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Tip for Maximizing Your Caps Score

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September 12, 2007 – Comments (4)

Everyone on here is playing CAPS with criteria to themselves.  Some play to mimic their portfolios, some to experiment with things they would not touch normally, some to prove a point, but all different.

CAPS has very different rules than what you can do in real life with investments and the scoring hardly represents real life, how ever, the scoring is the rating system here and there are a couple things that I am sure the inventors never intended for their game that can improve your score.

Currently 1/3rd is from accuracy and 2/3rds is from points.

I do a lot of underperform calls and I close them once I'm sure I will get at least 5%, which enables it to be counted, and I set another underperform call.  Here's why I close them.  Say you have a 1 billion market cap company with shares for $20, and you think it is going bankrupt.  Put one underperform and when it goes to zero you get 100% plus or minus whatever the S&P does.

By reseting it, say with every dollar decline you get 5% when it goes to $19.  You get 5.3% when it goes to 18, 5.6% to $17, 5.9% to 16, 6.3% to 15, 6.7% to 14, 7.1% to 13, 7.7% to 12, 8.3% to 11, 9.1% to 10, 10% to 9, 11.1% to 8, 12.5% to 7, 14.35 to 6, 16.7% to 5, 20% to 4, 25% to 3, 33% to 2, 50% to 1 and 100% to zero, and the total is about 359%.  I'm not sure, but I think you would also manage to get the same stock count as 20 in your accuracy.

Once you have a lot of points you don't move much because the point spread between players increases quite a bit.

Never do this for stocks that you have outperform ratings.  Say you start with a $5 stock, you get 100% when it gets to $10, and another 100% when it gets to $15, and so on.  If you reset at $10, you'd only be at 50% at $15.

The underperform tip can work strongly against you if you are wrong.  Lets say your $20 stock goes to $10 and you got an extra 17% with the method, 67% instead of 50%.  Now, a buyout for $20/share comes and you had just reset to $10.  Well, now you've lost 100% for a net loss of 33%, yet this stock is at the same price you started at.

Another point on reseting the down stocks, you can't reset them if they go below $100 million and instead you will turn off an underperform call that you can't reset. 

So, I play for a variety of reasons, and one is for score.

4 Comments – Post Your Own

#1) On September 12, 2007 at 3:06 PM, FoolishChemist (97.04) wrote:

One of the things I didn't like about CAPS.  Yes it's good for your score and ego, but does it improve the value of the site?  Right now there is a 7 day waiting period before you can end a new pick, I asked the CAPS folks many moons ago to have a 7 day waiting period after you end a pick before you are able to re-up it.  I think this would end or at least alleviate the score inflation you talked about.

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#2) On September 12, 2007 at 4:58 PM, dwot (69.85) wrote:

I think you would never get a system that people wouldn't find a way to work around it. 

In real life you put different amounts to different stocks.

You could consider the way this game evaluates stocks that go up a lot as a form of score inflation.  As a stock is higher in price the marginal return is diminishing yet the score is increasing at an accelerated rate.

People do this funny thing with money, by assigning it to one thing or another.  If a $5k investment turns into $10k and you have a separate $10k.  If they both go up by $1k, caps will give 20 points for first and only 10 for the second.  Indeed, if the second goes up $1100, it was a better investment.  That is simply another form of score inflation built into the game.

And the dividend thing, well, say you have a $10 stock and it pays out $5 in dividends and it goes up $5.  Caps will change your entry price to $5.  If you sell out, you have doubled your investment, 100% up.  Well, caps will show you up by 200%.  I suppose the real return is somewhere in the middle as you do have the dividends to reinvest. 

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#3) On September 13, 2007 at 7:28 AM, abitare (33.77) wrote:

Good post. I wish I knew this back in July.

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#4) On September 13, 2007 at 5:31 PM, ikkyu2 (99.34) wrote:

dwot, I did something similar here:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=13397&t=01000225485554971513 

Hope it can be useful to you. 

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