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barnettech (< 20)

Correlation between when you become a member and your caps score.

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August 18, 2009 – Comments (12)

No surprise that I became a caps member right before the recent market crash.  It will be tough to reach the 90s with that handicap.  Now I'm not proud for not seeing this coming but I do feel that Motley Fool should make when someone started rating stocks more prominent.  I noticed that lots of the top caps scores right now are members that joined in after the crash, and their score just reflects the recent recovery.  I urge you in picking your favorite fools for advice and guidance to take this into account.  I member who started rating in 2007 and has a caps score of 80 is much more impressive than a guy who started in March 2009 with a caps score of 99.

 Anyhow I hope fool.com responds to this post by making a fools start date more prominent.

 Again I am in no way proud to have not predicted the recent market crash.  I'm just impressed by fools who did.

12 Comments – Post Your Own

#1) On August 18, 2009 at 10:01 AM, SkepticalOx (99.44) wrote:

I started picking on CAPS right before the market crash, and the score went to negatives. Now I'm near a 99 score (and I usually only have around 70 - 90 active picks, and not 200 like some). So it's doable (once you realize that CAPS is very much a trading game, and not an investing game).

With that said, without a doubt, it's a lot easier to just start a new account every month and long all the ultra and triple ETF's you can one way or the other and hope for a market move and skyrocket up.

Remember, what matters is your real money portfolio. This is just a game. 

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#2) On August 18, 2009 at 10:08 AM, brickcityman (< 20) wrote:

I've given this some thought too...

 

I'm fairly new to CAPS so that (and some poorly timed picks) is reflect that in my score.

 

It sure would be nice to have the slate wiped clean each year, or to allow uses to filter performance of a given player based on period of performance....

 

Also I wonder if CAPS may not be distorted by the amount of bandwidth people have available.  I personally had been using the website for quite some time before becoming a member, but earlier this year I was all to consumed with real money management and thus put off CAPS.  Once things got a little more settled I set about creating my CAPS account...  Of course it doesn't actually reflect my in-real-life pricing and I suspect that should the market get hectic again it will disjoint further from my portfolio.

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#3) On August 18, 2009 at 10:13 AM, anticitrade (99.65) wrote:

:(  This is an argument that I hear all the time.  As a member who happened to join at the "best possible time" some would suggest that my score is a product of luck and not any skill on my part.  Maybe I misunderstand this argument, but outside of picking leveraged ETF's, don't these "lucky users" still have to pick stocks that will outperform the rest of the market? 

I am not trying to disagree with you, but just understand the argument better.

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#4) On August 18, 2009 at 10:17 AM, outoffocus (23.03) wrote:

I started early 2008 and didnt have a full understanding of the game until AFTER the crash so its been near impossible to bring my score back up.   However working to bring it back up has been interesting to say the least. Of course I could have started a new account and been back up to this 90s by now but bring this account out of the dungeon is more fun. It requires me to strategize more and do more research. Also the swings in score and rating don't bother me as much anymore.

I too take into account when people started their accounts, especially the top fools.  Many of the top fools either started their accounts 2 to 3 years ago and were able to bank thousands of points or started their accounts in March of this year and were able to benefit from the recent runup.  So CAPs ratings should definitely be taken with a grain of salt.

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#5) On August 18, 2009 at 11:28 AM, barnettech (< 20) wrote:

NO I am not discounting the fact that those that joined after January of this year did well.  They still beat the S&P.  But their score is still inflated relative to others that joined at an unfortunate time.  Their success is still in fact success though.

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#6) On August 18, 2009 at 12:28 PM, anticitrade (99.65) wrote:

I guess my question is "How are they inflated?" 

You could make the argument that members have an advantage who join during a time when individual stocks move much more than the general market.  So their correct calls are worth more points than correct calls would be in a different market.  However, their incorrect calls would also probably be substantially more damaging.  The point is they still have to pick the right stocks. 

You could say that people who joined at that time with leveraged ETFS and high beta portfolios in small caps have scores that misrepresent the efficacy of that strategy.  Particularly if these people continually created new profiles until they hit it at the right time. 

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#7) On August 18, 2009 at 12:37 PM, dargus (80.60) wrote:

I joined just before the crash and my score has been moving steadily higher during the recovery. My score is hovering around the 70's range now.

