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1Motley Fool Champion Shares PRO

Real-Money Trades | Real Portfolio Insight | For Real UK Investors

New-member Prospectus – Spring 2015

SCPRO_Borchure.indd 1 3/10/15 3:07 PM

Motley Fool Champion Shares PRO2

Your quest for high-probability returns begins here—

join us as we take stock-tipping to the next level...

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Motley Fool Champion Shares PROMotley Fool Champion Shares PRO 3

Dear Fellow Investor,Welcome to your personal guide to the Motley Fool’s Champion Shares PRO — the premium share-tipping service where each and every recommendation is backed up with real money…

In a real investment portfolio…

Managed alongside a real investing community, composed of members just like you.

To my mind, this service stands out as the single most valuable financial resource that the everyday UK investor can have at their disposal.

But please, don’t take my word for it.

In the pages ahead, you’ll find a comprehensive breakdown of absolutely everything that PRO has to offer, including:

• Our unique investment principles and process, which have resulted in the PRO portfolio’s robust double-digit market outperformance at the time of writing.1

• The exclusive benefits of membership, such as real-time trade alerts and clear, easy-to-understand allocation advice

• What current members have to say about their PRO experiences (and why they feel they’re getting “great value” out of their annual subscription)

• And much more…

I urge you to take a look, and to take time now and consider whether “going PRO” may be right decision for you.

Because there may not be “sure things” in the stock market…

But when we open our doors on Monday morning — 23rd March, I can guarantee they won’t stay that way for very long.

To your wealth,

Nathan Parmelee, Lead Portfolio Advisor, Motley Fool Champion Shares PRO

A Special Message from Nathan Parmelee, Lead Portfolio Advisor of Champion Shares PRO

Nathan Parmelee, Lead Portfolio Advisor

P.S. And remember, your receipt of this correspondence means you have been personally selected to enjoy a 24 hour “head start” on locking in a PRO Premiere membership. This program represents some of the most attractive terms of membership we’ve ever offered—in fact, the value is so great that we must insist the number of seats available remain STRICTLY CAPPED at 300.

In other words, fewer than 4% of investors who’ve expressed interest in joining PRO next week will be able claim a seat!

So if you’d like to get in while space is still ample—or before it runs out altogether—be sure to check your inbox first thing Monday morning.1 Since Nathan Parmelee and team took over the Motley Fool Champion Shares PRO portfolio at market close on 31/05/2011, the service has delivered an overall return of 47.74%. The FTSE All-Share Total Return index has delivered an overall return of 36.39%. Returns are calculated using a time-weighted rate of return (TTWR) methodology that includes dividends reinvested and trading costs. Returns are measured from 31/05/2011 to 28/02/2015. A number of portfolio transactions have been made during this period. Sources: Pricing data from IDC (end of market day values). Transaction costs from The Motley Fool Share Dealing Service.



Here at Champion Shares PRO, our mission is simple:

We strive to identify the absolute highest potential investment opportunities the market has to offer…and to alert our members the moment we do.

Our success thus far—and the even great successes we expect to achieve going forward—is rooted in both principle and process.

On principle, we believe that…

How Do We Invest?The PRO Process

Research AnalysisPortfolio

Management

Initial Research & Estimate of Intrinsic Value

Team Idea Review and Approval

Identify Potential Catalysts

Refine Estimate of Intrinsic Value

Assess Risks & Opportunities

Fundamental Research

Determine Initial Position Size

Articulate Thesis and Sell Strategy

Add to Portfolio

Monitor & Update

Sell or Add based on Valuation and

Risk/Reward

The same currents of greed and fear that cost in-vestors BILLIONS per year are often trail markers on the path to profit

Investors are hit with a barrage of headlines sending them on an emotional roller coaster that can lead to buy-ing high and selling low. We look to use swings in mar-ket sentiment to our advantage and have the experience to assess when it can make sense to ride out a period of bad news and also when to sell companies entering long-term, secular declines.

Potential losers can be identified—and avoided

Companies can be losing investments because of poor management, too much competition, secular chang-es in their industry, or simply because they’re overval-ued. We look to avoid companies that possess these warning signs.

