Use access key #2 to skip to page content.

Puzzle for CAPS Experts



January 03, 2009 – Comments (12) | RELATED TICKERS: AAPL , GOOGL , MSFT

I began participating in CAPS yesterday by entering 194 picks (98 outperform, 96 underperform) before the market open. All picks were the result of a stock screen. I closed the day with a member rating of 89.96 -- it peaked above 95 during the day.

I'm not foolish enough to believe that this performance is simply a product of my genius (which is, admittedly, considerable ;-)) Given that I have no "accumulated" score (i.e. no closed picks), my best hypothesis to explain such a high rating is that the number one predictor of member ranking is the number of open picks.

A friend of mine suggested that the percentage of 'undeperform' picks may also be highly predictive.

Of course, I could simply have been lucky on my first day.


Alex Dumortier, CFA (XMFMarathonMan)

12 Comments – Post Your Own

#1) On January 03, 2009 at 11:53 AM, madcowmonkey (< 20) wrote:

Active picks also count in rating. You scored 187 points with a 55% accuracy, whih in turn means you are rated at 89. Score is determined by 2/3rds accuracy and 1/3rd points.....something like that. I wouldn't put too much into the ratings:) Others tend to disagree.

Report this comment
#2) On January 03, 2009 at 12:06 PM, kaskoosek (30.20) wrote:

A member rating of 89 is easily reached.

What is indicative of your performance at this point should be average pick score and accuracy which both in my oppinion are very close to average.

Report this comment
#3) On January 03, 2009 at 12:08 PM, chk999 (99.96) wrote:

The CAPS ranking system is very sensitive to the accuracy rating. Since open picks in the green count for that, it is pretty easy to open a bunch of picks at the right moment and have the accuracy rating (and any postive score) move you up pretty high.

A truly random set of picks should be around a 50% accuracy and a score of zero. The fact that a postive score and somewhat better accuracy moves you up so much shows that most CAPS players are worse than a random set of stock picks.

Report this comment
#4) On January 03, 2009 at 12:14 PM, Option1307 (30.68) wrote:

Sweet first day. Congrats on that.

I would say the most important factor on Caps is time. Literally the amount of time you have been an active member. In my eyes, this sorts out the "winners" from the "losers" in this awesome game of Caps.

Good luck!

Report this comment
#5) On January 03, 2009 at 2:13 PM, TSIF (99.98) wrote:

Welcome aboard, have fun.  Be careful out there with the real money….and oh….no matter how good you do here and how much your head swells, your cool Fool’s Hat will adjust to size!  If you are good at racking up points, try working on your accuracy or you will never hold about 99% where the best of hats are.  Basically below 98% is a free for all, which does seem to make it confusing in the beginning when you first get started.

For your score.  Click on the "how are these stats calculated” on your Caps page under your score (just under the daily chart).  It will give you your percentile rating for points and accuracy and the blended score.  If you are positive, but  below 800 points and 50% accuracy then your caps will change colors every day with the market faster than you change shirts.  If you are mostly thumbs down then in an up market you may take a beating, (unless you are more right than the marker).  If you are mostly thumbs up then you can sink rapidly on a market down day.  Not all stocks move with the market so closely. Some will move opposite of the market. The more picks the more you will tend to follow the market. You can go from a cool multi-colored fool's hat to a propeller head in a day.  The "coldest" one day player award can be your compensation for the return of your propeller head. (I’ve done the cycle, and will always cherish my one day coldest award.  Only one person in 60,000 can carry this award on a given day. It coincided with an ice storm here in New England so was very timely, see my blog).  Since I'm here both to learn and as an investor, this is a cool place to be, score or not.  The other fools here, especially the long timers with the coolest (consistently) hats are very helpful and lots of fun and help.

