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Varchild2008 (83.74)

Is Motley Fool Caps Picks Broken?

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6

June 29, 2011 – Comments (7)

CAPS SCORE GUESSING GAME!!

Here's how you play!

I provide 2 actual company's All Star Caps Pick underperform/outperform percentages and you guess what the CAPS star rating is.

If you guess wrong...... Then Motley Fool Caps Picks is broken.   Especially if you are waaaay off.

Here's the first company!

This company has All Star Underperform Percentage of 11.1%
Same Company has All Star Outperform Percentage of 88.9%

What's the Caps Rating?

========================

Here's the second company!

This company has All Star Underperform Percentage of 6%
Same Company has All Star Outperform Percentage of 94%

What's the Caps Rating?


GOOD LUCK!!!    You'lllllllllll need it!

P.S.  This whole quiz idea generated after reading sometime ago someone defend the Motley Fool System by not being able to say what the system even is... No one seems to understand how it works.  I know how it works.... It's broken.

You just have to realize some companies even have PRAISE shown under the company description while most company's description is just description.  That's absolute BIAS written in text for all to see....Bias there....bias is everywhere!

7 Comments – Post Your Own

#1) On June 29, 2011 at 9:05 PM, 100ozRound (29.37) wrote:

First company is 3 star.

Second company is 4 star

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#2) On June 29, 2011 at 9:10 PM, Varchild2008 (83.74) wrote:

NOPE!

Close though on the 1st company....... WAAAAY off on the
2nd.

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#3) On June 29, 2011 at 9:48 PM, TSIF (99.96) wrote:

By broken, I assume you mean that you think it's not consistant.   

Unfortunately, you're leaving out valuable data. I don't believe the system is  broken from a consistancy standpoint..  The method to calculating STAR rating is NOT just All Stars.  The higher rated all stars carry more weight.  Also the weighting goes up as the number of picks goes up, (up to 100).

"Players with higher ratings have more influence on a stock's CAPS rating."

If a pick exceeds it's pick timeframe it also doesn't count in the star rating ,but will be in the statistics.

For example a BravoBevo, TMFBABO and a CLIENTNINE would probably be worth 15 or 20 80-85% rated players.

Second the stocks compete against each other for ratings. I take this to mean they are graded on a curve.

"All stocks in CAPS are ranked against one another. So, you may see some stocks with a large bullish sentiment that are only three-star stocks. What this means is simply that there are many stocks that the CAPS community is even more bullish about."

=====================

To your other point some Tickers have descriptions and some don't because of where CAPs gets it's feed. I don't know what you mean by Praise, perhaps and example will help. I don't think CAPS is biased toward any given stock, but I do think that many descriptions and comments change over time and it doesn't get updated.  The mods fix all the mistakes I find usally the same day.

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I don't agree wiht the STAR rating system in several ways.  Too many fools sign up for an account and leave with their picks open.  The accuaracy aspect keeps players leaving thier picks open long after they don't believe in them.  I think part of this could be "fixed" by having a one year maximum timeframe that gets renewed if you're still active and belive in it, else it falls from the count.  Their are 5 Star stocks that have been bankrupt for several years that are no longer pickable.  Open picks are left dangling.  A shorter time frame on it counting would help with these.

Based on yoru example  I don't believe the "secret formula" can be said to be brokend from your examples.

 

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#4) On June 29, 2011 at 9:51 PM, TSIF (99.96) wrote:

PS I'm aware of one company that comes close to fitting your second example. It's currently 3 stars. If ONE player closes their call on it, it will revert back to 5 stars. The percentage will only change slightly.   Maybe not fair, but consistant.

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#5) On June 29, 2011 at 10:10 PM, Varchild2008 (83.74) wrote:

Not revealing anything about these 2 companies until tomorrow and I will go super in-depth on your thesis that the CAPS scores are graded on a curve, pitted against each-other, actually doesn't explain anything.

The 2nd company above for example fits in the same sector as
a company with WORSE picks ratings and yet higher caps score.

You can not have a claim that stock

Stock A =  Less than  it should be cause stocks in same sector score higher....people more bullish on other stocks in that sector.

You can't claim that in this Motley Fool system when I am seeing the exact opposite here.

There's litterally no reason for the CAPS star rating to be what it is and it is NOT  3 stars  IMHO... but nice guess!

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#6) On June 29, 2011 at 10:22 PM, TSIF (99.96) wrote:

The part I think you are sitll missing...again, not saying I'm agreeing or disagreeing with it is that the RANKING of the all stars who have rated it are NOT weighted equal. TMFBabo's call outweights several (perhaps as many as 20) other allstars with lower ratings.   Without knowing the rating of the allstars in your example, the stars could have a wide range. In the example I'm aware of that has the same ratio as your number 2 example with 3 stars, I'm willing to bet that if the 99.92 downthumbing it. If they close their pick it goes to 5 stars.  There is ONE 99.88 upthumbing it. If he closes his pick it probably goes to one or two stars.  There are 12 other all stars ith upthumbs.  Weighting of the allstars, plus the timeframes, plus the sectors, is a secret recipe that on the surface has no consistancy.  The more picks, the more likely it is to balance out.

I'll wager a guess that both your two examples that you find disparity with have less than 20 all star picks.

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#7) On July 06, 2011 at 1:10 AM, krystoff (< 20) wrote:

Interesting discussion on all sides. I am no expert but in my opinion, the fact that there "appears" no simple correlation between CAPS all star ratings and CAPS stock ratings, is probably not because CAPS has run amok, but more likely is evidence of the sincere effort and complexity that has gone into developing the system.

Based on some complex posts by TMFCrocoStimpy,  who was involved in R&D of CAPS data... Motley Fool administration seems to have gone to significant lengths to make CAPS stock ratings "work." And in my guess, similarly to how Google constantly refines its search algorithms, Motley Fool may consider changes in the future--but also may not find it feasible to improve on what they have already done. And as we all know, "what works" mathematically is often not "intuitive," i.e., not what we might expect. There is some correlation between all star ratings and stock ratings but for numerous reasons this might follow some algorithm well beyond a x b = c. For example I present this excerpt from a message by TMFCrocoStimpy:

""""......I draw two conclusions from the work that we’ve done so far.  The first is that the player rating system is sufficiently robust, or sufficiently coarse if you look at it another way,  that nuanced changes in how we describe the information contained within the players is too subtle to translate into a substantial rating change in the stocks.  I’ll take the bait before it is even thrown out and point out that some people will then conclude that the rating system is meaningless….but that is not really the case, because when we eliminate our algorithmic player rating influence and just use an equally weighted influence model, that generates a substantive change in the stock ratings relative to the magnitude of any of the other ideas discussed above that were tested.  What it does open up though is the question of how much better a player with a rating of 100 is to a player with a rating of 70?  That I cannot say because there is no ready definition for what constitutes a “good stock picker”.  Is it likelihood of specific picks generating positive returns?  Over what period of time?  Or is it the likelihood of a large number of picks leading to an aggregate positive return (portfolio management)?  Or something else?  And in defining a “good stock picker”, how can you make sure to account at some level for chance?......""""

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