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JakilaTheHun (99.93)

The Double Elite Century

Recs

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April 01, 2010 – Comments (13)

During my time in CAPS, there has always been a lot of discussion on which metrics are most relevant to selecting the top CAPS performers.  Most feel that the "ratings" are skewed by the accuracy component.  While "rating" is the official measure that CAPS uses to rank players, it's not necessarily the most useful one. The only problem is that the alternatives aren't perfect or clear, either.

First off, there's score.  Most agree that score might be better than "rating" since it abandons the accuracy component, but it also has its flaws.  Since returns are measured based on one's initial position, this tends to skew score with time.  However, the "score" shouldn't really be all that skewed until after a number of years, so it still serves as a reasonably good measure of performance.  The second problem with "score" is that it tends to discount investors (e.g. someone like Wax) who will only make a limited number of high-conviction selections.  Hence, Warren Buffett would have a very good (but not spectacular) rating on CAPS, but he'd be held back by a lower score.  

Now we can view results by average returns, but this creates a problem as well.  Once again, returns are based on initial position (just like score), so this measure can become distorted with time.  Moreover, since "rating" is the official measure used to rank CAPS players, many might be sacrificing average return in order to build accuracy.  While some might disagree with me, I view "average return" as a poor measure when used alone; but it is more useful when used with other metrics, such as score, accuracy, etc.

We also now have "top underform members" and "top outperform members".  Both metrics are useful in seeing where one earned their points.  "Top outperform" is generally a better measure than "top underform", however, because the existance of leveraged-bias funds which have volatility decay.  Too many players "game" these funds in order to artificially boost their CAPS score.  It's also worth noting that many players will red thumb so-called "garbage stocks" that are normally traded OTC.  These are essentially free points; but it's difficult (and risky) to try to short these in real life.  However, despite flaws, there is still some validity to the underperform measure; one simply has to probe beneath the surface a bit more.

Realistically speaking, in order to find the best CAPS investors, I think you'd have to quantify the results using more useful metrics (e.g. average yearly return, sharpe ratio, sortino ratio, etc.) and you'd probably have to create an entirely different system.  Which reminds me --- if anyone from TMF is reading --- PLEASE, PLEASE, PLEASE create a CAPS Portfolio game to go along with the regular CAPS.  Everyone would get $10 million to invest as they please and go from there.  It's a great idea, methinks ;)

But I digress ... this entry is about some of the measure I have established in my head as indicators of great performance.  I evaluate the CAPS portfolios and I have my own opinions on which top-rated CAPS members are there because of flukes and/or gaming the system and which ones are the real deal.  Those who have made their points from actual stock positions (as opposed to ETFs and pump-and-dumps) are more likely to be great long-term investors.  Also, those who have continually performed well, rather than betting the bank on one-way movement at a particularly opportune period of time (e.g. going all long on leveraged ETFs at the bottom, or going all short at the top), are more likely to be good long-term investors.

There is one measure of performance I have had in my head for awhile.  It is by no means the best measure to predict the best performers here.   Rather, it's been a goal of mine to achieve this measure.  I call it ... and hopefully this name isn't too clumsy ... "The Double Elite Century."  

The Double Elite Century

The name sounds silly, doesn't it?  To tell the truth, I only named it right before writing this blog.  It has been in my head for a long time, but I never gave it a name until now.  In any case, you're probably wondering what the "Double Elite Century" is, right?

A CAPS player who has achieved the Double Elite Century ranks in the top 100 "Top Outperform Members", as well as the top 100 "Top Underperform Members."  There are only four CAPS players who I can find that currently achieve this distinction:

Bravo Bevo (#4 in outperform, #5 in underperform)
Vanamonde (#67 in outperform, #30 in underperform)
Fransgeraedts (#34 in outperform, #64 in underperform)
Wiiz (#71 outperform, #94 underperform)

In order to achieve this feat (as of today), you need about 7,000 outperform points and 3,475 underperform points.  

