What are the “Duke Street Trusts” From Motley Fool?

Checking out the teased high conviction ideas from David and Tom Gardner

By xiexgp@gmail.com, April 9, 2014

“You Won’t Read About ‘Duke St. Trusts’ in Bloomberg…

“But for Over a Decade They’ve Minted Returns Like 197.7%, 3,265.6%, and even 5,389.9%! (Seriously)

“The financial media is at it again: After a great rally they’re all blabbing that stocks can’t go higher, but they’re missing the biggest story yet…

“Because the 2 newest Duke St. Trusts have just been revealed!”

That’s how the Motley Fool has been pitching their Stock Advisor service recently — the 3,000% and 5,000% returns catch your eye, no?

Well, the returns are real — over decades, and for specific stocks out of a huge portfolio, but real. David Gardner in particular has been able to pick a few stocks that have been remarkable long-term growers over the years and, perhaps more importantly, has shown the ability to hold onto those stocks both through huge drops and through huge, several-hundred-percent gains that would have short-timers cutting losses or taking profits.

Some of the picks they’ve been tremendously successful with, like Netflix and Priceline.com and Amazon, have been stocks that I thought were too expensive before they went up by 500%… so just a warning that if we’re looking at that kind of stock again, you might want to take my opinion with a grain of salt.

And, of course, most of the stocks the Gardner brothers recommend do not go up several hundred percent or more. Their Stock Advisor service has often beaten the S&P 500 over the last 10 or 15 years, but not every year… and not every pick.

But the latest thing they’ve been pitching in recent weeks has been something they call “Duke St. Trusts” … so what are they?

Well, they aren’t trusts. And despite the name, they aren’t even necessarily income oriented (often when folks tease trusts, like the “Eisenhower Trusts” pitched by Investing Daily, they’re referring to Real Estate Income Trusts or Oil Trusts… not this time). They’re just stocks.

The ad is signed by one of the editors at Fool.com, continuing their tradition of getting the Gardner brothers away from the business of spinning sales pitches, and he talks up these “Duke St. Trusts” nicely:

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“While I’m fully expecting returns that will make the best investments of 2013 look like a molehill, I should warn you…

“If you’re just in this for the bragging rights or the thrill of incredible wealth or only want a fashionable stock tip to spill at the watercooler, this isn’t for you.

“Frankly, to really get the best returns, I shouldn’t even be telling you this…

“But those two maverick investors I mentioned earlier? They only agreed to release their new report, ‘2014’s Duke St. Trusts — Minting Tomorrow’s Royalty Today,’ if I shared it with genuine investors.

“But you’ve read this far, so I can tell you are one.

“See, like us, they invest for something bigger. They invest to help people like you and me realize our dreams of financial security.

“They’ve been doing it for over 20 years. And they’re damn good.

“To tell the truth: For over a decade the combined returns of the Duke St. Trusts they’ve picked have tripled the return of the S&P 500, up an astonishing 157.7%.”

Golly, doesn’t it feel special to know that you’re a “genuine investor?”

So what is he talking about? Well, the “Duke St. Trusts” are just “stocked picked by Motley Fool Stock Advisor” … but he goes a bit further and makes similar claims to past Motley Fool, ads, that if the stocks picked by the Gardner brothers are great, the ones they re-pick and re-recommend are even better:

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“Not only have both of those Super Investors from earlier recommended getting in on these investments…

“They’ve done it twice!

“That’d be enough to convince me right there, but then I saw something else shocking…. A ‘Super Signal’ that’s been lying dormant for nearly 8 years!

“The last time investors got a hint of this signal Pluto was still a planet and Barry Bonds was busy breaking The Babe’s record!

“Not only have both Duke St. Trusts been recommended, but one of them has received a sterling “buy” rating twice in a row!!!

“The importance of this can’t be overstated, so I’ll just lay the facts bare:

  • This has happened only five other times since 2002.
  • The last time this happened was 2006.
  • The average return every time it’s happened is 168.4%!!”

OK, so yes — it’s encouraging that the Gardner brothers are re-recommending these stocks and effectively pounding the table on them, and it might even mean that they’re better investments… but don’t get ahead of yourself, that 168% return is only slightly better than the average return of these “Duke St. Trusts” according to the claims they made earlier in this ad letter. And it’s a very small sample, so these stocks might be qualitatively better but it’s a bit of a stretch to say that their returns are necessarily going to be quantitatively better.

But still, now that we’ve heard the pitch I want to know what the stocks are. I know off the top of my head some that have been aggressively re-recommended by the Fool brothers over the years, like Marvel (before their Disney takeover) and Whole Foods (WFM) and 3D Systems (DDD), because those re-recommendations were pretty actively teased at the time too … but let’s check out the clues on this one:

These aren’t ordinary stocks. They’re attached to the world’s greatest money-printing companies.

Companies that could make you rich.