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LongTermBull (93.75)

I Like CAPS But...

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May 16, 2009 – Comments (31)

I don't think it truly serves it's purpose.  Or maybe I just have the wrong outlook.  To me CAPS should be a place for people to make picks for investments.  After all, isn't that what the Motley Fool is about, investing?  The scoring system rewards people for trading and taking small profits for accuracy and points.

This is my third account and the only one I will care about from here forward.  My second account I created at the end of the current rally but was able to become an "all-star" after a few days just by banking lots of 5+ picks for a high accuracy rating.  That isn't investing.

To me, however, the real problem is it is not beneficial to the community.  This site (the Motley Fool), from what I can tell, is geared towards the individual investor as a means to educate and help them. Well if the system benefits short term trading but the site touts buying and holding, what kind of message is that sending?  When I see a pick from a top player, especially if they write a pitch about it, I usually give it more weight.  But if players are buying, selling for a quick 5+ points for accuracy, rebuying, selling, etc.  how does that help educate?

This is not meant to be an attack on players who do this, they are just playing by the rules and should not be condemned for that.  This is an attack on the system.  I think CAPS the idea is fantastic; a community of investors picking and pitching stocks.  But for a site that recommends buying and holding CAPS falls short.

I wonder how different things would look if people had to wait a year or more to end a pick?  Perhaps then we could see how people truly feel about different companies.

31 Comments – Post Your Own

#1) On May 16, 2009 at 3:26 AM, goldminingXpert (29.59) wrote:

There's no way one could make picks, particularly underperform calls, that last a year at a time in this investing environment. How could anyone rationally form a judgment on say BAC with the limited amount of knowledge we have with the spectre of government intervention looming. BAC will trade somewhere between $0 and $30 1 year from today, most likely closer to 0 than 30, but I have no idea what it will do next year as I have no idea what bailouts Obama will enact next. All I know is that the odds highly favour BAC going lower in the next few weeks as it is massively diluting shareholders. If you own BAC, you want to see my negative pick so that you are warned. I wouldn't consider red thumbing BAC if I couldn't close it when the impact of the catalyst (share dilution) plays out.

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#2) On May 16, 2009 at 3:51 AM, catoismymotor (20.97) wrote:

LTB,

I have chosen to approach the game from the point of view of an investor. I do my best to choose and hold for the longterm and keep my picks low in number, less than 40. By doing this I know that I will not rocket into the high 90's tomorrow but sooner or later I will make it. I have chosen to keep it to that small number for a few reasons; I am picky, I need to stay within my arenas of knowledge and I don't want to devote hours of my time to playing this game when I have a life to live. Not unlike my approach in the real world.

Cato

 

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#3) On May 16, 2009 at 4:00 AM, LongTermBull (93.75) wrote:

I feel you have proven my point even more.  When you read an article on the Motely Fool and it mentions a timeframe it is almost, if not always, a long term outlook.  Buy today hold for years.  The site is not about predicting what happens in a week, a month or even 6 months.  The site touts over and over to buy in companies with great future outlooks and hold them for a long period of time.

Like I said above, I have no issues with people who pick CAPS stocks this way.  After all they are just playing by the rules.  My issue is that the parent site time and time again says buy and hold, yet their stock rating site allows people to buy, sell, buy, sell.  Putting aside scoring, how does that achieve the common goal of rating stocks?

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#4) On May 16, 2009 at 4:04 AM, LongTermBull (93.75) wrote:

Above comment was in reply to goldminingxpert.

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#5) On May 16, 2009 at 4:12 AM, LongTermBull (93.75) wrote:

cato:

I am doing the same thing.  If CAPS is a game then in that case I am wrong to criticize and it should be played as such.  But according to the CAPS homepage the slogan is:

"Investors helping investors beat the market."

Maybe they could have CAPS the game which would be its current form, then they could have a stock rating site that people actually rate with no bias towards scoring points.

 

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#6) On May 16, 2009 at 4:28 AM, MGDG (35.18) wrote:

I believe it's the current market enviroment. In a Bear Market we can profit by shorting or buying during rallies and going back to cash when they fail. Although now you can buy short ETF's to profit on the downside, rather than sitting in cash or short selling stock. We can't generate positive returns in a Bear Market by holding investments that are losing value.