 

I'm not even really playing the game. I just added stocks to CAPS as I purchased them in real life. I never trade out of a position unless I sell out of my real portfolio. I'm not rocketing to the top, but I have been on an upward trending trajectory.  Given this, someone really trying to move up surely can if they are a good short term stock picker.

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#8) On August 18, 2009 at 2:55 PM, barnettech (< 20) wrote:

I guess my assumtion is that I know for instance that if the market goes up 1% my portfolio goes up 3-4%.  Such is life in commodities/China for the past few years.  So in reverse if it goes down 1% then my portfolio goes down 3-4%.  So if you know about sectors with such movement getting caught during a down market can really smart!

 And basic math says if you invest $100, the market goes down 40%, you have $60, then it goes back up 10%, you have $66.  But if you had started caps in 2005 you had a few years to grow your $100 and then the crash still left you with a postive score.  Anyhow seems obvious to me.

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#9) On August 18, 2009 at 3:08 PM, portefeuille (99.60) wrote:

I have the feeling that really quite a few people don't understand what it actually means to give an "outperform" or "underperform" rating to a stock/fund in the "caps" game.

 

----------------------------

I Picked A Bad Day...

April 14, 2009 

I picked a bad day to decide to red-thumb a whole bunch of ultrashort ETFs.

Ouch!

Granted, I knew the strategy wasn't without some sizeable short-term risks -- but I also know that bear market or not, stocks generally go up over time and that in the long-term this strategy should work.  After all, just peruse the pick lists of the current Top Ten and you'll see quite a few people who have employed this strategy successfully for a while now.

But today, the strategy is certainly working against me.

The reason I decided to employ it?  Well, truth be told, I kinda miss being Top Fool... and I knew I had to do something if I wanted to stay it the Top Ten (it's been a bit of a struggle lately, as I've been popping on and off that list).  As I look back, though, I can't be anything but pleased with how well I've done in CAPS... and, more importantly, how well CAPS has done.

In a way I regret, just a little, red-thumbing the ultrashorts (and not just because I picked a bad day to do so!).  It was a bit of a break from how I'd 'played' CAPS to date.  I know some people probably think that the strategy shouldn't even be employable at all -- in the long run it is, in my mind, kinda like shooting fish in a barrel.

But then I thought back on how I got to be Top Fool in the first place, way back when.

One of the things that probably helped my player rating the most was my red-thumbing every alternative energy company I could find.  While I did get burned on a couple of solar plays (burned, solar, get it?), the points I racked-up on ethanol and fuel cells more than made up for it.  One doesn't have to read too many of my alternative energy pitches to know that I thought the technology wasn't mature enough yet to be economically viable, and that the valuations at the time were based more on wishful thinking than they were on economic reality.

I had some pretty good company too, as some of the other top-rated CAPS participants at the time were also quite bearish on alternative energy, especially ethanol.  It didn't take too long for all of these ethanol companies to achieve 1-star status -- and any honest examination of the records of these companies reveals, I think, that the 1-star status is well deserved.

The other big key to my early success in CAPS was red-thumbing a bunch of fly-by-night bulletin board and pink sheet stocks.  That too was a bit like shooting fish in a barrel.  Of course this strategy is still employed by many -- and it's hard to find a ticker with a .pk or .ob extension that sports more than one star (though there are some very legitimate, solid companies that trade this way) -- which is, in my view, as it should be.  After all, there are a lot of shams if not outright scams out there -- so the vast majority of these pink sheet and bulletin board stocks deserve exactly the CAPS rating that they get.

Of course, my stint as Top Fool, though much longer-lived than I'd ever have imagined, ultimately came to an end.

It came to an end for two reasons....  homebuilders and financials.

The CAPS participants that ultimately ended up unseating me from the top spot made a habit of red-thumbing just about any homebuilder or financial stock they could find -- whereas I stayed largely clear of those sectors (and actually green-thumbed about a half dozen homebuilders in 2006).  I sure couldn't fault the strategy -- as it was one I'd employed with alternative energy (though to a much lesser extent... there are a lot more homebuilder and financial stocks out there than there are ethanol and fuel cell stocks).

Once again it didn't take long for most homebuilder and financial stocks to achieve 1-star status... which, looking back, is exactly what they deserved -- and they achieved this status in CAPS well before the mainstream financial press had really caught-on.