There are several more who are close including myself:

JakilaTheHun (#51 in outfperorm, #123 in underperform)
Bradford 86 (#148 in outperform, #49 in underperform)
LawfordCap (#114 in outperform, #81 in underperform)
Tenmiles (#235 in outperform, #39 in underperform)
Gembree (#107 in outperform, #114 in underperform)
BrandonRoot2075 (#193 in outperform, #80 in underperform)



But first off --- don't get me wrong.  I'm not here to brag about myself.  Truth be told, I've racked up some underperform points from red-thumbing leveraged funds and garbage stocks.  Between the two, it's probably only about 1,000 points, so it does not detract from my total score by much, but it does detract from my underperform score a bit.  However, it's worth noting that most of the people around me in those rankings probably benefitted as much, or even more from the leveraged funds and garbage stocks, so it's unclear to me where I would stand if they did not exist.  In any case, I quit playing those funds several months ago because I wanted my score to be as realistic as possible and to come from investments that one could actually make in the real world (whether long or short).  

Of our list, I view vanamonde's record as the most impressive.  Vanamonde has a few garbage stock red-thumbs, but for the most part, it's about as clean as a CAPS portfolio (other than portefeuille's) that you will see.  

Fransgeraedts has also created quite an impressive record on both sides of the fence.  Once again, the underperform score is aided by red thumbs of short-bias funds, but otherwise, frans' portfolio is very clean.  

BravoBevo is a true CAPS sage, but such a large portion of his points comes from playing the volatility on trash stocks.  It shouldn't detract from his investing acument --- he still is very good at what he does.  It's simply difficult to tell how good from the CAPS profile alone.  That said, I believe it's completely possible that Bravo would achieve the feat or be close to achieving it even without the garbage stocks.

Of the four qualifiers for the "Double Elite Century", Wiiz's profile is most suspect.  I never encountered this profile before today; thought it might have been some hidden genius profile that no one knew about.  Well ... not so much.  Wiiz has been inactive for 10 months and racked up about 5,000 points from leveraged biased funds.  It's also worth noting that all of Wiiz's picks came between April '09 and May '09 and were almost all bullish.  This profile could some day be in the top 20, without every doing anything again due to the flaws in CAPS' rating system.  


Of our near-qualifiers, Bradford86 has an impressive track record.  In fact, that's Glen Bradford's profile and he now runs his own hedge fund.  He could have easily made the top 100 outperform members list if he were trying to.  Ironically, however, his underperform score is better than his outperform because nearly 5,000 underperform points come from short-bias funds.  So, even if his record is great, it probably wouldn't be prudent to consider him great on the short-side from his CAPS profile.  

Tenmiles should be noted because he has one of the best track records in all of CAPS.  IMO, he might be the best red thumber on CAPS since many of "top underperform members" are simply perma-bears who happened to be in the right place at the right time. He's a bit more conservative in the companies he choses to green thumb, however, so this might explain why his outperform score is not in the top 100.  

Gembree's record is pretty good, as well.  As with most people on this list, Gembree has racked up some points on biased-funds and garbage stocks, but gembree's record is good even if you ignore all of that.  


In any case, that's the "Double Elite Century".  Not sure if I'll ever qualify for it and I don't know if obtaining the status is particularly meaningful with the CAPS flaws, but it is interesting nonetheless.

Future Game Suggestions

One final note.  I want to make one suggestion to CAPS on the ratings.  This game will become meaningless if the returns calculation is not fixed at some point.  

CAPS should start measuring returns based on a one-year time frame.  Hence, if Stock A returns 50% S&P returns 20% in one year; then, both Stock A and the S&P return 20% in Year 2, you should get a score of +30 for Year 1 and a score of +0 for Year 2.  Under the current system, you would get a score of +36  (Stock A will record a return of 80% and S&P will record a return of 44%) and you would be rewarded for your market-performance in Year 2.  This is not that bad in a short-term timeframe, but over a period of 5-10 years, huge discrepencies will start to occur.  

Some of these profiles that simply came in and picked a bunch of bullish picks (e.g. red thumbing short-bias funds)  will probably be at the top of the ranking 10 years from now, even if they never make a pick again.  Indeed, we're already seeing this to some extent if Wiiz is any indication.  In the real world, these profiles' record would not be impressive, but CAPS will reward them expotentially more over the long-term due to the flawed scoring system.  

13 Comments – Post Your Own

#1) On April 01, 2010 at 12:24 PM, FleaBagger (29.21) wrote:

I would like to add that BravoBevo has made a surprising amount of outperform calls on what the rest of us would consider garbage stocks. 

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#2) On April 01, 2010 at 12:26 PM, TigerPackFund (< 20) wrote:

Jakila-

From my research, you clearly are one of the Top 10 or 20 CAPS minds and performers the last few years.  Keep up the great work. 

