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zversyp (< 20)

Motley Fool Stock Advisor Performance



March 28, 2008 – Comments (3)

Alright, so I was bored tonight, and I've drank a lot of coffee and Red Bull today.  While in this idle, caffeine-induced thinking frenzy, I suddenly remembered how many times I've seen people ask this question, or one like it, on the discussion boards.

"If I bought both recommendations from (Any newsletter) every month, how much money would I have?"

I was thinking about it, and got a little curious, so I thought a little harder.  If I had the money and the inclination to buy every recommendation, and I made an entire portfolio out of the stocks, then I wouldn't track the performance the way that the newsletters track it.  The newsletters are set up to track their performance by taking the selling price of a given stock and assuming that the money from the stock sales is put into the S&P 500 afterward.  Then the performance is based on the average gain of each stock pick.  It's not a bad or misleading way to track performance, but it's not how I would do it.  I would take the money from each stock sale and put it into the purchase of the next stock rec.  That's just me.  So, since I've never seen a calculation done on what that performance would be, and since I'm not going to sleep anytime soon, I decided to do it.  I only subscribe to Stock Advisor and Hidden Gems, so I can only do those, and so far I've only done Dave's side of the score card.  This is what I've come up with as of today.

Assuming $1000 invested in each recommendation at the rec price, each rec sold at sell price, and each sale proceeds added to the $1000 that was invested into the recommendation that was made for the month that the stock was sold at:

Principal: $73,000

Total Portfolio Value, March 27, 2008: $119,469.60

Total % Gain: 63.66%

CAGR for 6 Years: 8.56%

Assuming the same monthly purchases were made in the S&P without selling any positions:

Principal: $73,000

Total Portfolio Value, March 27, 2008: $83,663.88

Total % Gain: 14.61%

CAGR for 6 Years: 2.30%

That's what I came up with.  It's definately not the 20% annual returns that have been advertised on the site before, and it's less than the average pick gain of Dave's picks, which is currently 67.17%.  Then again, it's a hell of a lot better than the S&P over the same time frame.  The % gains I used for stock that had been sold were calculated from the buy and sell prices, not from the gains posted on the scorecard today.  Those gains have been tacked to the S&P since the sell rec, so I used the value that would have been rolled into the newest recommendation.  I guess I still need to do Tom's side of the scorecard, and I need to do the Hidden Gems scorecard, too.  I'm actually more interested in how the Hidden Gems card looks, since they seem to sell a little more often than SA does.

To make a long story short, I was just bored and decided to calculate a hypothetical situation that has been asked on the boards several times.  I'm not saying anything for or against SA.  I was just plugging in some numbers.  This isn't the most accurate calculation either, since it assumes that one was able to invest the exact amount that was available, down to the cent.  That wouldn't happen.  It also assumes that this is a tax-advantaged account, so taxable account performance would be different.  Basically it's just something to pass the time.

3 Comments – Post Your Own

#1) On March 28, 2008 at 4:43 AM, camistocks (70.55) wrote:

I was a subscriber to Hidden Gems many years ago. However I got fed up, because anytime they published a recommendation for a stock, it was up 10% already. If a newsletter has too many subscribers, it doesn't work anymore. There were even speculators who waited for the recommendation email to arrive, so they could immediately profit from the spike. I also doubt the performance they are claiming for their newsletters.

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#2) On March 28, 2008 at 6:35 AM, Gemini846 (34.20) wrote:

Most of the newsletters et out there are inflated, however as you mentioned they still rocked the S&P. The question is could you have picked those same or better stocks w/out them. It's a brainless way to trade. Some people like it.

Most people don't have the $1000 per stock like you are suggesting either so that's when it really gets tricky. People start picking and choosing and usually that results in even a smaller return.

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#3) On March 28, 2008 at 2:57 PM, zversyp (< 20) wrote:

I see both of y'all's points.


I see your point of view, but just to get this out there, I'm not pumping or bashing the newsletters.  Take my data for what it is, I was just bored.  I did mention that the results differed quite a bit from the 20% annual returns advertised on the site before, but that data was given by someone else, it was just happily quoted here.  I don't know how they came up with that, I just went off of what I would have done in this hypothetical.


I'm not going to say that the newsletters are inflated.  Their method of tracking performance is clearly explained, and they never advised, at least to the best of my knowledge, to buy and sell stocks this way.  The results do, however, clearly stomp the S&P.  I guess it's just one more way to show that they can beat the S&P.  And while I know that most people don't have $1000 a month to do this with,(actually it would be $2000 per month with Tom's side of the scorecard added) I just used an arbitrary number.  I know this would never happen, but I think it at least shows a pretty good idea of what a portfolio of Dave's SA picks would actually be worth.

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