Comparing The Motley Fool to Zacks Investment is like comparing apples to oranges. Motley Fool and Zacks both provide outstanding investment advice at modest prices while targeting different audiences.
The Motley Fool is a stock picking service that focuses narrowly on growth stocks, especially from next-gen companies. Zacks Investment casts a wider net, surveying the whole economy as it picks stocks, and then ranks them. Zacks’ recommendations are then further broken down into value, growth, and momentum categories. Here’s our The Motley Fool vs. Zacks Investment Research 2021 comparison.
The Motley Fool vs. Zacks Investment Research Overview
Both companies enjoy a sterling reputation for integrity among institutional and individual investors. Investors following the recommendations of Motley Fool and Zacks have dramatically outperformed the S&P 500 for two decades or more.
About The Motley Fool
The Motley Fool was founded in 1993 by brothers and equity analysts Dave and Tom Gardner. The company publishes stock recommendations in online newsletters. Its flagship product, Stock Advisor, is geared towards long-term DIY investors who like their fundamental analysis served entertainingly (hence their use of “fool,” as in a court jester).
The service has grown from recommending individual stocks to recommending portfolios of stocks around themes (e.g. entertainment, retirement, disruptors) for a 3-to-5-year hold. Almost all the companies are “next-gen” — companies whose operations are web-based (and primarily U.S. based.) Although not explicitly stated, The Motley Fool’s fundamental bet is that companies pioneering the digital transformation of the industry will capture huge appreciation in the stock market.
About Zacks Investment Research
Zacks’ entire system is built around the idea that earnings estimate revisions — the raising or lowering of earnings estimates by the professional analyst community — exerts the most powerful impact on stock prices. Founded in 1978 by MIT Ph.D. Len Zacks, Zacks Investment Research adds a layer of easy-to-grasp quantitative analysis to stock recommendations, and also covers mutual funds, exchange-traded funds (ETFs), and even options.
For those of us who don’t love complexity, Zacks’ recommendations are based on a simple one-to-five ranking. In short, Zacks focuses on fundamentals and timing; it aims to provide a trading advantage to fundamental analysis, offering both short-term trading and long-term investment advice. Zacks’ recommendations are based on research from its team of analysts covering 1,050 stocks.
How Does Each Work?
How The Motley Fool Works
The Motley Fool offers several newsletters, organized around investment themes.
- The founders review recommended stocks every week, and every two weeks they add a new recommendation (which is sometimes a previously recommended stock).
- Subscribers also have access to the online website, which posts “best buys” from their active recommendations.
- Sell recommendations are also posted, but they are rare.
- Investors choose from a selection of stocks and are advised to select a minimum of 10 to hold for 3 to 5 years.
The flagship Stock Advisor newsletter costs $199 a year but is available now for $99 the first year. American Express Platinum Cardholders, and their friends, will be reimbursed for the first year’s fees via AmEx. There are several other offerings from The Motley Fool, and there are overlapping stocks in the other newsletters. Three important ones are:
- Rule Breakers, at about $299 a year, claims to double the number of Stock Advisor’s recommendations and focuses more on early-stage growth companies.
- Discovery: Future of Entertainment focuses on companies in the gaming, streaming, and studio production ecosystem. Motley Fool claims these stocks are more volatile but offer greater appreciation potential on their way to becoming a multi-trillion dollar industry.
- 10X Portfolio examines Motley’s Fool’s past recommendations that have increased in value eight to 10X, and extracts from that experience a set of investment guidelines for choosing the stocks which it believes will also increase eight to 10X in the next 3 to 5 years.
How Does Zacks Investment Research Works
Zacks offers three tiers of service, but the majority of investors will be saturated by Zacks Premium newsletter, which costs $249 a year and provides 3 Rs: Recommendations, Rankings, and Reports.
- Subscribers can place their portfolios into the My Portfolio Tracker tool and instantly see the Zacks ranking for each security.
- Every trading day, the site will automatically send you breaking news and an update on your securities’ rankings.
- A ranking of one indicates “strong-buy” and a ranking of five indicates a “strong sell” recommendation.
- There is no reluctance to recommend selling a stock, and Zacks is justifiably famous for its disinterested views based on quantitative methods. This means Zacks provides both long and short recommendations, though short-selling is not recommended for beginning investors.
- Fewer than 5% of all stocks receive Zacks’ top ranking, and a stock is only ranked No.1 if it receives both a fundamental analysis recommendation and its earnings estimates have been raised by several professional analysts.
Zacks’ claims its short-term trading perspective and longer-term fundamental analysis give subscribers an advantage. A host of analytical tools rounds out the offering, and Zacks also maintains a Focus List of 50 stocks for long-term performance.
Zacks also has services for more advanced investors which require a mastery of basic investing concepts:
- Investor Collection is aimed at long-term investors. This service costs $59/month or $495/year, and features real-time buy and sell signals from the company’s long-term investor portfolios. It also offers a stocks under $10 strategy.
- Ultimate costs $299/month, or $2,995/year, and includes all of the above, plus market insights and “private picks” from all of their portfolio recommendation services, even those closed to new investors. Ultimate provides strategies and portfolios (called “investment approaches”), which enable investors to find the best fit for their investment theme.
