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Beware the all-star fool



May 27, 2009 – Comments (11)

Hey, fellow fools - 


This is my first blog post so I apologize if it is iffy. But I feel compelled to comment on something I've been seeing around the site for a while.

In a lot of the stories that I have read from different contributors, all-star members are routinely cited and used as a starting point for making picks, and their reasonings are cited as well. I feel that a word of caution needs to be sent out to all who would dare heed this advice - it can easily be BS. 

My caps score right now is 97ish. I'm in the top 2000 of 66,000. I joined about three or four months ago. And I don't know anything - anything - about stock picking. I came into caps as a test run because I was growing curious about seeing hypotheticals with stuff I picked in the market. But I don't know anything. I don't know what a P/E ratio means (I know low is good!), and I couldn't tell you a quick ratio from a profit margin. Most of my picks were just me running through the screener and finding things that looked nice. A lot of my score was just the ride from the start of march. 

I have seen numerous contributions from very well informed and well presented from members with scores in the 20's, 30's, 40's. They have done more for this site than I ever have or will. All I can advise is that you take everything you read, especially from 'all-star members', with a grain of salt.  

11 Comments – Post Your Own

#1) On May 27, 2009 at 3:50 PM, miteycasey (28.90) wrote:

The advice is worth what you paid for it.

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#2) On May 27, 2009 at 4:05 PM, ChrisGraley (28.52) wrote:

Yep, your better off finding players with the same views and strategy, although an All-Star with the same strategy is usually good.

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#3) On May 27, 2009 at 4:08 PM, BradAllenton (31.77) wrote:

I think anyone who feels that caps somehow relates to real world investing is retarded to begin with, so warning them will make no change in how they view caps scores.  

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#4) On May 27, 2009 at 4:08 PM, RonChapmanJr (30.10) wrote:

Yup, been saying this for years. 

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#5) On May 27, 2009 at 4:36 PM, jstegma (28.50) wrote:

One problem is calling anything 80 or higher an all-star.  It needs to be at least 95 and probably more like 99.5 to be a real all-star, and even that is a far cry from the top 10. 

The scores aren't always a sure indicator of whether the guy knows what he's talking about or not, but if they have 85% accuracy over a thousand picks, you can be fairly sure they have made reasonable predictions in their time on CAPS.  

It is fair to say that there are plenty of "all-stars" that don't know what they're talking about, but I don't think that invalidates the system entirely. 

I guess I don't have a very high opinion of picks made by players with low accuracy scores.  To me that's a clear indication the guy doesn't know what he's talking about.  You can get 50% by flipping a coin.

It's the equivalent of walking in to take a college entrance exam and watching some dipsh*t bust out a penny and start flipping it and filling out his test.  You are unlikely to want to cheat off of him.

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#6) On May 27, 2009 at 4:56 PM, foolsMeThrice (99.30) wrote:

i agree with you.  I don't follow EverydayInvestor.  He tends to red thumb stuff you can't do anything with in real life.  But there is a lot of value in seeing that red thumb even though you can't trade it.  You know to stay away from it as an investor.  And if you have reason to disagree it makes you dig more deeply into your beliefs and research for why you should not follow the crowd.

The heard effect happens even here as it does in any population.  so when a good and trusted player sticks a thumb out others will follow, some blindly.  Thus a decent pick may be trashed for no other reason than the all-star's bias. These cases would maybe produce a two or three star.

What I love seeing on caps are companies that go lower and are unratable for quite sometime but the the star rating goes up anyway because the ranking of the players that picked it gets better.

I believe the system works.  But all systems have flaws. for example TDRH followed floridabuilder for a number of home builder calls.  Just so happened at the end of his stint with caps, he made some bogus calls on purpose.  So you do have to watch out.

I will admit that on caps I simply don't do much due diligence.  I save that for my real portfolio and sometimes even then I don't do as much as I should simply because the information isn't out there.  For my real portfolio I will dig into the financial statements looking for red flags like long term debt rolled into short term, or short term debt that can't be rolled.

A player I like to follow is EldrehadsPicks.

