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Capital One: Two-Faced or a Single Coin?

July 20, 2007 – Comments (0)

The market doesn't know what to make of Capital One. Is it a high-growth, high-risk, low-yield lender, or a low-growth, low-risk branch bank that should be offering a high yield? The answer is simultaneously both and neither, yet it's hybrid identity has the market pricing it as the worst of all possible financial institutions - expecting low-growth, high-risk, and low-yield. While it is certainly a low-yield stock, that's because Capital One has consistently been able to get higher returns on investment than it would through returning money via a dividend. (I would argue that at current prices, buybacks are a better use of any uninvested cash flow than dividends.) Ever since it got into trouble with regulators a few years ago for underfunding its loss reserves, it has been carefully increasing those reserves and also focusing on increasing credit quality. Coupled with the bank acquistions, the company is now lower-risk than ever, and yet it continues to exhibit nice growth rates.   [more]



CAPS5StarIndex and CAPS1StarIndex: The meaning of their anti-correlated relationship?

June 01, 2007 – Comments (1)

The CAPS5StarIndex and CAPS1StarIndex have been "live" for the last 7 months, since November 1, 2006.  Although this is certainly too brief a time to definitively judge their performance, both indices are doing quite well so far. The CAPS5StarIndex had, as of market close on May 31, a cumulative score of +1491.01 and an average score per pick of +2.63. In the same vein, the CAPS1StarIndex had a cumulative score of +1616.56 and an average score per pick of +4.24. That's fairly substantial outperformance of the market on both counts, and as I discuss in their respective blogs, only a fraction of this performance is accounted for by ended picks, meaning that the active picks continue to rack up outperformance.   [more]



No More Mister Nice Guy: My First Red Thumb

April 09, 2007 – Comments (2)

I just gave up my "Yes-Man" charm by calling underperform on my first stock since joining CAPS. Personally, I wish that charm wasn't quite so strict, perhaps indicating individuals who "primarily" (by some measure that we could debate) call outperform. So why a red thumb from me now? Have I discovered some insanely over-valued stock or a scam of a company that is sure to plummet toward bankrupcy? Have I uncovered the next great short opportunity?  Not in the least.  [more]



Always Cut Your Losses!?

January 25, 2007 – Comments (2)

I came across this article today:   [more]



My Favorite CAPS Picks

December 15, 2006 – Comments (3)

I don't have nearly as many CAPS picks as some other players - I've only made 18 picks since I started back at the end of August 2006. That's only about 5 picks/month. With so few picks, each one is a call I've thought about, committed to, and ultimately believe in. Yet, I can look back and easily pick out a few calls as being my favorites of them all. The three picks I would name as my favorites (COF, LUK, and FUN) share many common traits. They were all made on the same day (8/31/06), making them my first 3 picks, and they are all losing to the market. That's right, the stock calls I would name as my favorites are not my timely calls on EBAY or CRYP, or my steady gainer AB, but are net losers so far. Why do I love these stocks and my CAPS calls on them?  [more]

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