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CAPS / CAPS Addictions 12-Step Program

URL:  http://boards.fool.com/just-remember-that-what-drives-our-stock-ratings-24777105.aspx

Subject:  Re: Nov 1st Date:  11/3/2006  12:01 AM
Author:  TMFBreakerDave Number:  48 of 122

Just remember that what drives our stock ratings are the player ratings of the people with active picks on a stock. If those people have active picks, it means they think it's worth making them -- or leaving them in -- at the present price. They are accountable for every uptick, and every downtick. And those who perform the best are then overweighted to determine our stock ratings. Thus, it is the in-the-game actions of the participants who have the most excellent and most voluminous track records that drive our forward-looking ratings.

The Netflix example does not prove anything either way to me. Indeed, we can find almost any sort of example that will illustate any given point. It's really only poring over the entire database, and running hypotheses and tests, that one can really draw meaningful conclusions. Otherwise, we'll risk basing our judgements on one-off examples that will often, if experience is any guide, tend like a mirror to show us just what we expected we'd see.

To close for now, the most important thing I can say for CAPS is that we're accumulating lots of great data, and it is data that is not just captured and held, but rated, ranked, scored. What insights the data will give us with the wide-angle lens cannot be totally predicted, but again, with almost 200,000 picks already, this is the world's largest stock ratings database and growing, in both volume and value.

For now, I still find the basic premise of deriving ratings based on the ACTIVE picks of the HIGHEST-RATED investors who have achieved on MERIT to be the most compelling and simplest foundation for a good ratings system.

One Fool's view,

David
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