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reddingrunner (92.04)

CAPS losers



November 21, 2012 – Comments (5) | RELATED TICKERS: VTI

Because of the scoring rules of CAPS, I treat this portfolio a little differently, I'm sure you do too.  The one aspect I hadn't really figured out was what to do with my big losers?  hold or delete?  once you delete them, they count as losers forever so there's an argument to just hold on to them and hope they come back some day, especially if you still think they will outperform in the future.  

But I am now instituting the same 30% rule I use with real life losers- once you've lost 30%, I sell you.  If I still believe in you I'll move you to a watch list and buy you again when you start to show a little positive mo.   Especially in CAPS.  If you keep a 50% CAPS loser, it has to outperform by 55% to become a winner- a very tall order indeed.  But if you sell it, and rebuy it when it starts to tick up, all you need is 5% outperform and you now are back to neutral in at least one aspect of the scoring- the stock has given you one win and one loss.  Of course I would keep it and ride it for awhile, I expect stocks I pick to win big.  But if it fizzled after a small gain, I could at least score a quick win before giving up on it for good.

This makes good sense, right? 

5 Comments – Post Your Own

#1) On November 21, 2012 at 2:19 AM, zzlangerhans (99.57) wrote:

If you keep a 50% CAPS loser, it has to outperform by 110% to become a winner. Then you have a positive accuracy point and a score of 5 points. If you terminate the pick and green thumb again and it regains the original start price, then you have 110 score points, one positive accuracy point, one negative accuracy point. The second choice is better, as long as your initial investing thesis was correct. If you were wrong and the stock gets cut in half again, you would have been better off sticking with your original crappy pick.

Of course, since it is now crystal clear except to newbies that scores are gameable and following top fool picks is suicidal, it is a complete waste of energy to seek a high rating in CAPS.



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#2) On November 21, 2012 at 9:28 AM, edwjm (99.87) wrote:


zz's first paragraph is absolutely correct.  Now you need to decide how you want to use your CAPS account.  Is it just a game to you, or are you more interested in following stock movement for investment purposes?

It would be nice if the rules of CAPS made the game closer to real life, but they have been "carved in stone" and thus will not be changed. 

Want to really rack up points?  Short inverse ETF's and other thinly traded stocks destined to fall, even though this would be hard to do successfully in real life.

Want high accuracy?  Keep cashing in on gains over 5 points and repicking the stock because, unlike real life, there are no commissions and accuracy is 1/3 of your CAPS score.

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#3) On November 21, 2012 at 1:57 PM, Diegoman19 (< 20) wrote:


Just Curious, how heavily do you rely on the Piotroski, Rev up 5, etc strategies? I kind of find it hard to believe that over a 12 year span these strategies have supposedly returned 3000% or more. At that rate, everybody would be a millionaire... is Piotroski himself a millionaire from using his own research?

But, going back to topic, I use CAPS for almost 100% testing purposes, stuff I would usually not do with real money. I just want to play around and see what works best... for real money I'm extremely conservative. The bad thing about CAPS is that it adds your % score. So, if you have 100 stocks that went up 1 point over the market and sell them all, all of a sudden you have 100 points in the pocket, which in real like it only means you still only made 1%, nothing to brag about.

Since accuracy is only 33% of the score, if you only have a few stocks then you want to never sell losing stocks because your score will be immensily affected. If you have a mountain of stocks, then accuracy doesn't matter too much. 

My two cents of the month.

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#4) On November 21, 2012 at 5:06 PM, constructive (99.96) wrote:

I think the closing strategy depends on whether you are green or red thumbing.

With red thumbs, it makes more sense to lock in 5% gains to improve your accuracy without hurting your score. (Especially if you want to red thumb to 0.) With green thumbs, locking in small gains is not good because you are sacrificing score for accuracy by moving your basis price up.

So the inverse is that it makes sense to let your red thumbs run against you (as long as your thesis still makes sense). With green thumbs you will more often want to lock in a loss in order to get a better basis price.

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#5) On November 23, 2012 at 10:49 AM, reddingrunner (92.04) wrote:

I mostly use the Rev+5 as a screen, it generally produces a lot of results and I'll pick one of those each month to invest in.  Much of my high CAPS score, and personal results, are based on that strategy.  I dump these quicker than I sell my conviction picks but hang on to them a long time if they do well.  A lot of times they show up on the screen because of great management and that tends to last awhile.  

AAII tracks this screen and if you look at YTD, 3yr, 5yr and 10yr results it is the most consistent out-performer.  Zack's also uses this, or something very close to determine their short-term rankings.  

Piotroski tends toward micro-caps and you have to get in and out at the right time and it does pick some big losers.  It's not for the faint of heart but does have a spectacular record if you check it daily and buy/sell mechanically.  I look it at once a month, but rarely use it.

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