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TMFJake (53.76)

Improving CAPS, Part Deux

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September 01, 2009 – Comments (18)

Thanks everyone for the comments and recommendations on my previous blog on Improving CAPS. 

It appears that a majority of CAPS members would like to see an alternative "Top Stocks" ranking system.  It's less clear whetheror not there's a strong consensus to substitute a volume filter for our current share price and market cap minimums.

Let's start with the "Top Stocks" ranking system.  

* We make use of the Top Picks feature on all CAPS member scorecards to create a separate CAPS Member Rating on just your Top Picks.  We only score the picks that you have identified as top picks and only for the period in which you'd designated a pick as such; therefore you couldn't simply designate your biggest winners as top picks to game the system.

* We restrict you to having no more than 25 or so Top Picks at any given time.

* You must have 7 Top Picks in order to receive a Top Picks rating.

* We require a 6 month holding period for top picks.

I'm disinclined to support these two rules which were proposed:

* Restrict top picks to stocks -- no ETFs or closed end funds.

* Restrict top picks to outperforms.

Vanamonde correctly pointed out that some will succeed in the Top Picks ranking by making broad sector calls, but these short term "flash in the pan" successes won't be as visible over the long term--when a consistent track record performance will be the keys to being on top of the leaderboard.

Now, let's talk abou the volume filter.

Streetflame pointed out that while the Volume filter got the most votes, it did not reach >50% of total votes.  I will drop the option that had the least votes ("Anything goes, rate all stocks") and re-post a poll below for the top two vote getters:

Finally, we discussed some other priorities that I think we will add to our backlog of work:

1.  Distinguish the way we represent stocks that have a historical CAPS rating put are no longe ratable--"doghouse" stocks as TSIF called them.  Stocks could either lose their historical rating or we could asterisk the "locked in" rating...

2. Provide a new ranking based on rolling 12-month performance.

3.  Provide better representation of Sector and Industry leaders--beyond the "Top 5" lists that you can find on our Tags pages.

I'm treating the Top Stocks ranking as the top priority but currently consider all of these items as officially on our backlog--with the exception of the volume filter; we'll see how the second poll results look.  I'll give you a better indication timing soon--sometime after Wall-E rolls out. :)  Don't hesitate to ask me about status.

Thanks and Fool On!

18 Comments – Post Your Own

#1) On September 01, 2009 at 5:02 PM, tonylogan1 (28.67) wrote:

I dont like the poll... lol...

I suggest a trading volume minimum AND a minimum share price ($1.00 or $1.50 is fine). Does it have to be just one or the other?

p.s. better than just volume minimum is a total dollar value traded minimum (i.e. more shares must be traded of $1.00 stocks than $50 stocks)

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#2) On September 01, 2009 at 5:05 PM, portefeuille (99.78) wrote:

It's less clear whetheror not there's a strong consensus to substitute a volume filter for our current share price and market cap minimums.

What is clear is that no one has yet brought forward a convincing argument supporting the $1.50, $100M rules.

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#3) On September 01, 2009 at 5:10 PM, portefeuille (99.78) wrote:

I suggest a trading volume minimum AND a minimum share price ($1.00 or $1.50 is fine).

The "order of magnitude" of the price of a share can be changed by a split. This alone makes the $1.50 rule absurd. But we have had all this in quite a few posts before.

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#4) On September 01, 2009 at 6:26 PM, UltraContrarian (32.95) wrote:

Port, in a pinch we may need you to vote 11 more times.

I voted for MicroCAPS (once).  Don't care that much about the other items but they sound fine.

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#5) On September 01, 2009 at 6:57 PM, streetflame (31.61) wrote:

For "doghouse" CAPS stocks, you could just replace their rating with a link to the stock page in MicroCAPS.

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#6) On September 01, 2009 at 7:39 PM, TSIF (99.96) wrote:

Port, I'm not sure what you point is about splits and order of magnitude, but the when a stock splits your starting price drops in half and the stock price drops in half, it's a null. But clearly I could be missing your point, and apologize if I am.

In regard to lowering the market cap to allow more stocks to be pickable in the main stream of the caps game, the volitility and the points that can be gained are my major concern.    The problem/concern that I believe is being raised is the ability of thinning the "junk" out of the game if you lower the threshholds by a volume rule.  Now if one enjoys the junk in the game and doesn't mind the huge score potential one can gain, especially a junk microcap where the score potential is multiplied substantially, then go for it.

