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Investors seeking to earn above average returns on investment may find stock picking services to be a helpful tool. For one thing, they can be a considerable time saver. A stock picking service can save an investor countless hours of time searching for promising stocks to invest in.
Of the millions of individuals who’d like to profit from stock market investing, few have the time to conduct in-depth research into even a small portion of the thousands of available stocks. One solution is subscribing to the stock picking services of professional investors, whose full-time job is analyzing stocks to identify the best investment opportunities. They make things easy: you get the pick, decide if you are interested, and then just open your stock trading app and buy it.
If you’re considering using a stock picking service, then there are several key factors to keep in mind for choosing the best stock picking service. First, there are the general characteristics to look for in a stock picking service. Second, but equally important, are factors that determine whether a particular service is well-suited to your personal investing needs and wants.
How to Identify the Best Stock Picking Services
Obviously, the first thing to look for is the service’s track record. In short, how successful has it been in picking stocks that generated above average returns? Investors should consider the service’s cumulative performance record – what’s the total return that an investor could have obtained from following the service’s stock picks?
What have the average monthly and yearly returns on investment been? What’s the maximum drawdown in investment capital that the service has suffered? What’s the ratio of winning trades to losing trades?
Transparency is a critical characteristic. The best services freely provide investors with the answers to all the questions posed above.
The Best Stock Picking Service for YOU
It’s important to find a service that matches up well with your personal investing –
- Time frame
- Risk tolerance
Most stock picking services are focused on a medium-term, or swing trading, time frame. That is, they look to identify stocks that offer significant profit potential within the time span of a few days to a few months. Some services strictly look for long-term, “buy and hold” investments, while others focus on the shortest investing time frame: day trading.
In addition to choosing a service that fits your preferred investing time frame, it’s essential to choose one that fits your risk tolerance. Some stock picking services that have performed well over the long haul have experienced large capital drawdowns from time to time. Some investors are simply not comfortable with large drawdowns, no matter how promising the long-term reward.
A good exercise is to look at a service’s maximum drawdown and imagine experiencing that right after you start using the service. Then ask yourself if you could handle that large a decline in your investment capital, in both practical terms (would you still have sufficient investment capital left to work with?) and from an emotional/psychological perspective.
The Seven Best Stock Picking Services
The following are our picks for the seven best stock picking services:
Stock Market Guides offers a stock picking service where they tell you the historical track record of the trade setup being used for each stock pick.
For example, if they make a stock pick for Amazon, they indicate which trading strategy is behind the stock pick and exactly how that trading strategy has performed in the past for Amazon.
So often, you hear people talking about technical chart patterns, but you don’t really know whether they actually work or not. Stock Market Guides reveals that information to subscribers, and once you have it, you won’t know how you could have ever traded without it. It’s like going from making blind trades to making fully-informed trades. That’s why we love this service.
For each stock pick they make, they send an alert by email or text. Their trade alerts are easy to follow and look like this:
In a way, their service is almost like a scanner with added historical performance information. It scans for trade setups that have a history of success and shows you the exact performance. It allows you to make more informed trading decisions and, of course, might put the odds in your favor of making solid profits.
The average annualized return of their stock picks in backtests is 72%. To our minds, if it’s possible to find trade setups that have a history of generating those sorts of returns, then sign us up. In the stock market, a lot of times, it’s a matter of being in the right place at the right time, and Stock Market Guides helps you figure out where to be looking at any given time.
They have two stock picking services. One is for picks that get posted before the market opens. The other is for picks that get posted throughout the trading day. Both services are the same price, so it’s just a matter of your personal availability and preference.
They also allow you to tailor the stock picks you get in terms of how long you hold the position. So, if you like to buy and hold stocks for 3 months to a year, they allow you to configure your stock picks accordingly. They also cater to active swing traders who want trades that are designed to last just a few days to a few weeks.
Price: $49 per month for either service
The Motley Fool offers several stock picking services. “Stock Advisor” is one of its most successful, with a well-established, 20-year track record. Since its inception in 2002, the newsletter’s stock picks have averaged an annual return on investment of 19%.
Approximately 60%-70% of the Fool stock picks have been winners, and nearly one-third of them have generated investment returns greater than 100%. Subscribers are provided with two new stocks to consider each month. New subscribers also get the Advisor’s “Top 5 Starter Stocks” and “Top 10 Stocks to Buy Now”, to help them build a diversified portfolio.
This service is very much focused on identifying value stocks to buy and hold for the long term. It has proven itself capable of substantially outperforming the overall stock market, but it’s still not likely to please investors wanting to double their investments in a matter of just weeks or months.
Price: $99 first year – $199 annually after that
3 – Seeking Alpha
Seeking Alpha isn’t a newsletter service like Motley Fool’s Stock Advisor that delivers a couple of specific stock picks each month. Instead, it offers subscribers a combination of lots of stock picks, from various sources – primarily SA’s stable of in-house investing experts. It also provides a wealth of high-end stock research tools to help clients make their own best stock picks. SA also covers investments other than just stocks, including commodities and cryptocurrencies.
SA gives investors multiple analyses of a stock, from multiple analysts. The idea is to get a more complete picture of an investment asset, and, thereby, a better evaluation of its real value and growth potential. The performance track records of each of SA’s investment analysts are shown. Seeking Alpha services include market screeners and its proprietary stock rating system.
Seeking Alpha is also a social trading website, so investors can get investment ideas from other investors around the globe.
SA is a good choice for investors who want to get an continual selection of stock picks, and who also want access to advanced analysis tools that they can use to find promising investments on their own.