For scoring, Alex, as Mad Cow indicated, open picks up and down count.  On a volatile day such as yesterday your points can swing by the hundreds.  The ratio that Mad Cow gave you shows that while points count, accuracy will weigh in when your point count goes positive. The range between a 20 cap rating and an 80 cap rating is VERY, VERY small.  AS chk999 indicated over 60% of the CAPS players are in negative.  This is from many reasons, the largest of which, (IMHO) is that most caps players aren't very active.  Those who set up a portfolio prior to this bear are mostly negative at this point.  Some have done rather well with an "unmanaged" portfolio when they picked conservative stocks that are better at recessions, because the decline in the S&P was greater than the decline in the stocks they picked.  In a turn up from a recession, the S&P, with small caps usually beats the bigger more recession proof stocks.  (In a normal market, this isn’t one).  The second largest reason most are negative is that they don’t understand the SPY/S&P relationship.  A “good stock’ you’d love to have in your real portfolio for a balanced mix, won’t necessarily beat the S&P on a rally.

Yes, you had a good day.  You got in when energy stocks were having an up day. Many of us have wrongly thought energy stocks had bottomed months ago, so suffered with our score. If they hold up they you should do well, but diversity is key. We should come out of the recession in stages. I'm not quite so sure that I'd thumb down the REIT's as you did, but most of my fellow CAPS probably would also. The sector loading can create some big swings!  The oils, financials, REIT's and small caps in your list should make active point changes.

If the market were normal, then you could leave things unattended longer with the right blend. In this market, if you don't close positions from time to time you could eventually lose out.  When you close a position you lock your score, (and better still your accuracy if you can hold a stock that is not performing for a brief bounce without it knocking down your point score and becoming unlikely to ever be green again).


Report this comment
#6) On January 03, 2009 at 4:58 PM, Gingerbreadman55 (27.31) wrote:

I also would like to add that scores for many accounts are in the toilet from this year's action. Helps to explain why just being positive puts you in the top 50 percentile



Report this comment
#7) On January 03, 2009 at 6:13 PM, Tastylunch (28.63) wrote:

madcow and CHK and the rest gave you the goods,

just wanted to say welcome, and I've really enjoyed your fool articles in the past

Report this comment
#8) On January 04, 2009 at 12:32 AM, rwandamassacre (99.85) wrote:

Hey marathonman,

Didn't you have some CAPs picks in the past? It seems that they got wiped clean and you were allowed to start again.

What's that about?



Report this comment
#9) On January 04, 2009 at 1:25 AM, hall9999 (90.73) wrote:

  Gingerbreadman is right.  Anybody who starts a new account has a leg up on most of the players here.  Heck you could make the minimum 7 picks, have 0 score and 50% accuracy and still be in the 58th percentile.

  Option1307 is right that time is the most important factor.  At the moment it would appear that the lack of time is in your favor (except against the all-stars who already have a decent score).  This is why CAPS really needs to start ranking people by time period... i.e. each person's performance is ranked over the last 3 months, 1 year, 5 years, etc.

Report this comment
#10) On January 04, 2009 at 11:48 AM, TMFAleph1 (91.92) wrote:

Thanks for the responses and thanks, Tastylunch, for your kind words about my articles.

Alex Dumortier (XMFMarathonMan)

Report this comment
#11) On January 04, 2009 at 12:21 PM, rwandamassacre (99.85) wrote:

"After all, showing up on a screen would be no more than the first step in a long vetting process before a stock becomes a recommendation"

I don't understand why you are picking stocks in CAPS via a screen when you stated last year that a screen is only "a first step."

Why don't you further vet your stock picks before recommending them in CAPS? Seems hypocritical, no?



Report this comment
#12) On January 05, 2009 at 10:35 AM, TMFCHarris (98.69) wrote:


Actually, the number of open picks is not as much a predictor of a high rating as a predictor of an extreme rating. Here are the average open picks by rating. To keep things consistent in the CAPS universe, I've broken these up by quintile.

Top Quintile - 30.84 open picks
Second Quintile - 16.55
Third - 14.27
Fourth - 17.49
Fifth - 37.51

As you can see, the correlation is fairly balanced on either side of the median - the more picks you have, the more likely you are to have a really good, or a really bad, CAPS rating.

Fool on,

Report this comment

Featured Broker Partners