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, such as 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 investment ideas.
Every company included in the index is incorporated and listed in the US.
And every company included in the index is either an open buy recommendations in one of our research publications Motley Fool Stock Advisor and Motley Fool Rule Breakers, or ranks among the top 150 US. 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 the 100 largest open Motley Fool’s stock recommendations and highest rated stocks in our research database Fool IQ. 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 explain the current overweighting of the index to the tech sector and underweighting to other sectors, such as utilities and energy.
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.
|Berkshire Hathaway Inc.||4.79%|
|Johnson & Johnson||3.57%|
|JPMorgan Chase & Co.||3.43%|
|UnitedHealth Group Incorporated||2.36%|
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
Since it’s an index, you can’t invest in the Fool 100 directly, but since the index constituents all meet liquidity requirements, the Fool 100 may be used by a financial institution to create an index-linked investment product, such as an ETF, which would seek to match the index composition and performance as closely as possible, before fees.
Certain affiliates of The Motley Fool may offer Fool 100-linked products and services.
- Bloomberg ticker: FLCUS Index
- WKN: SLA4Z0
- Index inception date: 12/29/2006
- Dividend yield: 1.03%
- Country allocation: USA 100%
- 100% Foolish
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