- Zacks also offers a trading platform combining comprehensive services with low-cost fees, so you can do your homework and trade all in one place. Read more about Zackstrade here.
Similarities Between the Two Services
Both platforms provide in-depth newsletters that recommend stocks on the basis of fundamental analysis. You will never be lonely by subscribing to either service because both are fierce about daily emails, follow-up recommendations, and breaking news.
- The Motley Fool and Zacks each offer plenty of free content and tutorials. Their websites feature step-by-step instructions on how to capitalize on their products and provide a good sense of what to expect from your subscription.
- The Motley Fool and Zacks have extraordinary track records of outperforming the S&P 500 over long periods of time.
- If you’re still unsure about which company is right for you, Motley Fool’s Stock Advisor and Zacks’ Premium have a 30-day free trial (they will refund your purchase if you are dissatisfied).
Differences Between the Two Services
Each platform has different analyst ratings and opinions.
- Zacks is quantitative and comprehensive in nature, covering stocks, mutual funds, ETFs, and options. It’s also broad, focusing on securities in all sectors of the economy, and categorizes its picks by value, growth, and momentum in addition to its famous rankings.
- The Motley Fool is more narrow and focuses on recommendations from its staff, while Zacks’ recommendations are culled from analysts across Wall Street.
- Motley Fool also focuses on long-term buy-and-hold strategies in next-gen companies, centering value. The Zacks Investment Research rating system is based solely on giving its members the most potential for profit in both the short and long-term.
Who Should Use The Motley Fool and Zacks?
The Motley Fool is best for beginning investors and those who wish to focus all or part of their portfolios on next-gen companies.
- Motley Fool’s strategy is long-only (it recommends stocks to buy) and its recommended holding period is 3-to-5 years.
- Its ideas are broken down into simple language, and investors can buy the recommended stocks or read the in-depth analysis.
- Motley Fool subscribers will have to endure a great deal of upselling and will often receive two emails a day urging them to “trade up” or combine with other Fool products.
Zacks appeals to more advanced investors, especially those whose investment horizon is shorter than 3 to 5 years. In addition to Motley Fools’ type of fundamental analysis, Zacks zeroes in on stocks whose earnings estimates have been raised (or lowered).
- Investors can assemble their own portfolios from Zacks recommendations and review other securities they may have against Zacks’ rankings.
- Because the company offers both strong buy and strong sell recommendations, investors may use Zacks for long and short strategies.
- Zacks also covers mutual funds, ETFs, and options, offering an extensive set of tools for both security analysis and portfolio analysis. Zacks subscribers receive daily updates about their portfolios and weekly notifications about other services provided by Zacks.
Customer Service Comparison
Customer service is largely DIY at The Motley Fool
- There are message boards with well-organized threads and an excellent FAQ section.
- There is also a community section where you will find lively comments on each recommended stock from subscribers.
- The Motley Fool offers tutorials on investment basics and even a live update during market hours, which features timely news about target companies.
- Although there is an 800 number, it is for questions related to subscriptions and services, not investment advice.
Zacks customer service is more investor-friendly.
- Subscribers can call an 800 number Monday-Friday from 9 a.m. to 6 p.m. EST and are directed to the appropriate staff member.
- All of Zacks department heads list their telephone numbers and email addresses.
- Zacks runs an FAQ section and a forum where subscribers can ask questions according to the topic.
- Zacks also offers tutorials and portfolio management tools for beginning and advanced investors.
- There is also a Zacks Method for Trading home study course available as a tutorial.
Main Competitors of Motley Fool and Zacks
Morningstar Premium, like Zacks, is more than a newsletter. It also ranks stocks, mutual funds, and ETFs within its own system, along with proprietary commentary and research. It is considered the gold standard of mutual fund rankings by many Wall Street brokerages. Here’s a comparison between The Motley Fool and Morningstar we’ve recently made.
Kiplinger’s has been around for decades and offers several newsletters focusing on income generation, retirement planning, and personal finance. Jim Cramer, the host of CNBC’s Mad Money, offers commentary, daily updates, investment advice, and a monthly members-only investment call through his Action Alerts Plus website and newsletter.
Bottom Line: Which Is Best?
Both companies are independent research firms that make money by selling subscriptions. Both put their money where their mouths are by running their own mutual funds, where you can watch some of their ideas perform.
If you’re just starting out investing, or don’t wish to invest much time into your portfolio, The Motley Fool is both simple and entertaining. The Motley Fool claims its Stock Advisor portfolio has earned a 588% return since 2002, compared to the S&P 500’s return of 120%, as of February 23, 2021.
For more advanced investors, Zacks provides a wider range of opportunities for both trading and long-term investing. It claims investors trading their No.1 ranked stocks have an average gain of 24.9% per year from 1988 to 2021, about 2.5 times the 9.98% average return on the S&P 500.
If you can afford it, the optimum choice is to subscribe to both Zacks and The Motley Fool. By screening Motley Fool’s recommendations against Zacks rankings, you can capture next-gen companies with earnings momentum, and then choose from Zacks top stocks to diversify your portfolios with opportunities from other sectors of the economy. This is, in fact, the strategy of this author.