A simple idea powers the Fool 100.
We’d rather own high-quality businesses than low-quality businesses.
Because we believe that, over the long-term, stronger companies will outperform weaker companies. And, as shareholders, we will eventually reap the rewards of this outperformance.
It’s just common sense really.
And yet, many popular indexes ignore this simple principle. Take the S&P 500, the world’s most widely followed index, as an example.Instead of focusing on quality, the S&P 500 blindly picks the market’s largest companies by market cap.And that means when you buy any financial product tied to the S&P 500, like an ETF or index fund,…yes, you may end up with exposure to some of the best companies in the world…but you may also end up with exposure to some low-quality business… for no other reason than these low-quality businesses happen to be big.
Here are a couple of painful examples: Enron was included in the S&P 500 in 2001….and Lehman Brothers was included in 2008.
That’s not to say that every company included in the Fool 100 will be a winner…because we will surely have some losers in there. The point is simply that because the Fool 100 tries to only include high quality companies with smart management teams, we believe that we have a better chance of avoiding exposure to companies like Enron and Lehman Brothers.
And that’s one reason we believe an index of high-quality companies with smart management teams, can outperform a portfolio built by blindly picking all 500 of the market’s biggest stocks.
What is the Motley Fool 100 Index?
The Fool 100 is a new market-cap weighted index that measures the performance of The Motley Fool’s 100 largest active buy recommendations or highest-rated stocks in Fool IQ, our Fool analyst opinion database.
Every company included in the Index is incorporated and listed in the U.S.
And every company included in the Index are open buy recommendations in our research publications Motley Fool Stock Advisor, Motley Fool Hidden Gems, Motley Fool Income Investor, Motley Fool Inside Value, and Motley Fool Rule Breakers, or rank among the top 150 U.S. stocks in The Motley Fool’s Fool IQ research database.
This means that a company can only be included in the Fool 100 after undergoing a painstaking selection and review process by our team of analysts.
This is the same review and selection process that has led to the success of many of The Motley Fool’s publications.
And this is the process that we believe will give the Fool 100 a leg-up on indexes that blindly pick companies merely on size.
How has the Fool 100 performed over time?
We’ve analyzed the performance of the Fool 100 dating back to 2007, and we’re happy to report that the Fool 100 would have outpaced the S&P 500 over that time period.
You can view the full analysis by clicking here.
What's in the Fool 100?
The Fool 100 is made up of 100 The Motley Fool’s active buy recommendations and/or highest rated stocks. Here is the current sector breakdown of the Fool 100:
At The Motley Fool we are looking for the companies that are going to drive innovation for the next decade and beyond, which may result in overweighting to the tech sector and underweighting to other sectors, such as banking and oil and gas.
You can also see this trend reflected in our top 10 holdings, which currently include longtime Motley Fool tech favorities such as Amazon, Alphabet, Facebook, and Apple.
|Johnson & Johnson||3.8%|
But it's quite possible this could change in the future. That's because the index is updated every quarter to reflect the latest-and-greatest analyst picks and ratings. For a complete discussion of index maintenance, click here.
How to invest in the Fool 100
Currently the only way to invest in the Fool 100 is to individually purchase each of the 100 listed stocks in the appropriate amounts.
However, financial institutions could use the Fool 100 to create an investment product, such as an ETF, which would seek to match the index composition as closely as possible.
- Bloomberg ticker: FLCUS Index
- WKN: SLA4Z0
- Index inception date: 12/29/2006
- Dividend yield: 1.32%
- P/E: 29.4
- P/B: 9.5
- Country allocation: USA 100%
- 100% Foolish
The Motley Fool (TMF) constructs, publishes, and licenses indices and does not offer or provide investment advice or offer or sell any securities, commodities or derivative instruments or products, and nothing on this website should be taken as constituting financial or investment advice. Unlike its affiliates, TMF is not registered with the SEC and is not permitted provide investment advice. Neither TMF nor its respective directors, officers, employees or affiliates make any representation regarding the advisability of investing in any security or instrument. A decision to invest in any such security or instrument should not be made in reliance on any information on this website. Inclusion of a security in an index is not a recommendation to buy, sell or hold that security.