And now we have a new slate of up-and-comers in CAPS who have made a habit of red-thumbing ultrashort ETFs.

A bit like shooting fish in a barrel?  Well, while not without their own risks (as my CAPS score today will attest), maybe so.  Unfair?  Again... maybe.

But you know what?  It's darn hard to find a levered ETF in CAPS sporting more than a 1-star ranking...  a status that, again, for a whole lot of reasons that many pitches and blog posts around CAPS can attest to, is in my view very well-deserved.

Early on I sure drew some fire for red-thumbing pink sheet and bulletin board stocks that weren't 'shortable' in real life.  A bit later I remember criticism levelled at Specbear, and others, for the 'unfair' practice of banking accuracy with their sector plays in homebuilders and financials.  And today I'm sure there are those that think playing the levered ETFs isn't entirely 'fair' either.

I'm not saying these criticisms aren't entirely without merit either...

But I can't help but look at it all and think, "Maybe so... but in the end, CAPS, as a whole, got it right.  Pink sheet and bulletin board stocks, as a group, are lousy investments and certainly not worth the risk.  Homebuilders and financials weren't just lousy stocks to be in, but the problems in these industries helped spark a full-blown recession.  And levered ETFs, in my mind, are pretty lousy investments, as a class, too.

Yup, I picked a bad day to red-thumb levered ETFs...  but whether I get it right, or wrong, matters far less than whether or not CAPS gets it right or wrong.  And while CAPS ratings aren't perfect and there are certainly a number of exceptions on both sides, I think the record is fairly clear that CAPS gets it right far more often than not.

Are some of the strategies that players use a bit 'unfair'?  Maybe.  But I think this misses the bigger picture -- namely that whichever side of the 'it's unfair' argument you come down on, CAPS, as a whole, largely gets it right.

Regards,

Russell (a.k.a. TMFEldrehad)

----------------------------

(from here, emphasis mine)

 

So apparently the "top lists" are only starting to lose all those players that made it there exactly because they bet on stocks falling and some sectors "underperforming", i.e. falling more than the benchmark.

---------------------------- 

#4) On February 11, 2009 at 12:05 AM, foolsMeThrice (< 20) wrote:

practicing the words of the great warren buffet will be greatly rewarding.  The top players here can't shift gears even though this is when your supposed to buy.  I don't know if you've noticed but their scores have mostly flatlined.  So in all of this turmoil, since October I've gone from 4000 points to 9000 caught up and passed those I thought were unreachable.  And I thought this was a bear market.

----------------------------  

(from here, emphasis mine)

 

Well apparently foolsmethrice was right. They were unable to shift gears. The only gear that has saved some is "neutral" as they have simply ended all calls that had scored more than 5 points and continue to close those that make this "cutoff". So now they sit there with there pretty much stagnant point score and ridiculously high "accuracy" and slowly drift down in the "caps" game ranking system as the few players that were able to shift gears and some "new" players are passing them. Those that have not shifted gears have lost quite a few score points within the last few months. But then again who cares about top lists ... 

 

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#10) On August 18, 2009 at 3:27 PM, barnettech (< 20) wrote:

awesome post portefeuille.  I really learned from your experience.  And really touched on my thoughts about folks that just use red thumbs and have a high score. Is it unfair.  Well my best new thought is...... should we all be shorting crappy pinksheet stocks and other crappy stocks, rather than trying to honestly calculate PEG values and working our buts off to become the next Jim Rogers, Marc Faber or Warren Buffet?  Maybe there is a lesson here, the way to make money IS the same way that we should be playing the market.  I'm currently not brave enough to carve out this path for myself.  What are your thoughts portefeuille and others?

 This is at the top of my list of things to explore.

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#11) On August 18, 2009 at 3:28 PM, barnettech (< 20) wrote:

And by the way I do think CAPs gets it right.  I don't actually care about the caps score just about the usefulness of the site and how much money I can make and becoming a philanthropist and lying on the beach in the Bahamas.  But folks, I think CAPs is the bomb.

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#12) On August 18, 2009 at 3:30 PM, barnettech (< 20) wrote:

And folks I'm disappointed more people aren't more into my other post about NEP today.  It is a wicked interesting stock I think and I wanted everyone's opinion.  Instead everyone is interested in their score!  Check out NEP and let me know what you think as value investors interested in high growth? 

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