I also vote for vanamonde as the single best "regular" stock picker on CAPS. 

I would have invited him to the WSS "hedgefunpractice" experiment, but he has shown no interest in the team concept we are pursuing or the TigerPackFund creation.  I assume he already works for a large hedge fund or brokerage from the shear number and timeliness of his correct picks.

Don't completely knock market and sector timing on CAPS however.  Fortunes are made (and lost) in the real world quickly nowadays, by using ETFs, and picks or pans in one sector or another....  The "market" index short ETFs have proven particularly bad buy and hold investment ideas, and the CAPS community was quick to figure out the flaws of compounding and time decay inherent in them.

-Tiger's Two Cents

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#3) On April 01, 2010 at 12:32 PM, edwjm (99.87) wrote:

I still believe that inactive members are the biggest flaw in CAPS.  Allowing a set of stocks to set for a long period of times is a gamble.  Some players will do well this way simply by the luck of the draw, others terribly for the same reason.  I am not suggesting that members be forced to change their picks with a minimum frequency, only that they be required to reaffirm their choices - by responding to a warning email, for example.  Accounts that appear to be utterly abandoned should be removed.

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#4) On April 01, 2010 at 12:35 PM, portefeuille (99.66) wrote:

I think 2009picks might be a really good player. He made 196 "outperform" calls on 01/02/09 (the low of the S&P 500 index at 01/02/09 is at around 899.35 and the high is at around 934.73).

He did not end any of those calls (probably. 5 delistings happened) until 03/10/10 when he started ending a few calls and starting a few new "outperform" calls.

I barely manage to stay ahead of him and I have done quite a bit with my portefeuille player.

2009pix made 187 "outperform" calls on 01/02/09. Since then nothing but 8 delistings. I think he should return as well, hehe ...

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#5) On April 01, 2010 at 12:38 PM, JakilaTheHun (99.93) wrote:

TigerPack, 

Vanamonde is in my top 5 for certain, and might even be my #1 pick on CAPS.  

I'm not knocking sector timing; just that I don't see those who obtained their rating from one correct call in one of the most volatile markets in history as necessarily being good investors. It takes a consistent track record over time; otherwise, the common phrase, "even a broken clock is right twice a day" comes to mind.  

My other concern on this issue is that most of the profiles that are at the top right now from "timing the bottom" were only created from Feb to May of '09.  Almost none of them had prior history; which could indicate that they create several profiles continually going "all-in" in order to try to time the market bottom.   How do we know that these profiles didn't do that?  We don't. 

Of course, this wouldn't make much of a difference, except that the CAPS scoring will continue to reward them 10 years after the fact; whereas, real world "scoring" wouldn't be nearly as kind. 

 

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#6) On April 01, 2010 at 1:16 PM, zzlangerhans (99.78) wrote:

In terms of players worth following with real life buys - the only ones I consider doing this with are Vanamonde, Tenmiles, and Ultralong. Vanamonde has helped me make substantial real-life profits several times, especially in biotech. If only he green-thumbed more, but then he probably wouldn't be as good. There may be others but since MF has no interest in providing tools for screening players, I can't find them. Other players I consider great such as Portefeuille, Bullishbabo, Translator999 are too risky since some of their green thumbs plow into the ground like F16's with seagulls in their engines. As Port points out in comment 4, there are probably dozens of dupe profiles in the top 200 created as a blind shot at a market bottom. Future picks from these should be completely discounted as predictive. It's amusing that new and low-ranked players consider "All-Star" or "99th percentile" meaningful accomplishments, when at 99.6 I'm still barely ahead in this irrational market. Right now I think the only way to identify real-life predictors is for the more serious people here to identify them and share them. Threads like this are a great start.

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#7) On April 01, 2010 at 2:11 PM, Option1307 (29.65) wrote:

Good post Jakila, and very thought provoking.

I agree that there certainly are a lot "top Fools" that made their names from calling the market bottom last year, or the top several years ago, and this doesn't necessarily make them good stock investors. In order to distingusih the "good" from the "bad", I look at the length of time they've been a Fool as well as checking out their active and closed picks. This really can shed light into how they made it to the top and if it was purely luck. I also believe that peoples' character/logic/reason can really show through in their blogs and IMO, this goes a long way in determining if they are a good investor etc.

