How the Motley Fools Pick Starter Stocks

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“If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.” — Henry Ford

If you want to grow your financial intelligence skills, it helps to learn from people who do it for a living.

The Motley Fool co-founders David and Tom Gardner have been living and breathing investment advice for years, and are among the most widely followed stock advisers in the world.

I like that they are lifelong learners of building wealth and financial stability.

What’s great about their approach is that they focus a lot on the education and the rationale, rather than just telling you their stock picks.  You can draw from their patterns to inspire and shape your approach.

Here is a summary of how the Motley Fools pick starter stocks:

  1. Simple business models.  They look for companies and business models that are easy to understand.   When you look at the company, you don’t have to ask “how do they make money?”
  2. Alignment with investment philosophies.  They look for companies that are doing great things for the world, providing high-value service.  They look for leaders who make things happen, who can transform a company and keep it moving forward.  They look for companies that share their values.
  3. Room to grow.  They look to companies who have worldwide expansion possibilities.  And when it comes to companies that have already gone international, they look for how that global reach can be a platform for future growth.
  4. Market beaters.   They look for companies that will beat the market for the long haul, not in a given day or month.
  5. Track record of success.  They look for companies that are household names, such as Apple, Nike, and Walt Disney.  They appreciate that brands are both a sign of staying power, as well as hard-won badges of success.
  6. Crowd favorites.  They leverage the wisdom of the crowds to check their thinking and to find exceptional insight that might not have been obvious.
  7. Innovative culture.  They look for companies that rely on regular innovation cycles, not just in their product but in their customer experience, employee experiences, and business models.
  8. Great people.   They look for leaders who inspire employees, customers, and shareholders.  They especially look for founder-visionaries who still run their creations.

I know that when I first picked a stock, I wasn’t thinking as comprehensively as they do.

Looking back, I wish that I had this broader perspective along with the key questions to ask and how to really evaluate each dimension.

Live and learn.

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Image by Bran Sorem.

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