He likes to drill down into the financials and give you a balanced pros/cons kinda approach to reading the statements.   And provides a quick background on the company and the management style.   I look forward to seeing him post again.  But he leaves out of the equation timing in any sense of it.  He also does not take into account the macro economic climate.

Good luck to you.


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#7) On May 27, 2009 at 5:46 PM, Barebonez (81.98) wrote:

I agree with "Toronian" the ranking are somewhat meaningless because  some new people jump in and 'learn on the ropes' and like me have an errant  week or two of bad picks to clear out then have to get back on track AND because, how do we judge a stock by what it did 12 month ago or 2 yrs?

or the last quarter?

SO give the top 100 players a 2008 top 100 charm and a #1 charm

New year a new market a new strategy new volatility

Does a analysis rating from last year or the year before impress anyone, OR is what are they doing NOW that counts???

 If CAPS did that the top people would HAVE to be more active and  caps would  get better for it and more plus the new people would be give new life


and i will also add  that it is NOT a 50% coin flip in a 'bear turn' the underperforms were running 85+%!! 

so instead of the caps rating 5 green being less worth or a 1 red pick going green in this volatility market is serious!!it should carry more weight

any one with the gumption to do that can pick stock ESPECIALLY all 7 days!!

especially for a short seller lol!!!

ALSO I vote for a new Chart format

EDITABLE charts with 'drowl' ALL THE TOOLS!! and where we can over lap them and the top sectors ranking

ok ok just my 2 cents









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#8) On May 27, 2009 at 5:56 PM, ElCid16 (95.14) wrote:

Wait, wait, hold the phones...

CAPS is an investment strategy game?  I just thought we were supposed to be picking letters that would look cool on hats or something.  I better close out my picks while I'm ahead.

Seriously though, All-Stars should definitely be players with a score > 99.0.  My score has been in the 90's for some time now, and I'd be a moron to consider myself a good investor.  My score just reaffirms that CAPS is a place for education and information sharing - not seeking the advice of people who can do well in an free online game.

Disclosure:  Short on investing intelligence.

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#9) On May 27, 2009 at 6:33 PM, Mary953 (84.91) wrote:

Dk, I think it's gonna be fun reading your comments.  When I started, I picked mostly from my own "what would I buy if I had the money" list and my score went up.  I chose extra stocks based on the "fools bullish on this like...." or TMF newsletters. 

With nothing to weight me down, my score zipped up to 98-99% Then I started trying to win at the system.  Fundamental Analysis? Nope, makes money, but not points.  Tech Analysis? Nope, CAPS doesn't work for short term.  Besides, the chat room is so much fun, I forgot to watch the market.  My CAPS score is still dropping.

The only thing I know for sure is, when they put anything about all-stars up there, I squirmed.  I wouldn't listen to my stock advice.  I throw it out there for CAPS as a whole. 

The people who answer are the ones ready to put an opinion with their name on it in front of the rest of this group.  That is one tough crowd.  Those are the ones I listen to - and I don't even know what their scores are. 

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#10) On May 27, 2009 at 6:35 PM, Mary953 (84.91) wrote:

Toronian - I am putting up another blog of posts with information for new members soon.  Someone should have said this a LOOOOOOONG time ago.  This blog is going on it!

Thanks, M

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#11) On May 27, 2009 at 6:55 PM, Gtrinvestor (95.38) wrote:

Personally, I think CAPS is a flawed system where people who make wholesale industry best, or rate only completely bogus small cap companies generally hit the top few spots. 

That being said, I still think CAPS has merit.  Why?  Because before I invest in one of the smallish to medium entities, I think CAPS commentary can add a lot of insight or perspective I may not have thought about.  I generally look for people's insight that have high percentage ratings and have real insight.  I then re-research what they have said to see if I agree. 

Is the system perfect... no.  Have there been about 850 posts in CAPS about what is flawed about the system (at least 8 from me personally)... yes.  But at least I would rather read a rec from someone with a high CAPS score, than some stupid message out on the Yahoo message board with nothing to back them up.  I also ignore people with ratings < 50, b/c they either have no history or some incredibly bad luck. 

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