Alpha Picks Review: Is It Worth It?

I've been a member of Seeking Alpha Premium for the last five years.

Seeking Alpha is one of my favorite places to conduct high-quality investment research. I use the site often, both for checking up on my current portfolio and for finding new investment ideas.

So I was excited when they launched their stock-picking newsletter, Alpha Picks.

After being a member of Alpha Picks for a year, I'm ready to share my experience with the service, how it works, and what else is included in the membership.

And since the main point of subscribing to any stock recommendation service is to get winning stock picks, I'm going to share the exact returns of every stock Alpha Picks has recommended since its launch.

If you're wondering whether Alpha Picks is worth it, what you really want to know is if its stock picks justify the subscription cost — does it actually generate alpha?

Based on its current performance, yes.

Alpha Picks review summary

• Overall rating:
• Service type: Stock-picking newsletter
• Best for: Medium- to long-term investors
• Cost: $199/year (new members can get their first year for $99 through our link)
  

Alpha Picks is a stock recommendation service driven by a “proprietary, data-driven computer scoring system.” In other words, quantitative analysis (more on this below).

In the ~18 months since its launch, the service has generated returns about 2.5x higher than the S&P 500 (27.51% vs 11.47%).

• Average return: 27.51%
• Max return: 210.49%
• Percent winners: 64%

Ultimately, whether Alpha Picks is worth it or not depends almost entirely on the results of their stock picks.

While it's still a relatively new service and I want to continue collecting data before drawing definitive conclusions, it has performed very well so far.

Disclaimer: All performance figures listed herein are as of the date of writing, December 7, 2023. Past performance is not indicative of future results.

What is Alpha Picks?

Seeking Alpha, the company behind Alpha Picks, was founded in 2004 with the goal of providing diverse, high-quality investment research to retail investors.

The core of Seeking Alpha is its crowdsourced content — more than 18,000 contributors produce 7,000+ articles per month with stock reports, investment ideas, and more.

Additionally, Seeking Alpha has fundamental data, charts, analyst ratings, and a number of quantitative tools like Factor Grades, Dividend Grades, and its proprietary Quant Rankings.

Free users have limited access to certain features and a handful of research reports each month, but a Seeking Alpha Premium subscription unlocks everything the site has to offer. For more on this, check out my full Seeking Alpha Review.

For investors who don't have the time or inclination to dig through thousands of pages of data and analysis, the company launched Alpha Picks — a stock recommendation service that provides two stock picks per month.

The idea for Alpha Picks was simple: take some of the research on the site and transform it into an easy, actionable product.

Thus, seeking Alpha's stock-picking service was born.

Alpha Picks' performance and returns

Since subscribing to Alpha Picks, I've been reading each new stock pick report and meticulously tracking the performance of every recommendation.

I'm a long-term, fundamental- and qualitative-based investor, so I was initially skeptical about Alpha Picks' quantitative-focused strategy.

Alpha Picks' stock reports are heavily focused on momentum, factor grades, growth rates, revisions, and other data. This is a different approach than I take when evaluating investments.

But that's all a matter of personal preference. There's more than one way to invest.

And, as of right now, the results are pretty undeniable.

Alpha Picks' performance (as of December 2023)

Here's a summary of how Alpha Picks' stock recommendations have performed since the service's launch in July 2022:

View this sheet

• Average return: 2.4x the S&P 500 (27.51% vs 11.47%)
• Max return: 210.49% (SMCI, selected 11/15/22)
• Percent winners: 64% (25/39)

A few things stand out to me about the results from Alpha Picks so far.

1. Where the outperformance has come from

Alpha Picks is specifically targeting stocks with the potential to make huge moves.

By picking a few of these big winners correctly, the underlying portfolio is dragged substantially higher.

If you had purchased the S&P 500 on every day Alpha Picks made a new stock recommendation, you would be up on 38/39 of those investments, a 97% win rate.

Still, despite a win rate of just 64%, Alpha Picks is outperforming by nearly 2.5x due to a handful of big winners. This is because four of the service's stocks have gained more than 100%, and two of those have gained more than 200%.

This is exactly in line with the objective of the Alpha Picks investment approach.

2. 2022 picks vs 2023 picks

The stocks selected in 2022 have an average return of 52.20% (and 75% are winners) — more than 3x higher than the S&P 500 — while the stocks selected in 2023 are essentially even with the market (and 57% are winners).

Do the picks need time to “mature” before outperforming? Possibly, but it's hard to say.

The service is still too new to say whether this is a fluke or expected behavior. Still, I've noticed similar results in other services (like Motley Fool's Stock Advisor), so this may be something to keep an eye on.

3. Closed positions/holding period

The Alpha Picks team has closed seven positions, one of which was acquired by another company (so the team had to sell it).

I don't see anything particularly noteworthy about the win rate or returns of the closed positions, but the team has closed 7/15 positions purchased more than one year ago.

This holding period is in line with what I would expect from a momentum-based service, and is likely to be a bit shorter than the two years the service claims in its presentation.

That said, there still isn't enough data for me to be confident this trend will continue, so for now it's just something to keep in mind.

How does Alpha Picks work?

Unlike most of its competitors, Alpha Picks is very transparent about its portfolio process, stock selection criteria, and who makes up its management team.