For me investing is about generating positive returns on an annual basis in all market conditions. For others it may be something different. The market is comprised of many different types of investors using different strategies and when market conditions are favorable to their style of investing, they will outperform and generate positive returns. I don't think we should limit this site to one type of investment style, just because we don't want to invest that way, believe in it, or even worse have disdain for it. 

LTB, I'm not implying that you have disdain for other types of market parcipitants, but everyones goal is the same, which is to generate positive returns on their assets. With the Bear Market we have been in, there are very few investments that have been generating positive returns with a buy and hold strategy. When the market conditions change, I think you'll find more of the type of investing your looking for in this site.

 

 

 

 

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#7) On May 16, 2009 at 4:54 AM, portefeuille (99.60) wrote:

When you read an article on the Motely Fool and it mentions a timeframe it is almost, if not always, a long term outlook.  Buy today hold for years.

Somehow I don't like those articles very much. There is very little information and it is tiring to read all those references to some newsletter. So the blog posts and "calls" in the "caps" game being different from those found on "the motley fool" is actually a good thing. They are (on average) better.

This "accuracy" thing is annoying. Everyone knows that. Everyone has mentioned it. I guess even those holding on to their "tweak the accuracy" strategy for years would be glad if they could put their energy to use on something slightly more productive.

Why does dwot hardly do anything for the past months? Because she has an "accuracy" that is ridiculously high. Her "average pick score" is around 6, which is, well, somewhat above average I guess. Multiplied by 1375 calls you get some 8000 points as the overall score. And combining the ridiculously high accuracy (rha) with that point score results in her being somewhere around #5. An article has been written about her. She appears to be a nice person, a Canadian teacher, nothing wrong with all that, but now she is in a position were every move is very likely to hurt her rha, so she just sits there. I can almost see her sitting in front of her block house (I am sorry, but in my imagination that is what nice Canadian teachers do in their spare time) thinking "I wished that rha would somehow go away" ...

 

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#8) On May 16, 2009 at 5:16 AM, LongTermBull (93.75) wrote:

MGDG:

I don't have disdain or even dislike for anyone's investing style.  My take on it is to each their own.  The point of my blog wasn't even to point out different investing styles, or why one is better or worse.  The point was that CAPS, in the end, is just a point based game.

Perhaps I can better make my point if I explain my situation as I have only been on CAPS for a couple of months.  When I first found it I didn't even know you could pick stocks and accrue points and a rating.  I just thought it was a site that the Motley Fool created so people could rate stocks and other people could see how the community felt, in general, about a particular stock.

In all my past readings of the Motley Fool website I have been under the impression that they believe in buying and holding and not worrying about what the market will do short term.  Since this fits my investing style I have always found the site helpful.  So when I discovered CAPS I of course could only assume it was geared towards this same buy and hold mentality.  After all, that was what the Motley Fool writers had always said.

It wasn't until I discovered the point system that I realized this was not the case.  Again, let me reitirate, I have no problem with players buying and selling short term for whatever reason.  If they do it to skim some points, keep their accuracy up, whatever, that is fine.  My problem is not with the players.  My problem is that a site that says they believe in the buy and hold method has a stock rating site that is not based around that same method.

If CAPS was meant to just be a stock game were players could buy and sell as they pleased with the main goal being amass the highest rating, I would have no problems with it.  And maybe that is all it is meant to be and I am missing the point of CAPS.  But given the track record of the Motley Fool it is hard for me to imagine they created CAPS to be a stock trading game.  When I first joined CAPS if I saw a stock rated 5 stars I thought wow, that must be a great stock since a lot of people like it.  I now realize that yes, 5 stars is a stock liked by a lot of people, but it may not be for the reason I thought.

Maybe I just have the wrong idea about CAPS, totally possible.