I assumed Microcaps was being suggested as "separate game" option and the points and players would be different.  Those seeking the challenge and the volitility of microcaps would be playing against others in the same forum.

From that standpoint, I'm confused by the choices.  If you want to include smaller caps in the main part of CAPs then I believe the volume rule is a good balance.  If you want to put smaller cap stocks into their own game then you don't need the volume rule quite so much.

In either game/version, however, a volume rule, even one not very restrictive looks to me like a valuable asset to keep the playing field level and the commentary, pitches, and picks geared to stocks that the real world might be interested in. I fully agree that calling a dog a dog, (ummm, I like dogs), okay a mother-in-law a mother-in-law, (hmmm, that's might not be a good analogy either)..... well JUNK, JUNK, (shills trying to take money from the unsuspecting), is a community service, but you can still cover the stocks that get pumped by a low volume rule that is not overly restrictive.  Those that only have the owners changing shares on every other Tuesday are really not of a value to CAPs palyers, their time, or the community.

So I would like to see more picks available in the main stream of caps, limited by a volume rule OR I  wouldn't mind seeing a microcap game that was independent of caps instead.

In regard to top picks, it sounds like a nice addition. Besides the dollar sign for top picks, how about a few more columns of the same nature, not necessarily ones used for the "game" charms, but more information for those looking at the picks a player has made.

"Those I own", "Those I'd put real money into, (maybe, but not necessarily a top pick), Those I need to do more research, (kinda like a note to onself), MY BIGGEST Mistake!,  Etc..... all with an icon similar to the $$ top pick.  Probably a bit much for some players to keep track of, but since many of us forget why we made a pick months or a year later, it might be humorous and useful.

Thanks Jake!

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#7) On September 01, 2009 at 8:01 PM, TMFBabo (99.99) wrote:

Here's my problem: even if volume requirements are lowered, many  micro caps are still likely to be blocked. Whether or not volume requirements are lowered, the separate MicroCAPS game is the only way to ensure that all the micro caps become rateable.  Please consider starting MicroCAPS regardless of the outcome!

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#8) On September 01, 2009 at 9:51 PM, portefeuille (99.78) wrote:

TSIF, I am trying to stay away from these "improvement" discussions because they usually lead to nothing, the "opponents" arguments are usually somewhat "weak" and I have grown somewhat tired of participating in them. And I have my list, hehe, so I no longer care all that much about some of the rules, hehe ...

I was just referring to the fact that any stock that trades below $1.50 and is thus "not currently ratable" in the "caps" game can be lifted to the other side of that limit by a reverse split. I of course agree that splits are more or less non-events.

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#9) On September 01, 2009 at 9:57 PM, portefeuille (99.78) wrote:

When they do change things it is usually for the better but they somehow have the wrong "priorities". A lot of obviously "urgent", important and extremely easy to implement changes have been suggested and the "improvement movement" even "gathered some steam" and looked to be getting somewhat more constructive at the time this post was written, but have a look at the date ...

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#10) On September 01, 2009 at 9:58 PM, portefeuille (99.78) wrote:

"opponents"

"opponents"'

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#11) On September 01, 2009 at 10:39 PM, TSIF (99.96) wrote:

Thanks Port, I was only thinking of "forward splits", not reverse splits in regard to your comment. You are quite right that a few stocks can pull off a reverse split and turn a JUNK stock (AIG) into a pickable one. 

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#12) On September 01, 2009 at 11:02 PM, Tastylunch (30.00) wrote:

re: Top Picks

would closed Top Picks that meet the 6 month holding period count towards score or is it just current top picks ?

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#13) On September 02, 2009 at 1:21 AM, TMFJake (53.76) wrote:

@tonylogan1:  I hear you.  I think there's more time to discuss/debate the appropriate way to implement a volume rule if we go that route. And, yes, when I say volume filter, I do mean an average daily dollars traded, not actual share volume. With this approach, I think share price becomes much less relevant.