In an ever-volatile market, vigilance is the inves-tor’s best weapon

Economic dislocation, tax uncertainty, and unprecedent-ed monetary and fiscal stimulus make for a fragile market prone to extreme swings — one we think is ideally suited to a business-focused strategy like the one at PRO.

These principles are what bring stocks onto our radar. And the vetting process that follows is what brings our highest-conviction ideas to everyday UK investors like you:



7 Ways We Aim to Make YOU MoneyAs we look ahead to our sixth year of PRO investing, we remain convinced that when it comes to beating the market, the smartest approach is a ‘Foolish’ one.

Make asymmetric bets

• We believe in allocating more capital to our best ideas.

Think like owners (even if we end up being renters)

• We take a long-term outlook, even if our actions turn out to be short-term.

Appraise value skillfully, not just quantitatively

• We approach each position in a manner that fits the unique circumstances of its particular business.

Take risk seriously

• We will strive to avoid losses. It’s the first step to successful long-term, portfolio growth.

Maintain portfolio boundaries & manage risk

• We maintain sizing limits for individual positions and sectors, and manage our overall exposure to different countries.

Be rationally opportunistic

• We aim to be wholly rational in how we size up the market’s opportunities and risks, then act decisively.

Embrace intelligent speculation

• We won’t shy away from rare, fleeting opportunities that don’t allow for comprehensive research. However, in these instances, our initial position will always be conservatively sized.



We aim to achieve this goal by investing in great businesses at good prices, uncovering exciting turnaround stories and zooming in on temporary ‘mispricings’.

We favour companies with…

• Recurring revenues and consistent cash flows protected by durable competitive advantages over competitors.

• Strong balance sheets (we avoid companies with excessive debt loads).

• Shareholder-friendly management. We like to see management incentives aligned with shareholders and a track record of returning value to shareholders.

We focus on valuation

• We target investments with a potential annual return of at least 15%.

• Larger positions will typically feature potential gains of 25% or more.

• We continually assess the intrinsic value of our shares and are committed to reducing or eliminating positions when they exceed our valua-tion estimates.

We’re rigorous about trying to protect our capital — and yours — from permanent loss

• We reduce our exposure when markets are euphoric and add positions when pessimistic.

• We resize positions when our outlook on risk/reward changes.

To meet our goal of capturing high probability returns we use our valuation criteria and qualitative factors to allocate capital to four strategies we believe have the best chance of providing market-beating returns.

What Does a PRO Investment Look Like?Our goal is simple: capture high-probability returns



PRO Investment Case Study: Smith & NephewExiting our position and locking in gains

Smith & Nephew (LSE: SN) is a leading global manufacturer of medical devices used for major joint replacement and chronic wound management. Read on to see why it caught the attention of our PRO team…

And how their measured, long-term approach to investing enabled them to actively manage portfolio risk and lock in staggered gains of 34% and 85% over a multi-year timeframe.

In February 2011 Smith & Nephew’s CEO of four years retired to be replaced by Olivier Bohuon.

While Bohuon had a strong career in the phar-maceutical industry before coming to Smith & Nephew, there is some uncertainty about his transition to the role and his stated plan for acquisitions.

We’ve been looking at Smith & Nephew as a way to play the global trends of a rapidly aging population, rising wealth, and the pursuit of a higher quality of life in old age, so are interest-ed to see how Bohuon steps into his new role.

20th September 2011 — We publish a short re-port adding Smith & Nephew to our Watch List with the shares at 594p.

22nd November 2011 — We publish our buy re-port and recommend buying shares of Smith & Nephew at prices below 575p.

24th November 2011 — PRO purchases shares at 556p.

Smith & Nephew’s third quarter results disap-pointed the market because of weakening oper-ating margins.

While maintaining profitability is important to Smith & Nephew’s success – and our invest-ment thesis – management had reasonable ex-planations for the short-term weakness.

We were happy to take advantage of the market negativity to start a position in Smith & Nephew with a cautious eye on those margins and man-agement’s acquisition strategy.