The issue with market timing is difficult to address, but it is definitely important, and as Tigerpack mentioned, can make or break investors. While I don't give many top Fools credit for using the decaying ETF's to their advantage at the market bottom, the same argument can sort of be made for any Fool that heavily picked outperforms during the last year. In all honesty, if you went long a stock anytime in spring/summer/fall 2009, you are highly likely to be outperforming. It was just a matter of throeing darts, they would all be winners! This certainly wasn't a typical or average market to say the least. So, I guess what I'm trying to say, is that many "Top Fools" may have inflated/unrealistic scores, even without the use of ETF's/etc. that are in no way indicative of their stock picking ability.

To be clear, I like your style a lot and definitely respect your opinion, but just go with me on this example. Someone could easily make the argument that your score is just lucky and you essentially called a market bottom as the majority of your picks didn't occur until early/mid 2009. Yes, you didn't use ETf's, but as we mentioned above, any clown throwing darts at a board could have made serious coin last year. The same logic could also be applied to Portefuille as well (again, I respect his skills, but you see my point).

I think the only way to truely gauge a Fool's stock investing ability is to factor in the time component, how did this Fool perform over multiple yrs. and did they perform decently in both bull/bear markets? I'd love to see TMF add score history for the Fool's entire Caps history.

Some of these profiles that simply came in and picked a bunch of bullish picks (e.g. red thumbing short-bias funds)  will probably be at the top of the ranking 10 years from now, even if they never make a pick again.

Pretty much agree here, although there is one point I'd like to make. Let's take the example of DWOT. She has been largely inactive recently (last 1-2 yrs.), yet still retains a high Caps rating b/c of the killing she made during the 2008/09 market crash.

Is this fair?

Well, on one hand I agree it is problematic b/c she is being continually rewarded for doing nothing and bringing nothing substantial to the Caps game. She arguably made one good call (damn it was a good call!), and now is basking in all the glory b/c of it without adding much else. However, she has stated many times that she does not like the current market valuations and therefore chooses to take herself out of the game/market basically all together. She believes protecting her assests is more important than risking them in an unfavorable situation (in her opinion). To me, this is actually good advice and should be rewarded (if this is the true rason for her inactiveness). Protecting your capital and sitting out until you feel more confident is NEVER a bad idea.

Thus, what is the right answer to this problem.... No idea!!!

Thanks again for the sweet post.

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#8) On April 01, 2010 at 3:38 PM, CharlieBeLong (29.67) wrote:

Nice post.  Very good ideas.  ESPECIALLY the Portfolio game.  Not only would this be fun, but it would seem more realistic.

=======

One alternative solution that would encompass many of yor ideas would be to calculate POINTS PER DAY.  (You could multiply this times 100 if people don't like decimals.) 

Example, a trade that currently calculates to 10 points.    Stock ABC goes up 25%, S&P up 15%.  But, if you divide the points by the holding period,  50 days, then you get 10 points divded by 50 days time 100 equals 20.  [10/50*100=20].

A 10 point trade that is held for 25 days would be 10/25*100 or 40 points.  

Even if this is not used in calculation the rating, it would be a great proxy for annual return and very useful in identifiying top CAPS traders. 

=======

Finally, someone had the idea...I think Tasty Lunch to have points dwindle over time.  For example points accrued during the last 12 months accrue at 100%.  Points accrued during the previous 12 months at 80%, and points prior to that at 40%.  Or some other arbitrary number.  That puts a little more pressure on people to continue to outperform.

 

Thanks for the discussion.

 

 

 

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#9) On April 01, 2010 at 4:33 PM, TMFBabo (100.00) wrote:

I agree very much about the compounding score and think it's a worse problem than accuracy (which is itself a problem and causes players including myself to end picks early).  I like the proposed solution of diminished future compounding.  Personally, I sold my soul early on, closing picks with low cost bases and re-thumbing to get higher accuracy. 

Major reform to the scoring system would be tough because the foundation is the star rating system.  If the scoring metrics were to change drastically, I would change my style drastically.  Why? I enjoy trying to get to and stay at the top.  I play to score points at a high rate of accuracy, not necessarily to provide real investments for people.  The two aspects coincide often, but diverge badly sometimes.

Regarding Bravo, I think he could make a lot of money even without using thinly traded stocks.  The ability to score points with that much consistency translates to profits in real life - I truly believe that.

