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hall9999 (99.55)

Mission Statement - Fewer clients. Less money.

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October 19, 2007 – Comments (6)

  Yeah, "Jerry Maquire".  Anyway, as it applies to CAPS - I know it's not what you want to hear, but I think we would be better off if you picked fewer stocks and got fewer points. 

  TMF wants us to pick a lot of stocks so that they can aggregate a lot of data and combine our intelligence to come up with ratings that are more accurate and cover more stocks than the pros.  But you can't make a worthwhile analysis of 200 stocks (unless you just do a few at a time) and you certainly can't keep up with all of them.  Anyway, at this point we are 37,667 strong so is it even necessary?  To paraphrase a TMF criticism of Wall Street, "AAPL has 9595 picks.  Will one more tell you anything new?"

  Is someone with 5000 points a better stock picker than someone with 500 points?  If they do it over the same time frame and with the same number of picks then yes.  However people start at different times and have different numbers of picks.  Not only do new players need to pick a lot of stocks to catch up but they also need to take more risks.  A good player can achieve high accuracy pretty quickly but points take time.  Without a fair way to compare players that overall score benchmark will just get farther away from new players as time goes on.  Anyway, I'm not trying to say you shouldn't try to get lots of points.  You should just do it with a number of stocks that you can reasonable keep track of.  And there's nothing wrong with taking risk.  Since this isn't a real life portfolio that is tied to your level of assets and when you plan to retire then the consideration of risk only applies to your goals for CAPS and to what stocks move you to provide some input.  But as time passes and overall scores get higher, picking risky stocks to hit big winners becomes a necessity for new players to catch up. 

6 Comments – Post Your Own

#1) On October 19, 2007 at 4:50 AM, fransgeraedts (99.93) wrote:

dear hall,

i am still just a beginner. But i have -like you- been thinking about caps and its pecularities.

A few thoughts.

I think we should not alter the rules to quickly. Let see how this plays out for a while longer. People adapt, invent, circumvent. Observing and participating in that will be worthwhile. For example: new strategies are coming to the forefront. You could call them sectorpicking instead of stockpicking. Among other things they are an answer to the question you raise above: how to amass points without taking on absurd (and therefore selfdefeating) risks. TMF wants to raise us as buy-and-hold-stock-picking children... . Some of us are exactly that. But others grow up into something completely different. I think that is interesting, exciting, and for caps as an investment tool very very good.

In general i think we should alter caps not by taking something away but by adding features. If possible in a way that adds complexity and opens up possibilities instead of limiting them.

One of the things i learned (again) from Caps is how important praise is. Especially if deserved. The lucky charms do that very effectively. I think one of the solutions to the problem of "catching up" already exists -but could be used more extensively and better.  Most charms i can aim for irrespective of wether i am new. In effect some of them are more easily achieved when being new. (hottest week,month, 100 over 100) That mitigates partially the depressing look upwards at those 1000's of points. (How could it be used better? make more charms that are directly related to new players. Also, and i think very important in general, you should never lose a charm once you gain it. Being for example hottest player of the month is very difficult to achieve. If you have done it, that should stay visible. An easy solution would be to change the coloration of a a charm when its no longer true..but was.)

A second solution that allready exists, is the new player category in itself. Within that category i am competing against people that are more or less in the same situation as i am. Therefore i can, in the beginning, measure myself against them instead of against all of caps. It is possible i think to make that existing feature more visible and prominent. For example by giving not one percentile (what is my position within all of caps) but giving two (what is my position within the new players.)

Over time however the existence of the new player category will not suffice. When caps is 10 years old the gap between beginners and the succesfull among the old hands could be unsurmountable indeed. (Think of it as trying to catch Warren Buffet in dollar terms) The solution should be i think along the lines of the new player category. People should be constantly compared both to the general community (including the WB's) ánd to people in their "age" group. We could for example compare everybody to the group of people that entered in the six months surrounding their own entry date.

Your suggestion of limiting the amount of stocks people can choose intrigues me. I do not think it would solve the new player problem. In 10 years time there will be WB's among the limited stockpickers as well. But i nevertheless think that done in a certain way, your suggestion could give caps another dimension, would be a welcome addition.

