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|Subject: A Fool's Future Story||Date: 3/30/2007 10:49 AM|
|Author: deadcat2||Number: 5225 of 8157|
The year is 2011 and CAPS has now been up and running for about 5 years. It's recognized as one of the most interesting and comprehensive databases of investor sentiment and behavior regarding stock picks over the previous half decade. There are now over 90,000 active players. TMFEldrehad has dropped from the Top Ten list some time ago - though he still remains a highly rated All Star - choosing instead to spend more time with his wife and children, having vowed not to miss their formative years. Another player, StockObsession, burst upon the scene a few years ago and displaced all other Top Fools, having over 4,500 total picks and a total Score of 8,927! The TMF staff has been diligently adding a multitude of new charms to recognize all the thresholds that are being broken by StockObsession in particular, and many of the players in general. Incidentally, in real life StockObsession is a hot dog vendor who sets her cart up every day in the financial district of New York City.
AssetMangler, told years ago no one was forcing him to play the game and if he didn't like it, he could quit and build his own game, did just that. While many thought the game more "real" and a better learning tool, the whole Betamax vs. VHS lesson became clear again and the Mangler learned that the miracle of marketing is always a driver for commercial success. "Better" doesn't always win.
To respond to the apparent demand for a portfolio management-based game, a couple years ago TMF included an additional tab for all players who signed up and paid a one-time fee. They are provided a scorecard for their portfolio, viewable by everyone in CAPS. The one-time fee loads his/her account with $100,000, and a virtual "trading fee" of $10 is assessed for each stock transaction. A player can declare bankruptcy at any time, and if they pay the fee again, their account will be reloaded with another $100,000. A record of all bankruptcies is maintained for all to see. Interestingly, but perhaps not surprising, is the fact that the cream of this crop is quite different from the top players who might be measured by other criteria. And so, another level of data (and subscription revenue) has been successfully and brilliantly harvested:)
Another move that smacked of genius was when TMF recognized that the more "winners" there were, the more players might be apt to play. In addition to the Player Ratings which tended to reward the quantity of picks, winners were also recognized in Top Ten Lists for Best Returns, Sector Experts, Multi-Bagger Gurus, Bankruptcy Pros, Momentum Mavens, Value Virtuosos and Portfolio Hotshots. There are many ways to succeed in the investing game and as TMF recognized more of the different approaches investors might employ, another level of interest and data mining tools were generated.
Today I'm applying some filters and doing a few sorts in the regular CAPS to see what stocks might be worth researching further. The cool thing is that the system now allows a player to save a handful of custom "screens" they've created. Since I haven't done this before, I'm building my own screening tools today.
I'm looking for recent picks from long term players who've done well. First I use the Best Returns lucky charm and look at the list (which I pare down to the top 5% only) sorted from high returns to low and then low to high just to determine the range of returns. Since the top 5% includes 4,500 players (!), there are a few other sorts and filters I'd like to apply. What I'd like to see are players with returns that are greater than 15%, Days As Active Player greater than 1,000, Accuracy at 67% or more, Active Picks less than 60 and Active Picks/Total Picks Ratio greater than 67%. That should give me a universe of very successful, long term buy and hold investors who've been at the game for a little over three years. Lastly, I can reverse sort by the column Days Since Last Pick so I can zero in on recent picks by players who rank high in this screen. That could be where some of the best ideas for my next investment might come from. After that, I may also sort by the Pitch/Pick Ratio column - or better yet, those with the Most Helpful Pitcher charm - just to see what the most frequent pitchers in this screen might have to say about their latest picks. To satisfy my curiosity later today, I think I'll use some of those same screens to identify the most successful "traders" over the past few months.
As you can see, there are now a multitude of tools to slice and dice the CAPS database, and THAT is what has made it the most interesting source for new investing ideas. After gathering a couple years of star rating history it was determined that there was, unfortunately, little predictive power to the rating system. In fact, overlaying a history of the star ratings for a specific stock upon the price chart for that stock, it was found that there was greater correlation of ratings to current price movement than future price. There were some exceptions - stocks generally perceived as value plays seemed to hold and even increase their ratings through their more meaningful price dips. However, as the player count approached 40,000 it became more apparent that the microcosm of CAPS players - rather than distinguishing itself from the macrocosm of investors (i.e., the general market) - had instead begun to reflect it.
As the predictive power of the the star rating was better understood, the formula evolved considerably over the next few years and the correlation became more manifest. In fact, the correlation of star ratings to future share price performance is now statistically significant. The downside (as some players see it) is that subscription rates to CAPS have increased commensurate with star rating predictability.
Other sorts and filters I'll apply today include sector (or Ticker Tag) sorts starting with the greatest aggregate star rating movement - up or down - over the past week, month, quarter or year. That data might give me an idea of other industries I might explore to diversify my portfolio. For that matter, there are probably another dozen sorts I should run tonight before the market opens tomorrow. The investment knowledge gained by "playing" CAPS has allowed many a Fool to retire ahead of schedule. For that, I raise a toast...
(who'd have to write another lengthy post just to list all the contributers to the ideas contained herein:)
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