The Motley Fool in recent years has done just fine with its Stock Advisor and Rule Breakers picks many of which have been in that sweet spot of technology growth stocks, but much of the marketing has shifted to their newer, higher-end services. Like most publishers, the Motley Fool seems to be focused on that “marketing funnel” — bring in free or low-cost subscribers (Stock Advisor is often available at $49/yr, refunds are easy to get), and then work to upgrade them to high-end services that offer model portfolios or more focused sector targeting (today’s teased service, Extreme Opportunities: Trend-Spotter is being offered at $1,799/yr, with no refunds).
And a few readers chimed in to ask about this latest Trend-Spotter offering publicized this morning, so I’ll give it a look today in the interest of timeliness. The general spiel is that the service is launching with a focus on five different “trends,” with two stock picks for each trend, but they only hinted at two of those picks today… so that’s about where our guessing is going to have to focus.
They say, also, that the goal is to identify stocks that are NOT in other Motley Fool services… which is going to be a challenge, and will probably mean that they’re going to have a lot of smaller and newly public companies in this grouping. Which should mean much higher risk and, they hope, higher potential for big returns.
The ads are mostly signed by Eric Bleeker, who has pitched a lot of these Fool “special opportunities” upgrade services over the years, but the people who are running the portfolio, and presumably selecting the stocks, will be Fool analysts Emily Flippen and Seth Jayson — I’ve never noticed Flippen’s name before, but she was apparently a Rule Breakers staffer, and Jayson has been a Fool writer and analyst for a very long time.
The way they’re trying to distinguish this service is with their concept of “Genesis Trends” — here’s a bit from the ad:
“I believe 2020 could be the beginning of the next era of technology and investing trends…
“Generating a wave of powerful new ‘Genesis Trends’ that today are only at their beginning.
“Because history has shown there have been past years when investors could suddenly discover the emergence of MANY powerful trends that appeared in a narrow window of time.
“The moment the Internet came about – wasn’t everyone in technology drooling about their next potential billion-dollar idea?
“And we saw when the Internet went mainstream in 1995, a MASSIVE wave of new trends emerged!
“In just a narrow window of time, e-commerce rose, search engines grew, and massive data centers began dotting the American landscape.”
The other examples given of these kinds of “genesis trends” are the mobile revolution, which was really fueled by the introduction of the iPhone, and they say we’re at the beginning of another big wave now…
“13 years later we could be at the beginning of a similar moment where a series of massive trends suddenly rise at once. I call it the DIGITAL WAVE.
“Now, coming into 2020, the reality is no one could have predicted this moment… It’s the result of perhaps millions of businesses and hundreds of industries all embracing a rapid digital shift at once in response to the coronavirus.”
And they sum up this idea of “genesis trends” here:
“… here’s what’s important about ‘Genesis Trends.’
“They’re moments when technologies or growth markets suddenly hit a point of rapid acceleration that effectively creates the beginning – or ‘genesis’ — of a new trend.
“During the emergence of ‘Genesis Trends’…
“Growth rates can suddenly reach new and often much higher levels
“Winners and losers of industries can be rapidly reset
“Companies that establish EARLY leadership positions become difficult to disrupt”
That actually calls to mind many of David Gardner’s oft-cited criteria for “Rule Breakers,” with particularly the focus on buying high-growth and buying “first mover” companies that Wall Street routinely calls “too expensive.”
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And, of course, it’s objectively true that we’ve seen a massive shift in the economy and consumer behavior during this pandemic shutdown, with widespread theories that this six-month period has effectively accelerated several trends toward e-commerce and digital work and entertainment in a major way — those things were already happening, but in many cases somewhat slowly (like telehealth, for example, where adoption was painstakingly slow pre-COVID), and our global stay-at-home orders moved that growth ahead by anywhere from a few years to a decade.
It has indeed been shocking, and the hottest stocks have certainly reflected that shock — Amazon posted 100% revenue growth in a quarter, for crying out loud, and that shouldn’t be possible for one of the largest companies in the world (OK, I’m rounding up, it was 97%… but still), and that led to the equally crazy move in the shares, with the company’s market capitalization increasing by $600 billion just since January 1 (to accentuate that craziness, there are only seven publicly traded companies with a total market cap above $600 billion in the world).
Will those trends persist? Nobody knows for sure, but technological change does have a way of sticking once it has been adopted… which doesn’t mean that every e-commerce company will do fantastically well, but it does mean that they’ll probably have strong tailwinds because e-commerce has, probably permanently, taken a bigger chunk of consumer buying than was previously expected (as the Fool cites in their pitch, e-commerce went from about 16% of sales last year to over 27% so far this year). The three trends that they specifically highlight in the ad are e-commerce acceleration (Wayfair (W), Shopify (SHOP), Amazon (AMZN), etc.), work from home (Zoom (ZM), Fastly (FSLY), etc.) and remote healthcare (Teladoc (TDOC), Livongo (LVGO), etc.), but they also do mention a few others — streaming video, the “race for a vaccine,” and the “death