Community Intelligence Works
With a year of data now crunched, we’re pleased and perhaps even excited to show you how our CAPS star ratings are performing. The headliner: CAPS 5-star stocks exhibited superior outperformance of the market averages, CAPS 1-star stocks exhibited superior underperformance of the market averages, and everything in between did about what you’d expect. Four stars beat two stars, and three stars slightly outperformed the market. Check out Tim Hanson’s The Top Stocks and the Top Returns article for more detail. Here’s the short version:
Community intelligence works. Especially when it emanates every market day, all year long, from the world’s greatest investment community.
Let’s briefly review how this works. You pick stocks. We score you. We rate you on a scale of 0-100 (just like the SAT), and rank you against your fellow Fools. We also take your picks, and we create ratings for the stocks too -- the star ratings (quintiles) I’m talking about in this blog post. Our CAPS stock ratings are weighted based on player merit -- no beauty contest, and you don’t have to be a talking head on TV. Just straight numbers: If you’re a 90-rated Fool, the stocks you pick will get better ratings than if you were a 10-rated Fool. We update all of our data and ratings and rankings every 15 minutes, so that CAPS star ratings provide you a very rare and rich “Doppler radar” look at the stock market. CAPS ratings are merit-based, forward-looking, and firmly predicated on this community’s broad and deep intelligence.
What’s the bottom line, then? Our star ratings matter. Factor them into your thinking. This is absolutely not to say that every 5-star stock will beat the market, or even beat every 1-star stock. It is to say that these broad categories appear to be predictive and important and noteworthy. And given that they now cover more than 5000 stocks on the market, we almost always have an interesting and valuable second opinion for you on any stock you might research.
There’s always so much more to say about CAPS. I find myself, in this quantitative-focused blog post, wanting to talk about all the amazing qualitative content that lurks behind every ticker across the site. So many Fools have typed in anything from a sentence to a 10-page writeup for their picks. Beyond even its star ratings, CAPS therefore has so many thoughtful and fresh insights for you as you conduct your stock research.
But to close as I began, with best wishes for CAPS in year two, let’s take one more look at the big story: