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Thank you RIMM!

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December 07, 2006 – Comments (16)

To Research in Motion (RIMM), that CAPS call that shows up in glaring red as my worst ever, costing me more than 100 score points all by its little lonesome, I just want to say... thank you! And for seeming, at least for now, to be reversing direction and showing some decline in stock price *after* I ended my underperform call? I want to say... Thank You Very Much!

I hope that 'all time worst' stays up there - and not just because it'll mean that I won't have any even bigger losers in the future. No, I hope it stays up there as a reminder.

You see, when I first started in CAPS, I did a little bit of coat-tail riding. Finding the best stock pickers, CAPS players, and stealing a few of their picks for my own CAPS pick list. RIMM was one such pick, pilfered from one of the best in the business, Bill Mann (known in these parts as TMFOtter). Did I know anything about RIMM? Not really. I knew they had something to do with Blackberries (and at least I knew we weren't talking fruit!), and I knew, from Bill's pitch, that they had decided to keep their technology proprietary.

But that's about all I knew.

Hey, it was Bill Mann for cryin' out loud!

Make no mistake, I'm not saying that Bill made a mistake on his RIMM call. He may well prove to be correct... I really have no way of knowing.

And *that* is the problem.

I made my RIMM underperform call, and watched the stock price climb, and climb, and climb, and climb. All the way up I'm thinking, "Uh oh... did I make a mistake? Did Bill make a mistake? When is the pain going to end? Should I end the pick? Not end the pick? What do I do?"

RIMM isn't my only poorly scoring call. I have a few other stinkers in the mix as well (which is bound to happen given that I've made a total of about 500 picks so far). The problem with RIMM was that I had no thesis... okay, well I did have a thesis, "Follow Bill", but I had no *real* thesis by which to judge the stock price climb. While an investing thesis is important to deciding which stocks to get into, I think it's equally important as a frame of reference when deciding which stocks to get out of.

If one of my ethanol plays scored -100 points, but nothing had really changed, I'd know what to do.

I'd sit on my hands and wait.

I'd wait because I have a thesis, and nothing I've learned, yet, has caused me to rethink that thesis. Not so with my call on RIMM.

I hope Bill proves to be right. First, because I think he's a great guy, a super analyst, and I wish him all of the CAPS success in the world.

And also because it will prove that much more of a reminder to me. I can envision looking at that 100+ point beating I took, on a call that was right all along, just because I had no clue what I was doing and was simply blindly following - rather than understanding the thesis presented and deciding, for myself, that I agreed with it.

So... thanks RIMM! I really mean that. You've reinforced yet another valuable investing lesson I've learned along the way. May that glaring red 'all time worst' score stay on my scorecard for some time to come.

16 Comments – Post Your Own

#1) On December 07, 2006 at 6:49 PM, TMFSelzhanik (99.47) wrote:

Congrats on breaking the 2000 barrier today. That's impressive.

This post is a great argument to why people shouldn't simply "steal" picks without understanding *why* they are picks. Very nice post, Russell. Hopefully Dan reads it! :)

P.S. I saw that AFV Solutions made the top 5 worst stocks list. Fantastic!

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#2) On December 08, 2006 at 12:03 AM, obiwankenobe1250 (88.21) wrote:

Great to see you making 2000.05, TMFEldrehad (a/k/a Russell). I don't know how that worked out but the probability of finishing a day within 5/100ths of exactly 2000 has got to be rather slim. About as low as me ever catching up with you! Jeepers, will ya slow down already!

I do continue to watch your picks, and several of my favorite Fools (mostly in the top 10). As you mentioned, it is indeed is interesting to see how groupthink works here, as well as in politics.

Sometimes, I wish CAPS did allow for a closer simulation to a real portfolio, allowing one to paper trade with all of the resultant costs included. Yet at this point, I'm just glad to be able to learn, both from my own successes and mistakes, and from several others here who are adept at picking stocks, and price direction.

If I'm not mistaken, you're the first to break 2000. Congrats and ... party on, Fool. I hope your successes here help to improve many real life portfolios, including yours!

Obi

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#3) On December 08, 2006 at 12:13 AM, Steve819 (96.21) wrote:

Hey Russell,

Congrats on the 2k mark as well. That is quite an accomplishment.

I have a question though.

Obviously RIMM blew up on you, and your "trust in Bill" thesis wavered, which is perfectly fine.

So, why didn't you noodle around a bit, and build your own thesis to see if you could justify continuing to hold the pick? The beauty of CAPS is that no real money is on the line, and after 5 points, the damage has been done to your accuracy.

Just wondering. :)

Steve

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#4) On December 08, 2006 at 10:35 AM, schnico2015 (70.61) wrote:

Russell,

I have a similar problem with RIMM - I added it as an "Underperform" without doing any real research. To tell the truth, my pick was based on "well, Apple will come out with a SmartPhone and that will hurt RIMM."

Some great research there, right?

I found that I was willing to put in an Underperform based on little knowledge (I don't short stocks in real life, yet). But on Overperfoprms, they are all stocks I am following closely, and I own almost all of them in real life.

The moral of this story, for me, is not to make any pick on a whim. For me, it's got to be something I have followed enough to at least seriously consider betting on or against it in real life.

Regards,

schnico2015

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#5) On December 08, 2006 at 1:23 PM, aaarivera (< 20) wrote:

Wow, I wouldn't mind having a 100 point loser if I had your score...2000!...congratulations...

I actually tried shorting this stock a couple of weeks ago, but I covered by the end of the week after it went up a couple of points...too scary for me. I felt like I was standing in the middle of a street in Pamplona, Spain, trying to stop all the runners along with the bulls instead of running with them.

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#6) On December 08, 2006 at 2:01 PM, wolfersmith (98.67) wrote:

I hate to disappoint you, but Northwest Airlines is coming close to beating your all-time stinker record. Any idea why it continues to go up? Are you going to change your mind on this one or hold out and trust that it's just a matter of time until this dog will die?

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#7) On December 08, 2006 at 3:01 PM, TMFEldrehad (99.99) wrote:

Thanks for all the feedback!

Two points made here that I'd like to respond to.

Fist, why didn't I spend a little more time researching RIMM and deciding for myself whether or not to end the pick? The simple answer is time constraints. I may well do that at some point in the future, but until then I thought the best course of action was to end the pick.

As far as Northwest goes - yeah, that one has been killing me, especially today. Thankfully I seem to be doing well enough on other picks (at least today) to largely offset the impact. I'm wavering on what to do here as well, but think I'll try to tough it out a little longer. Bankruptcy stories don't often end well, and I'm more inclined to take my chances here than I was with RIMM.

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#8) On December 08, 2006 at 10:54 PM, mikeinmadrid (93.42) wrote:

I stil believe in the RIMM short. I copied Bill too. I made a few dollars with a real short too. I'm keeping my CAPS short, Nokia will take down RIMM in due course.

A long bet on RIMM is a bet on hope over reason. RIMM is going down!!

(perhaps)

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#9) On December 09, 2006 at 9:38 AM, tiobueno (99.54) wrote:

That's the result of compulsive picking... I look at the percentile rank of the score, percentile rank of accuracy and the total score/number of all picks ratio (my idea here) for choosing really favorite and useful players i can learn from. Yes, to me, the total score/number of all picks ratio should count 1/3 for getting the rank.

Cheers

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#10) On December 09, 2006 at 5:48 PM, TMFEldrehad (99.99) wrote:

tiobueno,

Of course you can use any method you like for choosing your favorite players - but I'd caution you against using total score / number of picks.

The reason is that had this been a measure in CAPS all along, many, many players would have behaved differently from the beginning. Judging players by a set of rules other than those they are playing under is quite likely to lead to some suspect results. My personal situation aside, Seth (TMFBent), is a *much* better investor than average score per pick would indicate - and it'd be my very strong suspicion that his average score per pick would be much, much higher than it is right now had he been judged against that metric all along - because he would have behaved very differently.

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#11) On December 10, 2006 at 12:19 PM, tommorrowtoday (< 20) wrote:

Your ethanol thesis makes objective sense; however, hasn't ethanol always been about politics and not energy? With presidential elections on the horizon and no real alternative energy solutions in the works, I think ethanol may have some run left in it.

Thoughts?

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#12) On December 10, 2006 at 12:19 PM, tommorrowtoday (< 20) wrote:

Your ethanol thesis makes objective sense; however, hasn't ethanol always been about politics and not energy? With presidential elections on the horizon and no real alternative energy solutions in the works, I think ethanol may have some run left in it.

Thoughts?

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#13) On December 11, 2006 at 11:03 AM, TMFEldrehad (99.99) wrote:

When it comes to politics vs. economics regarding ethanol, I'll hang my jester cap on economics. Politics may well lead to some short-run success for these companies, but long-term success or failure will hinge on economics and even if the politicians subsidize the industry enough to make it work (which I doubt), it'll still be a commodity business with the 2nd and 3rd tier players having little chance for success in my view.

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#14) On December 11, 2006 at 2:48 PM, spinradical (79.12) wrote:

"It's good to lose a battle. It teaches you how to better win the war." I've been losing battles lately myself...

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#15) On December 11, 2006 at 11:11 PM, Novavm (99.89) wrote:

Hello TMFeldrehad,

I deeply respect your top place.

One thing which wonders me is: is it possible to apply your picks with real money.

I think- will not be possible.

I see that you have OTC and pink sheet stocks short.

As far as i know a lot of time when you go short in tiny traded stocks ,squeeze comes very fast.

What do you think?

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#16) On December 12, 2006 at 3:06 PM, TMFEldrehad (99.99) wrote:

It's true that a number of my underperform calls have been made on stocks it'd be quite difficult to short with real money as shares aren't readily available to be borrowed. That's not the case for all of my underperform calls, however.

Not saying you, or anyone else for that matter would, but I would like to add that I would STRONGLY discourage anyone from following any one of my picks with real money on the basis of my having made the pick alone - a lot of what I do in CAPS is experiment with ideas that I, myself, would never try with real money.

That said, since CAPS is a stock picking / stock ranking game and not a portfolio simulation game, I think being able to make calls one couldn't make with real money greatly enhances community intelligence.

The real master at finding junk stocks isn't me, though. That honor I'd have to bestow on Seth (TMFBent) by a country mile. What he's done, and what he's uncovered, has been absolutely incredible - and I have learned a great deal from his efforts.

CAPS, ultimately, is about finding the best stocks in my view. Part of finding what to invest in is finding what *not* to invest in and I believe that exposing some of these fly-by-night companies, as CAPS has so far done a darn good job of doing, helps immesurably in that regard.

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