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#9) On May 16, 2009 at 5:32 AM, portefeuille (99.60) wrote:

By the way: I also had a ridiculously high accuracy until I ended quite a few calls and started several other one on May 13. My accuracy went from ca. 85% to the less ridiculous level of 79%. My point score did not change that much that day (enough to cost me maybe 5 "ranks"). I plunged from #2 to #22 in 24 hours. But that is okay. These top lists don't matter that much. This is from camistocks (see comment #29 here):

So this is it... We worship the top tens and feel good... Americans love top tens...

Nobody cares about interesting blogs. 

 

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#10) On May 16, 2009 at 5:49 AM, portefeuille (99.60) wrote:

The "staff" here keeps repeating that the "caps" game is about rating stocks and not players. They do not care whether the players find the ranking system fair. They want to build something that gets results like those mentioned in the paper that is the topic of this post

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#11) On May 16, 2009 at 6:06 AM, MGDG (35.18) wrote:

I agree with you LTB and I understood your dislike was with the site and not different investing strategies. I was pointing out why the issues you raised have become so prominent. There are flaws in the scoring that may or not be fixable to everyones satisfaction.

 I know early on in Caps, when we were in the middle of a 4 year Bull run only the most successful traders could ever hope to keep up in scoring with the buy and hold strategy. Now that the trading strategy is outperforming, the opposite is true. It can be diffucult to wade through that to find players successful with the buy and hold strategy, to learn from, bounce ideas off of, or to just shoot the breeze with someone with like minded ideas.

 

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#12) On May 16, 2009 at 7:26 AM, dudemonkey (38.86) wrote:

LTB, I'm with you.  CAPS has almost no actual investment insight.  It's all about trading and should be treated as such.

This has less to do with the current market environment and more to do with the short-term focus of most people.  I talked to several of my friends about investing and they all started day trading after those conversations.  They just didn't get the idea of investing.

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#13) On May 16, 2009 at 7:29 AM, dudemonkey (38.86) wrote:

I think it was Warren Buffet who said that either people get the idea of buying a dollar for sixty cents right away, or they just never do.

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#14) On May 16, 2009 at 7:30 AM, portefeuille (99.60) wrote:

... but now she is in a position were every move is very likely to hurt her rha ...

... but now she is in a position where every move is very likely to hurt her rha ...

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#15) On May 16, 2009 at 9:45 AM, richlongrun (89.83) wrote:

who cares about the game that much really? I use the information gained from everyone's outlooks to help with my real life portfolio. sometime's I come across something that is very helpful and puts some real money in my pocket. I do believe though if someone is playing the game like they would in real life they should pay interest on short selling and taxes on realized profits to make the game more fairly weighted for everyone regardless of their investment style. I agree long-term buy and hold strategies are at a bit of a disadvantage.

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#16) On May 16, 2009 at 10:24 AM, RonChapmanJr (70.40) wrote:

An important point that has not been brought up is the idea that over time the "buy and hold" bulls will be at the top of CAPS.  Given the scoring system bulls will eventually be able to accrue significantly more points than bears if their skill level is equal.  It'll take a while, but it will happen. 

ron

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#17) On May 16, 2009 at 11:49 AM, TDRH (99.67) wrote:

RonChapmanJr just nailed it on the head.   May miss the boat, but, atnticipating another leg down in the next few months, when that happens, those that invest in the correct stocks when there is blood in the streets will dominate.  In the future I see 1000 - 1200 points swings in the leader's scores being common.

The accuracy that you refer to is relatively difficult to aquire even if it is banking/cheating the game.  80% is a challenge to reach, 85% is difficult to even maintain, and I have no idea how Everyday maintains 90+....even with capturing/banking it is still tough.

I can't speak or write for DWOT, but personally I have seen bulls that guessed/timed it right rush by me.   I have seen bears take 3x shorts to the top - all this in the last two months.   I am waiting for a clear direction for the market.  IMHO the recent gains are not based on fundamentals, we will return to the recent lows, and it is possible that the market will overshoot to new lows.  

 I have suggested it many times, but in order to improve the "scoring" of players I would suggest that the 25% for accuracy be divided into accuracy and average pick score ranking.   It would be fairly simple to calculate/weight.   With an average pick score of 5, I would most likely be in the top 50. 

That said, it is just a game, but I have learned a great deal from individuals here and have profited from them.   

