All-Star Inside Pitch: With JTODD04
James Todd calls himself a rookie investor. James Todd, however, is also the fifth-best investor in Motley Fool CAPS. That's better than Bill Mann, Goldman Sachs, and even someone named TMFMmbop. Yes, JTODD04 is rated 99.98.
So how does James do that voodoo that he do?
According to James, it's easy. "A couple of times per week, I'll take a few minutes to review the score leaders and their biggest losers. If I agree with the direction, I'll jump in." And that tack has worked quite well, propelling James to more than 800 points and 70% accuracy. "I laugh with a friend about being as accurate as his fancy technical analysis software. I have some of the best minds working with me on ideas and timing. And did I mention it's free?"
James has figured out one way to use CAPS as a powerful research tool. See, as master investor Benjamin Graham observed decades ago, the stock market, in the short term, is a popularity contest. Even compelling buys can drop after you've bought them. While these drops are painful, they also give confident investors the opportunity to buy more shares at lower cost.
By tracking some smart investors and picking up their picks that are down, James has found a powerful way to scoop smart stock pickers on price. Take OYO Geospace (Nasdaq: OYOG, Rated: 89.58), for example. A five-star stock, James noticed that a number of the investors he watches rated in outperform at more than $60 per share. When it dropped to $55, James read the pitches, liked what he saw, and swooped in. OYO Geospace is up about 20% since.
It's a simply three step formula that even novice investors can use to profit from CAPS:
1. Find some expert investors to track.
2. See what they're willing to pay for a stock.
3. Pay less.
Give the strategy a shot. While you can start by experimenting in your CAPS portfolio, you'll only make money by actively investing in the picks. As James laments, "I love that CAPS gives me a real record of the decisions I've made. I only wish I had some real money in this portfolio."
Tim's note: I had a great time contacting James and learning about how he uses CAPS. If folks find this sort of profile interesting, let me know and I'll keep posting them to my blog. Also, I think CAPS users might find it helpful to start scooping James on price. It's another layer of due diligence you don't have to do yourself.