Two players I respect quite a lot for their individual stock picking abilities are vanamonde and tenmiles.   The players you listed are all great players, to tell you the truth.  I respect a player's ability to value individual stocks both long and short.  That to me means that you truly understand valuation of individual securities, which is the only approach that makes sense to me.

My favorite red thumber of non-garbage securities is actually streetflame.  He's a solid player going both long and short, although he doesn't make the double elite century list.

@zzlangerhans: Most of my picks are just stock screen fodder chosen after a 3 minute glance at the financial statements.  I will unfortunately continue to have some of my picks crash and burn badly.

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#10) On April 01, 2010 at 7:04 PM, zzlangerhans (99.78) wrote:

Yup, fortunately for you nowhere near as often as mine do.

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#11) On April 02, 2010 at 12:19 AM, Tastylunch (29.20) wrote:

Nice blog Jakila

Double Elite Century

hah I'd probably call that a double triple if I named it. Too much sports on the brain for me. :)

I think one of  CAPS's game biggest problem is poorly communicated mission to its Players. Every week I see hordes of complaints of why isn't there weighting or other concerns related to portfolios or stock picking. The players four years later still don't get what this game is.

I know when I first got here, I assumed like most do that it was a portfolio game. Then I looked in the FAQ at the scoring and went ohhhhhh.

It's not really a portoflio game of course, the best fit I can say is that it is basically a sell side analyst game.

So theoretically accuracy should be really important in that aspect. Since that seems to be the main metric analysts are supposedly judged on (well if you are assuming they actually were to do their jobs instead of sugarcoating things for preferred clients)

but the problem is I bet the majority of players never figure that out.

and another problem is you have gamers like myself who abuse the heck out of it. I freely admit I'm just chasing accuracy at the moment I don't care what happens to my points. I mainly use my CAPS port as a watchlist or experimental ideas.

what I think CAPS scoring needs (even to be a better sell side analysts game) is some element  of "pain". Right now it's pretty effing painless to let losing pick ride as long as you want. I've had a couple whim red thumbs blow up mega large, but it's taken them over a year before they did me any real damage ( I do miss being in top 100 but I don't really care if I get back or not right away). All the while I picked up another 8 points of accuracy.

I think that's what needs needs to change, Sell side analysts have a lot pressures and Conflicts of Interest in the real word I wouldn't want here, but they are at least forced to admit mistakes when they make them.

another problem is that once you get to 99+ you could stay there indefinitely if you shut down most of your picks like Everdayinvestor or Dwot. So I think there should be a one year rolling rank as well to encourage continued activity.

would be nice if our outperform and underperform scores were displayed somewhere on our CAPS page.

+1 to your CAPS portfolio game idea. I think a lot of people here would really like that and most would probably prefer that. The problem I suppose for the Fool would be whether that option would erode the talent pool here. I bet a high % would only play game or the other and since the Fool uses CAPS ratings in their newsletters and mutual fund I don't think they'd want that they'd want to lose some of their best raters to a portfolio game.

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#12) On April 04, 2010 at 10:10 PM, sentinelbrit (85.17) wrote:

You only find out who is the best stock picker when real money is at risk and when conditions mirror real life. Mutual fund managers come in for a lot of criticism for underperforming the indices. In truth, over time less than 50% of managers will beat the market. Why? Because for every buyer there is a seller and because of costs. To outperform you have to take risk and the best managers have periods when they underperform - sometimes significantly. The best managers have reasonable overweight  sector or stock positions relative to the index. Managers whose portfolios resemble the index will never outperform over 3-5 years.

I am not a great lover of performance measures that factor in risk. Modern portfolio theory will say that many managers who outperform do so because they take higher levels of risk than the index. Therefore, one has to adjust performance by the amount of risk in the portfolio. But how accurate are these measures of risk? To me, this is another example of how academics have muddied the waters of investment management.

In order to find the best stock pickers you need to assess their performance in bull and bear markets which means you need at least 5-7 years of a track record.

It would be great to have a system on MF where only long-only portfolios are managed. One could buy leveraged ETFs but red thumbing stocks would not be allowed. It would also be good to be able to add to holdings. This would sort the good stock pickers out from those who game the system. It would also level the playing field between fund managers and CAPS players.

 

 

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#13) On April 19, 2010 at 12:00 AM, TMFUltraLong (99.95) wrote:

Bradford86 actually made most of his points by mirroring my UltraLong portfolio =)

UltraLong

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