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#18) On May 16, 2009 at 7:32 PM, MGDG (35.18) wrote:

TDRH, using some of the accuracy weighting for average pick score would put more emphsis on holding positions. It should be simple to implement and I believe a majority of players would be in favor of it.

I still believe the current perception of players gaming the system because of current market conditions will go away once the bear ends. The players that are good investors will then rise to the top. The players that are good traders and investors will remain at the top as they adapt to changing market conditions.

The argument is not really about ranking or score so much as it is about the lack of information, education and ideas on improving oneself as an investor. If a player has ideas or research on a stock, but is not picking and pitching it because it won't perform well in a bear market, but they believe it would be a good long term investment, they could post a blog on it instead.

That would increase the sharing of ideas for and against and spur more education for those wanting to learn and improve their knowledge of investing. Players could put the stock in their watchlist, pick the player as one of their favorites and follow the developments in the stock.

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#19) On May 16, 2009 at 7:52 PM, portefeuille (99.60) wrote:

Players could put the stock in their watchlist, pick the player as one of their favorites and follow the developments in the stock.

You could also do something like this (okay, no pitches, but it is a start) ...

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#20) On May 16, 2009 at 8:47 PM, MGDG (35.18) wrote:

portefeuille, that's the idea I was thinking of. My thoughts were to have one stock per blog and use the blog for pitching. Players could post their ideas or questions pro or con on the pitch. It would be educational for those wanting to learn and the collective knowledge from different players could be put into action.

It would address some of the dislikes players have with the site without having to pick a stock before a player decides it's ready to be picked. The blog could be simply titled XYZ STOCK, which would make it easier for a player to find what they were looking for.

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#21) On May 16, 2009 at 8:53 PM, portefeuille (99.60) wrote:

ultralong does that (see here). So do some others ...

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#22) On May 16, 2009 at 9:15 PM, MGDG (35.18) wrote:

That would be it portefeuille. The players looking for this in the picks, should instead find the players doing this in their blogs and pick them as their favorite. They can stuff the stocks they agree on in their watchlist.

 This wouldn't address the issue of the Star rating for Caps stocks, as the player might be looking for a better entry point before rating the stock. It does address the issue with a lack of information on picking stocks for long term investing.

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#23) On May 16, 2009 at 9:57 PM, truthisntstupid (84.04) wrote:

Every time I go to a site like this and scan (doesn't seem worth the time to actually READ) the comments contained therein I get the same impression:  CAPS is so flawed that it is nothing more than a game and the various complaints by people who know more about the scoring system than I will ever take the time to learn (doesn't sound worth my time) all say the same thing.  Your scores mean nothing.  This is Alice in Wonderland and you are all nothing but a deck of playing cards.   You have all read too much on trading and options and too little on investing to have anything to say that would be of any interest to me.  This is a monopoly game with short-selling.

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#24) On May 16, 2009 at 10:04 PM, russiangambit (29.40) wrote:

I guess, they MF could assign bonus points for a pick that was held long-term,i.e. longer than a year, since in real life the tax will be lower. But it really doesn't matter in real life whether you make $500 on a stock in 10 months or in 10 days. 

I can't imagine myself , personally, holding many stocks for more than a year. When I buy a stock I have a clear idea why I do it. And usually I expect the result to manifest itself in under 3 months. Otherwise, I conclude I simply was wrong and sell.

The only stocks I would hold long-term are the ones with dividends higher than 5 %.

I've seen quite a few posts lately asking why buy-and-hold is not popular. May be the better way to approach is to explain why buy-and-hold is the best investment strategy, in your view. In terms of buy-and-hold, how confident are you that you can forecast economic conditions 15 years out ( the average timeframe for buy-and-hold strategy according to financial advisors)? You can't really forecast. What you are doing, you are relying on previous statistics, and you expect that future performance will be smoothed out on average to match those statistics. But as they say, past performance is no guarantee of future results.

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#25) On May 16, 2009 at 10:10 PM, portefeuille (99.60) wrote:

The score points mean somthing and it should not be that hard to understand what. The accuracy is somewhat less important.