1. Quantitative analysis

At the heart of Alpha Picks is its quantitative analysis, and the main component of this analysis is Seeking Alpha's Quant Ratings.

Since 2010, the Quant Ratings model has delivered impressive results when backtested:

The system ranks stocks based on five factors: value, growth, profitability, EPS revisions, and momentum.

Quant Ratings serve as the foundation for the Alpha Picks stock-selection process.

Notably, Seeking Alpha acquired quant analytics platform CressCap Investment Research in December 2018.

Steven Cress, its founder and CEO, joined Seeking Alpha as Head of Quant Strategies, and is now the leading team member of Alpha Picks.

Note: Seeking Alpha Premium users can also access Quant Ratings.

2. Investment criteria

Buy criteria

From the Quant Ratings, the Alpha Picks team selects two “Strong Buy” rated stocks each month. At the time of publication, each pick must meet the following criteria:

• Have a “Strong Buy” quant rating for at least 75 consecutive days
• Be a U.S. common stock (i.e., no ADRs)
• Not be a REIT
• Have a 3-month average market capitalization greater than $500M
• Have a stock price greater than $10
• Have not been recommended in the past year

Sell criteria

Alpha Picks notifies its members when it's time to close or reduce a position in the portfolio. They sell the entire position if any of the following occur:

• The quant rating falls to “Sell” or “Strong Sell”
• The quant rating falls to “Hold” and remains at “Hold” for 180 consecutive days, as long as the stock is not a “winner” (see below)
• The company is acquired or it announces a merger of equals

Letting winners run

The team's research shows that portfolios perform better when letting winners run.

A stock is a “winner” when it doubles from the price at which it was purchased.

For winners, if the rating on the stock falls to “Hold” and remains there for 180 consecutive days, the team will only sell the initial investment in the stock, keeping the remainder of the position in the portfolio.

The team only eliminates positions in winners entirely if the rating falls to “Sell” or “Strong Sell,” or if the company is acquired or announces a merger of equals.

3. Investment team

In addition to its best-in-class data, analytical tools, and proprietary models, Alpha Picks' investment team always makes the final buy/sell/hold decisions.

In this way, the service describes its investing approach as “quantamental,” combining both quantitative and fundamental analysis.

The Alpha Picks team is composed of three primary members:

• Steve Cress: Head of Quantitative Strategies
• Zachary Marx, CFA: Senior Quantitative Strategist
• Joel Hancock: Senior Director of Product

4. Portfolio process

The Alpha Picks team offers three potential strategies its members can deploy:

1. Buy at least 5 “Strong Buy” rated Alpha Picks from the existing portfolio.
2. Buy the entire portfolio using the allocations in the “Portfolio” tab.
3. Use Alpha Picks as an idea-generation tool. Read the analysis of each pick, and choose the stocks that suit your strategy.
   

Unlike most of its competitors' services, the Alpha Picks team does not buy equal weights of each stock it recommends, though the vast majority of its picks receive a 2–3% allocation.

Given the distribution of returns in Alpha Picks so far, buying every stock that the service recommends provides the best chance of capturing the few stocks that drive most of the outperformance.

How much does Alpha Picks cost?

Alpha Picks costs $199/year and includes 24 stock picks each year (two per month), stock analysis reports, portfolio commentary, and performance updates.

New members can get their first year of Alpha Picks for $99 (50% off) through our link.

Keep in mind that Seeking Alpha does not currently offer a free trial or a refund policy for Alpha Picks.

That said, I have had good experiences with their customer support in the past — you might be able to talk them into a refund if you have a good reason.

What else is included with Alpha Picks?

After subscribing, you'll be added to the Alpha Picks investing group.

The group comes with four tabs:

1. Analysis: The Analysis tab (pictured above) shows each of the investment reports and performance summaries in chronological order, as well as the portfolio's total return.
2. Portfolio: The Portfolio tab shows the return of each pick, the sectors the stocks are in, their ratings, and the holding percentage.
3. Performance: The Performance tab shows the up-to-date total portfolio return and the return data of all the service's picks, which days they were selected, and how they're performing compared to the S&P 500.
4. About: The About tab discusses the investing strategy, portfolio process, and strategy characteristics, plus provides some background information on the team.
   

I wouldn't be surprised if Seeking Alpha added more features to the service over time (especially educational and community features), but it's focused on one thing right now: delivering high-quality stock picks.

Alpha Picks pro and con summary

Alpha Picks vs Motley Fool, Zacks, and The Barbell Investor

Here's how Alpha Picks compares to a few competitors:

You can read more about each of these services in my article on the best investing newsletters.

Final verdict

This Alpha Picks review really comes down to a few key things:

• The service is outperforming by a factor of 2.4x. Past performance does not guarantee future results, but this is a very strong start for the Alpha Picks team.
• The service is $99 for new members. To make it worth it, you should preferably have a few thousand dollars to invest.
• The service is new. While the results have been great so far, I would like to see a few more years of outperformance, especially in different market conditions, before I can say anything definitive about the investment approach.
  

The bottom line with any stock-picking service is whether or not it can consistently deliver outperformance. While it's early, Alpha Picks has been doing exactly what it advertises: generating alpha.