources to get you started, including stock-sector introductions (growth, value, small- and large-cap, etc.) and industry overviews to get you acquainted with all the options available. The best news is that, although the specific-stock research is only accessible through a subscription, they’ve made their educational resources available for free.

 

Zacks Investment Research

Zacks is one of the most well-pedigreed research firms in the market. Founded by an MIT graduate in economics, Zacks research and analysis focus on the predictive power of statistical models. Zacks gathers data from third parties to create a meta-analysis of stocks along four criteria:

  • Agreement – how much analysts agree with each other or how closely aligned they are.
  • Magnitude – the amount by which analysts revise earnings estimates with an assumption that a greater degree of revision margin movement means a proportional underlying stock movement (this was the founder’s cornerstone thesis behind the firm and holds today).
  • Upside – a comparison against Zack’s “favorite,” or in their view, most accurate analysis against the crowd consensus analysis.
  • Surprise – the likelihood of unexpected earnings beating or falling short of projections.

From these criteria, Zacks ranks stocks into five categories from Strong Buy to Strong Sell.

Since Zacks effectively outsources analysis and research to professionals and makes that research available to investors alongside their proprietary ranking, you can see the full extent and scope of upsides and downsides for specific stocks.

 

Investing Style

No matter your investing style, Motley Fool or Zack’s has what you need.

Motley Fool’s broad-scope investing style is a moderate-term, buy-and-hold strategy over a five-year span. In other, words Motley Fool focuses on growth stocks. This contrasts with value stocks, which are intended to be bought and held indefinitely (think Warren Buffet-style), and momentum stocks, which are more actively traded as certain external factors like news or earnings drive stocks up or down.

This baseline style’s service is called Stock Advisor. With this product, Motley Fool will email you two individual stock picks every month and their most current list of 1) Best Buys, 2) 10 Timely Stocks, 3) 10 Foundational Stocks, and 4) 5 ETFs.

Stock Advisor has returned over 500% total since 2002, so its methodology and strategy are certainly sound.

Motley Fool has other products to fit investing needs:

  • Real Estate Winners: Expands the scope of Motley Fool into the real estate game with Real Estate Investment Trust (REIT) suggestions and other opportunities.
  • Rule Breakers: Two additional monthly stock picks that are higher risk but have higher rewards. These are the 10x possibilities.
  • Everlasting Stocks: This “eternal portfolio” option gives buy-and-hold forever stock picks. This service is excellent if you’re trying to build generational wealth.
  • Millionacres Moguls: This next-level real estate offering offers premium picks and the opportunity to attend live events.

Zacks’ baseline service is called the #1 Rank List and consists of Zacks’ top percentage of stocks – all those that Zacks rates as strong buys. These generally differ from Motley Fool’s time horizon, and Zacks focuses on the immediate term with a 1-3 month recommended hold period.

Zacks also breaks stock scoring down into value, growth, and momentum (VGM). These scores help inform an investor’s strategy and holding period.

For example, if a stock is high on the “momentum” score, then it is good for a short-term hold. Growth is held for the medium term, and values are held indefinitely.  This flexibility in offerings lets investors pick what suits them best – but it is less prescriptive than Motley Fool.

How do Zacks’ picks compare? Zacks, since 1688, averages a market-beating annualized 26% return.

 

Cost

Remember, we’re looking for quality and reliability, so cost is required. What differs, though, is the price point.

Motley Fool’s baseline Stock Advisor service is usually $199 per year, but we have exclusive first-time subscriber pricing (at the bottom of the article) for only $79 annually. Other Motley Fool services range in cost, but Stock Advisor is the most affordable and all-encompassing option.

Zacks also ranges in pricing but even the baseline is pricier:

  • Premium: $249 annually and includes Zacks #1 ranking, research reports, premium screening options, and a Focus List of 50 stocks to add to your portfolio.
  • Investor Collection: $495 per year and adds Stocks Under $10, plus ETF, Income, and Value Investor recommendations.
  • Ultimate: this is the highest-cost option and is $2,995 annually. This includes a much more diverse selection of research and recommendations including options, short-selling opportunities, and even crypto.

 

Conclusion

Both Motley Fool and Zacks are great resources for new and experienced investors, but for the overall value, we have to go with Motley Fool. At a much lower price, Motley Fool’s prescriptive stock picks are great for even the newest investor to learn the ropes while still getting market action.

 

Jeremy Biberdorf is a long-time internet marketing pro turned online entrepreneur and blogger. Check out his investing blog at Modest Money.

 

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Photo: Iamchamp, YFS Magazine, Adobe Stock
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