CAPS is so flawed that it is nothing more than a game and the various complaints by people who know more about the scoring system than I will ever take the time to learn (doesn't sound worth my time) all say the same thing.  Your scores mean nothing.  This is Alice in Wonderland and you are all nothing but a deck of playing cards.   You have all read too much on trading and options and too little on investing to have anything to say that would be of any interest to me.  This is a monopoly game with short-selling.

You should read the paper mentioned above (pdf here, again, see this). If you are still unimpressed after reading it (abstract and conclusion might do for a start) read it again ...

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#26) On May 16, 2009 at 10:57 PM, truthisntstupid (84.04) wrote:

Not interested.  After having been a bookworm addicted to reading about investing all my adult life (I'm 52) I firmly believe in a long-term approach to investing.  Dividends are making a huge difference in my life.  They are more dependable and can be counted on more.  I buy utilities and large-caps like Pepsico and elect to RECEIVE my dividends instead of reinvesting them.  Sure, a company or two in ANY portfolio however carefully chosen may cut or suspend their dividend.  That's why it's good to have a lot of them.  I think of dividends as "extra paychecks"  which I can buy more shares and increase as time goes on.  Stupid?  I don't feel "stupid"  several dozen times a year when I'm cashing my dividend checks.  My "extra paychecks"  started out few and small.  Now there's more of them - and they're bigger. 

People that don't make a lot of money have severe obstacles in their life that all conspire to keep them from ever getting anywhere.  Life's "little emergencies"  nickel-and-dime their savings away every time they ever manage to accumulate any.  They can't afford an investing approach that doesn't immediately increase their cash flow and their income. 

I make a little less than $9 an hour.  Investing for dividends and defying conventional wisdom by electing to RECEIVE my dividends has enabled me to "ratchet up"  my income so that I am less likely to have the savings I've accumulated wiped out if the old clunker in the driveway craps out.  Dividends did that.  I am doing VERY well for someone making less than $9 an hour and it took less than two years.  I have used what I know about investing to improve my life dramatically.  But I bet my CAPS score would suck.  Therefore, you can have your game.  Some of you may really be making good money from your "investing"  activities in real life.  And some of you may just be good at playing your game.  But if you want to knock long-term investing in good companies that pay dividends and have and still ARE observably and steadily lifting me out of poverty as I write this then you are indeed fools  to me.

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#27) On May 16, 2009 at 11:00 PM, portefeuille (99.60) wrote:

whatever

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#28) On May 16, 2009 at 11:01 PM, portefeuille (99.60) wrote:

or "okay"

(my english is not that good, maybe "whatever" sounds too strong ...)

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#29) On May 17, 2009 at 2:05 AM, portefeuille (99.60) wrote:

Here is a blog post on the topic that might be worth reading:

Finding the true gurus in CAPS

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#30) On May 26, 2009 at 8:45 PM, JonBarleycorn (71.55) wrote:

Why does dwot hardly do anything for the past months?

portefeuille My take on the lady is that she is incredibly bearish and incredibly patient. I don’t think for a minute she is guarding by inaction. Watch and learn.

JB

 

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#31) On June 12, 2009 at 3:51 AM, checklist34 (99.72) wrote:

i agree that the utility of CAPs for investment help is quite minimal. 

I have gotten some pics from CAPs, including:

-BOOM.  I found that here somehow, read about it, liked it, bought at 10, doubled down at 5.  I haven't looked in a couple days but it was 21 the other day. 

-ACAS and the BDCs.  Boy, oh boy, have I made money, and I mean a whole whole whole lot of money on BDCs.  I learned about BDCs after coming to caps.fool.com one day I saw ACAS on their little "stock of the day" thing so i clicked on it.

Then I looked into ACAS, read the 10k, listened to the call, read the 10q, called their IR, found a zillion other BDCs and got long on ALOT of ACAS, ALD, MCGC and more right at their bitter bottoms when I made my "mark to market accounting bounce" blog. 

So i've profited enormously from having come to CAPs, but in indirect ways, and never really from reading these blogs. 

The dominance of bears here on the CAPs game blogs is so extreme that I bet if I came back as "USAdoomed" and got all hyper negative that I'd get 20 recs on every blog within a month.  lol 

too much work

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