@streetflame and bullishbabo: I do want to see a MicroCAPS *some day,* regardless of how this vote turns out.

portefueille: I believe the top picks alternative ranking goes a long way towards addressing some of what zzlangerhans has requested.  As do better, more prominent ways of identifying sector/industry leaders. And, of course, the new top tens lists, were an attempt to address some of the issues he raised.  We may not be moving as quickly as you like, but we'll keep moving...

@TSIF:  We definitely want to do some form of pick tagging, so you can designate "Picks I own," "Biggest Mistakes," etc.

@TastyLunch:  I was  thinking current top picks would count toward the Top Picks ranking as well as your performance in older Top Picks up to the point in which you removed the top pick designation. 

Thanks all!

 

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#14) On September 02, 2009 at 12:31 PM, TSIF (99.96) wrote:

Jake, Even if lowering the threshhold doesn't meet muster, I would like to request that the LIMIT order feature be "enhanced" to allow limit orders to be placed on picks that are below the threshholds. For example a stock that is at $1.40 be eligible for a limit order to go active if/when the pick reaches the $1.50 threshhold, so the order is "waiting to go".  I do realize that someone might have picks pending that count against their pick count that may never go active, so the player needs to monitor the pending picks.  I do realize that some new players may not understand why a pick doesn't go "active". This can partially be offset by addtional text on the limit order, or a warning box that "this pick is currently below the minimum threshold for activation and will not activate until the minimum threshold ($1.50 or $100 Million market cap) is met".

An equity can be stuck on your pending list even by the current system. Currently if a pick is at $1.55 and you enter a limit order for say $1.60, and then the price drops to $1.40 before reaching the $1.60 pick threshold the order does stay active, until cancelled or the price rises back up to the $1.60. So anyone confused by why a pick doesn't go active can still fall into this loop. It's also possible to get a pick active on a stock below the $100 million threshhold by todays software if it is falling in price faster than the system can keep up with market cap.

I believe allowing LIMIT ORDERS to be placed when an equity is below the threshhold would help with some of the more fickle equities that are near the threshhold due to the recession and bouncing around it. It would also help players who can't be in watch mode all day long to try to catch one drift into the boundries.

Thanks,  TSIF 

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#15) On September 02, 2009 at 12:34 PM, TSIF (99.96) wrote:

PS, can you see about having the 5PM daily alert of our picks set longer. In a volitile market the alert is often truncated.

I also noticed that if you use a limit close, then even if the pick doesn't close it often ends up on your own "Alert" list for the day. Even though your own picks, in other circumstances never show up on the list.  The pick is not really closed, and it's confusing.

Finally..... I see some players with 201-204 open picks, that are all REALLY open.  I suppose part of this is due to the limit feature and how the picks are counted when they are pending, allowing more picks to be qued up than allowed. Not complaining, but it seems to be a variant that could cause some confusion.

Thanks again.

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#16) On September 02, 2009 at 12:59 PM, TMFBabo (99.99) wrote:

Jake, Even if lowering the threshhold doesn't meet muster, I would like to request that the LIMIT order feature be "enhanced" to allow limit orders to be placed on picks that are below the threshholds. For example a stock that is at $1.40 be eligible for a limit order to go active if/when the pick reaches the $1.50 threshhold, so the order is "waiting to go". 

I second this.  I'd like to start limits on currently unrateable tickers so that they start as soon as they're rateable. 

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#17) On September 02, 2009 at 1:58 PM, JakilaTheHun (99.94) wrote:

I'm going to follow BullishBabo and vote for MicroCAPS.  Honestly, I'm not sure which selection I prefer; I want major exchange microcaps to be ratable just as much as I want low-volume .OB and .PK stocks to be unratable, but it's unclear to me whether we will get a solution that will do that, so I'll go ahead and vote for m-CAPS

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#18) On September 15, 2009 at 10:05 PM, CVMp (91.18) wrote:

 

Try using a minimum liquidity requirement where ...

 

Liquidity = average dollar amount traded per day.

 

Liquidity = ave shares traded times price

Anything under $1 million per day is tiny and should be off the table.

 

Also, don't allow any shorting of .OB stocks or stocks on the "Unable to borrow" lists.

 

The other suggestion is to simply appliy a "transaction cost" to all  picks based on known relationships between liquidity and trading cost.  Cheap, thin stocks might be charged 0.20% per side and Google gets charged 0.05% per side.

 

 

 

 

 

 

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