15th April 2013 — PRO sells part of its stake at 747p. With the shares up 34%, a full 10% above our valuation estimate, and representing 5% of the portfolio we decided to sell 40% of our po-sition to reduce our exposure and manage risk within the portfolio. As a well positioned medi-cal device firm we’re comfortable to maintain a 3% position.

25th September 2014 — We announce that PRO will sell its remaining stake in Smith & Nephew.

We estimate Smith & Nephew shares are pricing in optimistic growth assumptions for the next five years and what we believe is a buyout pre-mium driven by recent speculation. We’re scep-tical an offer will come forward, and used the lofty valuation to exit our position to lock in an 85% gain beating the market by 40%.

This example is intended as an illustration of our process, and is not necessarily a fair representation of the outcome achieved. All returns quoted above include dealing costs but exclude dividends. Pricing Data from IDC.

Due Diligence Decision To Buy Decision To Sell



What Do Real PRO Members Have to Say?

What, for you, has been the most valuable part of Champion Shares PRO?

“What I’ve learned about the markets, how they work, how to trade, how NOT to trade, what mistakes to make, how to avoid those mistakes—all that kind of thing. It’s vital for someone who’s contemplating going into investing.”

How would you describe the quality of insight that the PRO team provides—and do you feel that insight saves you time, as an investor?

“When you read a PRO recommendation, you immediately understand someone’s put in a lot of work, a lot of background effort…someone’s gone to a lot of trouble to research. And that in itself—I have tried it—it’s a full-time job, and I haven’t got time for it.”

So for you personally, is PRO worth the money?

“On that basis alone, it’s worth the money.

But at the same time, there’s the added bonus of the knowledge that I’m gaining. Which… has enabled me to learn so much, to actually research, and find, and invest in, my own recommendations.”

Would you recommend Champion Shares PRO to a friend?

“I have recommended it to friends in the past…and I would do it again tomorrow!”

Clive’s been investing like a PRO since 2009

“Because of Champion Shares PRO, I no longer have to guess. It’s taken the guesswork out of my investment choices, and…I feel I’ve got someone with me, far more knowledgeable than I, help-ing me along the road.”

–Clive Foreman, Southampton



Meet the PRO Investor TeamFrom small-cap fashion brands to international mining plays, our analysts leave no stone unturned in their quest for the BEST opportunities the market has to offer…

Nathan joined the Fool as an analyst 2004, and has served as the Lead Portfolio Advisor of Champion Shares PRO since 31st May 2011. Perhaps you already know Nathan from our Motley Fool Share Advisor newsletter service, where he’s been a co-advisor since February 2012.

Prior to joining the Fool, Nathan worked for a well-regarded industrial and financial services company (including a 3-year posting to Japan and 7-months in the Netherlands), where he learned the intricacies of corporate acquisitions. His BBA in Accounting and Information Systems from the University of Massachusetts Amherst served him well in that field — but not nearly as well as it has since he started donning a Fool’s cap.

Under his direction, the PRO portfolio has delivered returns of 47.7% — besting the broader market by over 11%.1 Pressed to boast about his most impressive PRO investment thus far, Nathan flatly states:

“I don’t think we’ve found it yet… we’ve found a number of winners in the past, but I think the best is yet to come.”

1 Since Nathan Parmelee and team took over the Motley Fool Champion Shares PRO portfolio at market close on 31/05/2011, the service has delivered an overall return of 47.74%. The FTSE All-Share Total Return index has delivered an overall return of 36.39%. Returns are calculated using a time-weighted rate of return (TTWR) methodology that includes dividends reinvested and trading costs. Returns are measured from 31/05/2011 to 28/02/2015. A number of portfolio transactions have been made during this period. Sources: Pricing data from IDC (end of market day values). Transaction costs from The Motley Fool Share Dealing Service.

Nathan Parmelee, Lead Portfolio Advisor



Michael Olsen, CFA, Portfolio Co-Advisor

Mark Rogers, Research Analyst

Zach Coffell, Research Analyst

Michael Olsen is a dyed-in-the-wool proponent of buying cheap. His previous work at the Fool includes research positions on multiple US re-al-money portfolio services, in which he accu-mulated extensive experience in analysing com-panies, digging deep into company filings, and running data-based quantitative valuations.