I would like to see it introduced among lines like this. There should not be a change in the general limit. Those 200 stocks are fine and they give room to a plethora of strategies..which is as it should be. However within that and as an extra possibilty people should be able to create like a sublist of stocks that is rated seperately. They should be able to do that simply by marking a stock already in their portfolio. (It would give meaning to the dollar sign!) The rules for that sublist are debatable but in keeping with the TMF tradition and aims it could be something like this:  You enter the rating only after you have marked a minimum of 20 stocks. You may enter no more then 30. All of the stocks should be outperformers. You have to hold a stock for at least a month. If the number of marked stocks drops below 20 you drop out of the rating. (From this point there are two choices..either your points score is frozen and if you enter again by marking more then 20 stocks you begin from zero...or ... if you enter again you unfreeze your score and add to the existing points)

Thinking about Caps is just as important i believe as thinking about our stockselections. This is a game, an information mine and an important experiment in collective intelligence. And it is fun,

 

fool on,

grin,

fransgeraedts

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#2) On October 19, 2007 at 8:15 AM, jsthwrth (95.27) wrote:

I would support adding "average pick score" as another way of ranking CAPS players (in addition to accuracy & score). It would rid some of the disparity from those who picked thousands of stocks to those who picked only in the teens. I think I respect someone whose average pick score is 10 more than someone's whose average pick score is 1.something.

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#3) On October 19, 2007 at 9:19 AM, hall9999 (99.55) wrote:

  It should be noted, I'm not advocating a change in the rules for CAPS.  I recognize that not everyone uses CAPS to demonstrate their skill as an analyst.  I think the flexibility that CAPS allows is fine.  If  people want to use it to keep track of stocks they like, or if they want to "win", or try out different strategies, or pick every stock in one sector they should be able to do that.  I'm merely suggesting that the stock ratings and analysis would benefit from people limiting themselves to stocks you can look at and watch closely enough to provide an informed opinion.  As for points, player comparisons would be easier if more people played this way but I would be happy if CAPS just provided more ways to compare players and added more data such as montly/quarterly and yearly player rating.

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#4) On October 19, 2007 at 9:26 AM, Gtrinvestor (99.88) wrote:

hal9999

I'm w/ you on this one.  I have posted 2 separate blogs with the same assertion, basically stating that anything over a certain number of picks begins to become simply sector plays rather than a decent focus on individual companies.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=18478&t=01009056218036619047

&

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=17248&t=01009056218036619047

.On the 2nd blog TMFCramerica noted the point and said they would keep it a consideration for at least future contests (which is what my immediate beef concerned).

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#5) On October 19, 2007 at 9:28 PM, hall9999 (99.55) wrote:

  It should be noted, I'm not advocating a change in the rules for CAPS.  I recognize that not everyone uses CAPS to demonstrate their skill as an analyst.  I think the flexibility that CAPS allows is fine.  If  people want to use it to keep track of stocks they like, or if they want to "win", or try out different strategies, or pick every stock in one sector they should be able to do that.  I'm merely suggesting that the stock ratings and analysis would benefit from people limiting themselves to stocks you can look at and watch closely enough to provide an informed opinion.  As for points, player comparisons would be easier if more people played this way but I would be happy if CAPS just provided more ways to compare players and added more data such as montly/quarterly and yearly player rating.

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#6) On October 23, 2007 at 3:53 PM, TheGarcipian (86.14) wrote:

I agree with you both, hal9999 and Gtrinvestor. However, fransgeraedts has some very interesting points, ways for augmenting the CAPS rating system. (He obviously put some good thought into it). Personally, I like his idea of using the "dollar sign" column for picking your best 20-30 stocks (Actually, I'm keeping it to my best 10%, which makes for 20 stocks out of the 200 I have chosen). Also, I like the hal's idea idea of adding charms for the best 3-month, 6-month, 12-month players, and fransgeraedts's idea of giving you those charms for life (though they be greyed out if the title no longer applies currently). Do either of you know if TMF is compiling these suggestions in a public forum that we can review?  Thanks,

--Gar 

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