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Subject:  14 Ways to Use CAPS... and counting. Date:  10/24/2006  3:09 AM
Author:  TMFBreakerDave Number:  3706 of 8840

CAPS: Investor's Swiss Army Knife

CAPS is a service, a game, a platform, a home, shared fun with friends, a contest, a revolution. I've heard all these words to describe CAPS from our customers already, and others besides. It's already amply clear that we share some affinities with the old Dan Aykroyd Saturday Night Live “It's a Dessert Topping! It's a Floor Wax!” ( CAPS shimmers with manifold features and reasons to visit, watch, participate. Because I think of CAPS more than anything as a tool, I have come to think of it as “a Swiss Army Knife for investors.” To that end, I wanted to list some of the gadgets and gizmos that our Swiss Army knife offers.

Before you look over the list below, please note that I believe that CAPS is a worthy tool, a worthy regular click for investors, for any single one of the reasons contained herein. And yet I believe it does all of the following, effectively. Not every investor will have every reason below to use it, but I believe we are in the process of building together something that is very valuable and very useful for ALL 14 -- and counting -- of the following reasons. Choose your favorites:

#1: A learning tool "companion for life." The Fools who so far have embraced CAPS the most are those who recognize that it is a tremendous home base for learning. With CAPS you now can -- and should -- write notes to yourself as to WHY you are picking any stock, WHY you are selling, etc. etc. -- what we've been teaching people to do over the years on a yellow legal pad can now be done in a permanent home online repository. Not only that, but multiply this usefulness by thousands; CAPS is housing not only all your own actions and reasoning over the months and years, but that of many thousands of others. Almost nothing else I can write below holds a candle to the value of this single reason. (Students of the game may enjoy checking out the new “Lessons from CAPS” board:

#2: A factory of new stock ideas. Investors have been pointing out to us for months and, internally, years that CAPS helps them find new stocks they never knew about. As it continues to happen for me on a daily basis, and as I've been using CAPS for two years now myself, I can tell you that this concept has serious legs. Whether it's a compelling investment rationale popping up in the Buzzbox, whether it's a ticker symbol I don't recognize on the Player Page of a highly rated investor, etc., I am constantly deepening my awareness and knowledge of what's going on in business and the stock market.

#3: A second opinion for any stock you're investigating. Based on my own observations over the past few decades -- paraphrasing words from Thoreau -- “most investors lead lives of quiet desperation.” They typically get their stock picks from one source: their broker, something they read that someone said in some magazine, or from their Uncle Bob -- though they can't even verify Uncle Bob's historic returns or the value of his advice. By giving you the Long Tail view of the stock market -- with already over 2000 stocks rated at this early stage -- CAPS is there as a sounding board, or second opinion -- for anyone who is investigating any stock they hear about. Again, one-third of all stocks in America have zero -- zip, zilch, nada -- analysts covering them, and therefore there has been, pre-CAPS, very little information or perspective to be had on these companies. Whichever stock we're talking about, you can now tap directly into CAPS for free and -- beyond just our star rating -- drill down right into the colored thumbs, the commentaries, the information and perspective -- backed by people actively taking a stand one way or the other -- on the security of interest to you. Investors who've found CAPS will no longer lead lives of quiet desperation....

#4: Track some pretty darn good investors. Speaking of those investors whose pages I'm browsing, whose pages serve as a repository for all they think and do as investors, boy there are some very good ones. Even operating off less than a year full of data, I can already find people who match my own approach, or take a radically different approach, and I can see their favorite ideas, their most recent actions, their rationale -- I can find people who are right a high percentage of the time, or have a knack in a certain industry, and I can follow them. When could I do that before in anything like this depth and detail?

#5: Track Wall Street. CAPS tracks the buy and sell advice of Wall Street firms all in one place, for the first time surrounded by all of us. Thanks to CAPS, that proverbial “anal-yst” people complain about on discussion boards from time to time is being held accountable for every single future recommendation made -- tracked, rated, ranked, scored. “We're listening.” For now on, everything counts. Before CAPS, you may have wondered how reliable it was to follow Jim Cramer's TV advice. Before CAPS, the analysis of Bear Stearns, or Bank of America, had no implications to me, no differentiation among their generic-sounding financial brands. Now thanks to CAPS, I sit up and pay attention to one, and am tempted specifically to go contrary the other. (Don't know which? Check it out. Check out ALL Wall Street tracking: Do a Player Search starting with the prefix "Track" -- you'll find them.) We've now seen enough eyes light up as we pitched this aspect of CAPS in dozens of corporate business settings to believe #5 here is pretty special.

#6: Fun with friends. Where else can you check in on your friends' portfolios, favorite and least favorite stocks, and by extension, their investment minds? Before CAPS, I couldn't "see" what my dad was thinking about as an investor -- what stocks he favored now, and WHY. Now I can check in any time I like -- and do. And our family phone calls have a new extra dimension of understanding and fun. My list of favorites contains a few dozen online Fool friends as well, all marked "Favorite" and in one convenient place for me to check in on every day. Do this yourself: If you have selected one or more CAPS participants previously as a Favorite, go to your My CAPS page, and under the FAVORITES tab in the upper-left notice the rather hidden (at present) "Display All Favorites" link. Hit that -- see what happens. From TMF1000 to pencils2, I have 35 Favorites already, and counting....

#7: A place you, and everyone, can point to. Every present action taken on CAPS is public, documented, archived, accessible. Want to prove anything? Want to prove to any external third party that you DID in fact say that Vonage would be a bad stock or that “you've been consistently right about Google,” or want to check on some Wall Street analyst's call to see what he/she said the call before this one? A public showing in the light of day of every prognostication you've made on stocks, or others have made -- a platform that serves as home to that -- is useful in many ways, not the least of which is the powerful aspect that you can now point to the “statuary” of your own actions and show people the marmoreal day and price of your predictions. And yes, investment professionals are taking notice. On October 5th of this year, we received the first such declaration from a professional money manager, who writes, "Although I would argue that your site competes in various ways with my portfolio management business, I have to say that your CAPS program is brilliant. There is no way for a person in my business to become established and to show (unless I am a mutual fund) proven records of a winning strategy. We get buried under headlines and God Forbid we are wrong. So, thank you. You just became my number one resource for stocks."

#8: A showcase and testing ground for every different investment approach. Already in our Top Ten you see investors who are trading in and out of the market, and people who sit patiently on just a dozen or so stocks, but are "almost always right." It'll be fascinating to see how these different approaches play out versus each other over time. In the meantime, it's already clear that every approach has something to offer, and CAPS is showing that it's more about following and learning from and practicing AN approach well, than just one single “best” approach. CAPS is a tremendous fishbowl that will be of fascination to academia, as well.

#9: A portfolio or watchlist tracker. In the midst of the grandiose, let us not lose sight of the mundane. Type your portfolio into CAPS and come back each day to see how your stocks did, to enjoy others' commentary on your stocks, and if you care, to follow how our community is ranking your stocks, and how those rankings may be changing. Or look how Steve Ellis put it, recently: “As an investor... I review many companies weekly, and often dismiss them for one reason or another, and never look at them again. Well, now I can pick them for underperform, leave a note to myself via a pitch on my initial sentiments, and forget about it until six months later, when it blows up or skyrockets. I can then review my initial thesis, and know exactly what to focus on when I review the company again, rather than re-start everything from scratch. I can also enter all of the companies that I really like and think will outperform the market, but not my current holdings, and can monitor in real time if I made the right decision.” Plus, just wait till we offer watchlists, and alerts....