Michael graduated from the University of Rich-mond with a degree in business administra-tion with a finance concentration. He holds a CFA charter.

Mark Rogers is a member of the Fool’s global equities research team, specialising in small and mid-cap UK companies.

Having grown up around a family firm, Mark views stocks as long-term business commitments. He credits Warren Buffett and Ben Graham’s Security Analysis for his old-fashioned investment values, and has studied the 20-year record of the entire list of LSE stocks. He has a degree in Economics, and holds the CFA UK Level 4 Certificate in Invest-ment Management

Zach’s investment career began on his 20th birthday when his father gave him a copy of The Intelligent Investor, by Benjamin Graham—and the Fool.co.uk website address.

Graham’s value-investing text was formative in Zach’s investment career, and the principle of maintaining a margin of safety is key to his in-vestment philosophy. He is the newest analyst on the Champion Shares PRO team.



As a member of Champion Shares PRO, you can expect…

• A stream of our highest-conviction stock recommendations, sourced directly from portfolio manag-er Nathan Parmelee and his team as they invest £100,000 of The Motley Fool’s own money in a live real-money portfolio.

• Confidence in knowing EVERY stock recommendation that Nathan and his team make is purchased in cold, hard cash and then tracked on the PRO portfolio scorecard – not only does this demonstrate our convic tion in the companies we’re recommending to you, but it can also help you determine how big a position to take yourself.

• The freedom to mirror all of our trades exactly, or to just cherry-pick from our recommendations à la carte – PRO’s real-money portfolio provides a constant reference point that’s there to help you make smart in vestment choices.

• 100% assurance that our analysts’ buy, hold and sell alerts are issued to members in ‘real-time’. That means there’s no fixed monthly schedule. Put simply, when the best new investment opportunities pres-ent them selves, or if the investment thesis of a company we’ve recommended has started to unravel, you’ll hear from us right away about the action you need to take.

• The opportunity to buy and sell shares before we do. When the service announces its intention to buy or sell a share, it then executes that trade at least 24 hours afterwards. This means PRO buys and sells at prices similar to those that you can achieve.

• A ‘business-focused’ investing philosophy that’s not constrained by conventions such as company size, market capitalisation, geographical borders, or business style.

• The most comprehensive (and most exclusive) service the Motley Fool has EVER offered to UK investors.

How PRO Works

EmergingGrowth<15%

Special Situations

<20%

Small Caps 20% - 40%

Core>40%

PRO’s 4 Investing Strategies



“I already enjoy Share Advisor… why should I go PRO?”Understanding the PRO difference:

At PRO, we aren’t just recommending shares – we’re assembling a real-money portfolio for you to follow along with in real time.

So while Share Advisor identifies shares on a monthly basis for members to pick and choose from,

PRO is for investors who are ready for a more active, opportunistic and all-encompassing approach to the stock market.

How our services compare – by feature: Champion Shares PRO Share Advisor

Carefully researched share recommendations Real-time (no fixed schedule) 2 per month

Ongoing coverage for all recommendations with clear ‘buy-hold-and-sell’ advice

Guidance on how much of each recommendation to buy

All recommendations backed by a real-money portfolio of the Motley Fool’s own cash

Lively community discussion boards with access to Motley Fool analysts

Regular international investment opportunities

Turnarounds, special situation and small-cap investment

Company visits, management interviews, and a watch list of shares



We’re looking for qualified investors, with ambitious financial goals…

With a modest amount of capital on hand… so they can make PRO work for them

Is Champion Shares PRO Right for You?

Our flagship Share Advisor newsletter highlights what we consider are two great investment ideas each month— and we’re proud of the opportunities it provides thousands of everyday UK investors.

But we aren’t so proud as to ignore the fact that for a select set of particularly ambitious, goal-oriented, or just plain busy investors, the need for financial advice extends beyond idea generation…

And on to more comprehensive, hands-on guidance on critical investment decisions, like:

• How to assemble stocks into an actual portfolio…

• How much money to allocate to each of your holdings…

• How to tailor a portfolio over time or to certain market conditions…

That’s exactly why we developed Champion Shares PRO.

