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EScroogeJr (< 20)

One lunacy of Caps

Recs

3

October 26, 2007 – Comments (3)

Today I was looking at the red part of my scorecard, reviewing my losers. One thing that caught my attention was my MWA score of minus 30. Not that it's a bad business or anything, but for some reason the stock has chosen to go down. All right, I felt confident enough about MWA and saw no reason to cut and run. But then it occurred to me that I could cheat on the system by picking MWA-B to outperform (that would be Caps's equivalent of doubling down). Generally speaking, it's not honest, but since everybody else uses that trick, why should I put myself at a disadvantage? So I typed in MWA-B, selected outperform, and was about to leave the page when I noticed something strange. It was the star rating. Yes, while MWA was a 5-star stock, its sibling MWA-B had got only 4 stars from the Caps community. So let me get this straight: the class of shares that is equivalent to MWA in all respects except that it offers more voting power and is 6% cheaper is expected to underperform MWA? Does anybody seriously believe that paying a 6% premium for the same stock is the surest way to better investment returns? The Caps community says yes.

3 Comments – Post Your Own

#1) On October 26, 2007 at 11:43 PM, TMFSpiffyPop (99.39) wrote:

Had you not in a sense been contributing to that "lunacy" by adding intelligence votes to the one, and not (until now) the other? :)

On a slightly more serious note, there is no Big Brother uberlord (or "organizing intelligence") nailing down anything that pokes up. If you see inefficiencies, maybe that's like any other market, eh? But I don't know of any smarter stock database in the world and every day it gets a little smarter (the action you took today is a great example of this, no?).

And by the way, if this link works, you'll see that over the past year, here are their (graphed) performances:

MWA -30%

MWA-B -37%

Real-world results. Why did that happen?

How smart might CAPS actually be? ;)

--David 

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#2) On October 27, 2007 at 12:15 AM, EScroogeJr (< 20) wrote:

Indeed. It is hard to believe, but the discrepancy is getting bigger. I guess, I keep making the same mistake over and over again: assuming that other people are going to behave rationally.

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#3) On October 27, 2007 at 12:47 AM, FleaBagger (29.75) wrote:

They say that to perform the same action and observe the same reaction over and over, each time expecting a variant reaction, is surely madness. That is, expecting others to be rational is lunacy.

That said, CAPS is lunatic. The proof is that my rating is down 16 points today. And I'm great. Hence, CAPS is lunatic.

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