Price: $239/year for Premium subscription; heavily discounted first-year deals are commonly offered, along with short-term free trial periods
4 – Mindful Trader
The Mindful Trader stock picking service is run by Eric Ferguson.
He researched historical price tendencies in the stock market to determine an investing approach. The idea is that his trading strategy might put the odds in his favor.
He relies strictly on his research to make trades.
His stock picks are for swing trades, so they aren’t long-term stock picks like some of the other services on this list.
His stock picks look like this:
You can use any trading platform you want to make the trades, although he uses Think or Swim and has tutorials for using it on his site.
He’s pretty aggressive about position sizing. But that’s what it takes to achieve the returns shown in his research, which suggests triple digit returns might be possible in some years.
Price: $47 per month
5 – Trade Ideas
Trade Ideas offers stock picks generated by its proprietary artificial intelligence (AI) program, which it has affectionately nicknamed “Holly”. Holly runs dozens of algorithms every day to provide investors with a selection of the day’s best stock picks, prior to the market open. Subscribers can adjust Holly to only send stock picks that match certain specified criteria.
Holly continues to screen for good buying opportunities throughout the day, alerting subscribers to new trade ideas through text or email messages. Holly’s picks include suggested entry prices and profit targets. Trade suggestions run the gamut from day trades, to swing trades, to long-term buy and hold investments.
Investors can also use the Trade Ideas stock screener to scan for opportunities according to their own set of investing parameters. The TI “Oddsmaker” feature enables investors to backtest and refine trading strategies.
The Trade Ideas website offers a wealth of investor education resources, including articles, videos, and books on investing. And in-house market analyst and trading expert, Barrie Einarson, hosts a live trading room each trading day, from 8-3:30 (New York time), where subscribers can watch him trade his own account, and benefit from his market commentary throughout the day.
Holly’s services don’t come cheap, but Trade Ideas has managed to garner a large number of loyal subscribers who attest that she’s worth every penny. TI frequently runs a “7-Day Free Trial” offer.
Price: $167/month (equals $1,999 annually); There’s also a $17/month “Alert” newsletter that provides five swing trade suggestions for the week each Sunday evening
6 – Zacks
Zacks is the polar opposite of Trade Ideas’ AI stock picks. What Zacks offers is first-class fundamental analysis and stock rating. Stocks that it rates #1 have generated an annual return on investment of approximately 25% – substantially outperforming the 11% average annual return of the S&P 500.
Zacks is a good fit for investors who, like Zacks, are strong believers in the benefits of using good old-fashioned fundamental analysis, rather than high-end technical screens.
Premium Zacks subscribers can choose from a wide selection of suggested stocks, that all come with detailed research reports and analysis. Zacks stock picks appear through several lists:
- Focus List – a portfolio of 50 stocks identified as the best long-term investments
- Zacks #1 Rank List – focused on medium-term swing trading opportunities, this is Zacks’ list of current “strong buy” recommendations, the top 5% of stocks, according to Zacks’ analysis and scoring
- Style Score Lists – stock picks categorized into “value”, “growth”, and “momentum” lists
- Industry Rank – identifies the strongest industries and the best performers within each industry
- Best Earnings Surprises – the Zacks Earnings Expected Surprise Prediction (ESP) Filter points out stocks with the highest probability of experiencing a positive earnings surprise
- Zacks #5 Rank List – the opposite of the #1 Rank List, the #5 is a list of stocks most likely to underperform, that represent good short sell opportunities
Price: Zacks Premium is $249/year; the “Investor Collection” option is $495/year and adds several additional lists, including best ETFs and “Stocks under $10”, and eight complete portfolios; Zacks “Ultimate” costs $2,995/year and gives investors access to all of Zacks more than two dozen lists of stocks analyzed using various criteria
7 – Benzinga Pro
Benzinga Pro isn’t really a stock picking service as much as a high-end stock news and research service. Therefore, it’s geared more for “do-it-yourself” stock pickers.
Benzinga’s real-time market news feed is unique. That’s because Benzinga generates its own market news reports, rather than just re-capping reports from websites such as MarketWatch or Yahoo Finance.
Benzinga Pro subscribers have access to Benzinga’s stock screener that can be extensively customized and made to incorporate both fundamental and technical analysis criteria. Other subscriber services include watchlists, swing trade alerts, access to the live news desk chatroom, specific trade ideas, and daily biggest gainers and biggest losers tracking.
A helpful stock research tool provided is Benzinga’s analysts rating newsletter that summarizes the ongoing views of several highly respected market analysts.
The “Options Mentorship” subscription adds the feature of personal mentoring and investing education services provided by Benzinga’s options expert, Nic Chahine.
Price: Benzinga Pro $177/month or $1,404/year (30% discount); Options Mentorship program $347/month – 20% discount for subscribers who pay annually ($3,367)
Finding a good stock picking service is one way that investors can improve their trading profitability and return on investment capital. Stock picking services can save investors time, offer them the benefit of insights and analysis from more experienced investors, and help to ensure that investing decisions are made based on rational criteria rather than on hype or emotional impulse.
There are many different stock picking services to choose from, and they vary widely in terms of factors such as:
- The focus of their stock selection (e.g., short-term vs long-term, value vs growth stocks)
- Their methodology for picking stocks, what technical or fundamental criteria they use
- Amount of risk
- The cost of the service
It’s important to choose a service that not only offers excellent performance, but that also fits your personal investment goals, trading style, and risk tolerance.