We believe you can successfully follow PRO with as little as £5,000 – £10,000 of cash that you’re ready to put to work.

So rest assured: you do NOT need £100,000 to match PRO‘s portfolio – we’ll help you size your positions according to how much money you’ve got.



Frequently Asked Questions

What shares does PRO cover? Do you include AIM shares?Yes. At PRO we go where the opportunities are and don’t limit ourselves – and our potential returns – by things like size or market. We don’t play favourites – we like companies big and small, loved and unloved, followed and hidden. And while we do think there’s a lot to like about UK shares, we aren’t afraid to look internationally for other money-making opportunities.

While the majority of our holdings are UK-listed for the financial convenience of our members, we’re always thinking about business on a global level, and PRO holdings tend to have significant potential to prosper internationally.

Does Champion Shares PRO make investments on my behalf?At PRO, we do everything we can to help you build your own winning portfolio … stopping just short of logging into your broker account and actually making the trades for you!

That means we’ll tell you exactly what to buy and when, and how much to put into each investment – giving you the detailed investing information you need to place your own trade through your own broker.

You’ll also have access to our premium PRO forums where our team and your fellow members can answer any questions you have during the process.

Can your investments be held in a stocks & shares ISA?Yes, in fact all of the investments we currently have in the PRO portfolio should be eligible for inclusion in a stocks & shares ISA, as they are listed either on the London Stock Exchange (either the main market or AIM), the New York Stock Exchange or NASDAQ. There is a small chance that we may recommend a share in future that isn’t eligible to be put in an ISA, in which case we would endeavour to notify you when making the initial recommendation.



Got Questions?Email us at: [email protected]

At The Motley Fool, we believe that successful investing isn’t always as much about having all the right answers as it is about asking all the right questions.

That’s why we want to make it possible for you to ask Nathan Parmelee and his analyst team any questions you might have about the Motley Fool Champion Shares PRO service and this new-member reopening.

While we can’t promise they’ll be able to answer every single question, Nathan and his team will do their utmost to answer the most important and recurring questions. And they will post their answers right here for you to see.

So please check back often, and in the meantime, don’t hesitate to send any questions you may have to [email protected]

On Monday 23rd March, Champion Shares PRO will briefly open its doors to new members…

Don’t miss out… watch your inbox for your Priority Invitation to join us!

Please be aware that for regulatory reasons, the team cannot give personal advice on individual shares.


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Risk Warning

• The prices of all shares, and the income from them, can fall as well as rise.

• You run an extra risk of losing money when you buy shares in certain smaller companies including “penny shares”.

• There is a big difference between the buying price and the selling price of these shares. If you have to sell them immediately, you may get back much less than you paid for them. The price may change quickly, it may go down as well as up and you may not get back the full amount invested. It may be difficult to sell or realise the investment.

• You should not speculate using money you cannot afford to lose, or rely on dividend income for non-discretionary living expenses.

• Some securities may be traded in currencies other than sterling, and may also pay dividends in other currencies. Changes in rates of exchange may have an adverse effect on the value of these investments in sterling terms. You should also consult your stockbro-ker about any additional dealing or administrative charges.

• We have taken all reasonable care to ensure that all statements of fact and opinion contained in this publication are fair and accu-rate in all material aspects.

• Investors should seek appropriate professional advice from their stockbroker or other adviser if any points are unclear.

• This newsletter gives general advice only, and the investments mentioned may not necessarily be suitable for any individual.

For all queries please email [email protected] or call us on 0207 462 4300 (we’re open Mon-Fri, 9am-5pm).

Authorised by The McHattie Group, St Brandon’s House, 29 Great George Street, Bristol, BS1 5QT. Tel: 01179 200 070. Email: [email protected]. The McHattie Group is authorised and regulated by the Financial Conduct Authority, and offers restricted advice on certain types of investment only.

Details of what subscribers may and may not do with the content of the Champion Shares PRO service are stated in the Terms and Conditions. http://www.fool.co.uk/help/terms-and-conditions/

Designated trademarks and brands are the property of their respective owners. The Motley Fool and the Jester logo are registered trademarks of The Motley Fool Holdings, Inc. ©1998-2015, The Motley Fool Limited.


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