Of all the industries that have been most affected by technology, entertainment may be the most visible and the most exciting. Sure, medical nanobots that can cure cancer are cool, and those Boston Dynamics robots can do some cool parkour, but let’s be real: that stuff’s for nerds. The cool stuff, the sci-fi stuff that we’ve all been waiting for exists somewhere outside or on top of our own reality.
Now let’s say you’re a future-minded investor who has a lot of faith in the idea of augmented reality. No doubt you’d think there’s a lot of money to be made there, right? The trouble is, how do you figure out which companies have anything to do with AR and, more importantly, which ones are available for/worth investing in.
Augmented reality asks the question: what if we layered holographic graphics over the real world instead of encasing our heads in those uncomfortable VR headsets? Pokemon GO gave us a pretty interesting use case when it hit the scene a few years back. If you recall, the game made you look around using your phone’s camera to locate colorful digital creatures for you to trap inside of balls and show off to your friends.
The good news is that the Motley Fool’s Augmented Reality and Beyond service has already done all the heavy lifting for you. The bad news is that the service is pretty expensive for the average investor, and you can’t really tell if it’s worth it without shelling out the cash to check it out for yourself. Unless there were some really swell folks who took it upon themselves to find out whether the service is worth it or not.
You’re welcome in advance.
The Motley Fool
The Motley Fool is a financial advice firm that was founded in 1993 and has been pumping out high-quality research and recommendations ever since. The firm’s name comes from a Shakespearean character who spoke truth to power regardless of the potential consequences, and the company has embraced that ethos in every aspect of their business.
The people at the Motley Fool spend their days poring over reams of research, toying with spreadsheets, and generally working their collective butts off for the sole purpose of bringing you the kind of honest financial advice that you can’t get anywhere else.
What kind of advice, you ask? The full answer is pretty long, so let’s just say that they bring their customers the best financial counsel possible in the form of stock recommendations, actively managed portfolios, and expert analyses that cover every corner of the market.
This article is about the Augmented Reality service, but that’s just the tip of the iceberg. If you’re interested, the Motley Fool has guidance on everything from fintech to biotech, long-term plays and timely suggestions, and everything in between.
Augmented Reality and Beyond
Price: $1,999/year
Like many of the products and services offered by The Motley Fool, the Augmented Reality and Beyond service is an actively managed portfolio of stocks recommended by the Fool’s team.
The service lists these as its guiding principles, what it calls its principles for success:
- Buy at least 12-15 Augmented Reality stocks
- Plan to hold these investments at least 5 years
- Understand the market can be volatile, and stocks can move up or down in excess of 20%
- Know that Augmented Reality is intended to help build up the growth portion of an overall portfolio
- Understand that new stock recommendations will be added over time to further diversify the AR portfolio
The service makes new recommendations for augmented reality-related stocks on a regular basis. They don’t just recommend every single stock that has anything to do with the technology, however. The team lead Jason Moser determines what to buy and sell based on the following:
- Staying Power: Stocks must show a clear long-term trend or short-term catalyst that will help create value. This service in particular is devoted to getting in on augmented reality at the bottom floor, as the technology is still in its infancy.
- Competitive Advantages: Only stocks that have significant or the potential for significant competitive advantages will be considered for the portfolio. These factors include things like network effects, intellectual property, brand recognition, superior technology, and so on. The Getting Started page of the service lists Disney and Zoom as companies with competitive advantages that make them worth looking at.
- Strong Leadership: This one’s a bit more nebulous. Moser and his team recognize that great leaders are rare and hard to identify, but promise to keep a lookout for leaders with the skill and foresight to guide their firms to financial success and outsize stock price gains in the future. Moser mentions Bernard Charles, the longtime CEO of Dassault Systemes, as one of the leaders with the vision and track record that makes them worth watching.
- Fiscally Fit: If we haven’t left the era of unprofitable tech firms getting huge valuations based on the potential of their technology, we’re certainly approaching it. Moser and his team recognize that not all future-focused firms will start making a profit as soon as they’re founded, but they aren’t interested in making big investments in companies with bad balance sheets and no clear path to profitability.
The team is also careful to note that augmented reality stocks should only be a portion of your portfolio. The technology is too new and the future too uncertain for augmented reality stocks to take up more than a sensible slice of your overall portfolio—unless you’re one of those adrenaline junkies who loves skydiving and swimming with sharks, then you just do you.
The team behind the Augmented Reality service also notes that, while they believe in every stock they recommend, their recommendations are not indefinite. Ideally you’d keep every stock in your portfolio for at least five years, but if one of the recommended stocks starts tanking/is no longer able to beat the market the team will send out a sell recommendation as soon as is appropriate.
So that’s how the service works in theory. How does it work in practice?
Augmenting Your Reality?
The augmented reality service costs $2k per year. If you’re supposed to hold each stock for at least five years, that means you’ll theoretically be on the hook for $10,000 over the same period. In other words, you’re going to need to make at least $2,000/year and/or $10,000/five years from the recommended stocks for the service to be worth it. That’s a lot of ground to cover.
The portfolio is composed of:
- 65.1% information technology stocks
- 11.6% healthcare
- 9.3% communication services
- 9.3% consumer discretionary
- 4.7% industrials
And by market cap:
- 55.8% large cap
- 20.9% mid cap
- 4.7% small cap
- 2.3% other
Now let’s take a look and see how the portfolio’s been performing since it was created back in 2019.
Since June 2019 the portfolio is up 32.06%, while the S&P is up 31.98%. That’s a gain of just 0.08% over the S&P.
Now, granted, the portfolio hasn’t even been around for the five years they recommend you hold each stock. Even still, $2,000 a year is a pretty steep price for 0.08% over the S&P.
Of the 43 recommendations made since June of 2019:
- 28 have risen in price
- 15 have returned more than the S&P
- 5 have seen triple-digit price increases
That’s not great, but maybe the data’s a bit skewed because the newest recommendations haven’t had time to appreciate. Maybe the earlier recommendations are looking a little better.
Of the 20 recommendations made in 2019:
- 15 have risen in price
- 8 have appreciated faster than the S&P
- 4 have delivered triple-digit returns
That’s a bit better, though those numbers aren’t doing a great job of selling the service, especially at that price point.
Conclusion
It’s hard to argue that augmented reality will play a massive role in the future. It’s only a matter of time until firms in the space are making money hand over fist…but how much time are we talking?
This service is hard to recommend as it is right now. The higher the price point, the better the performance has to be to legitimize it, and as of now the numbers just aren’t compelling enough.
$2,000 a year is a lot for most investors. And until the portfolio starts taking off and delivering enough returns to make it worth the money, well, you might want to sit tight and put your money elsewhere.
