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First off, let me say I'm completely on board with statistical analysis to help screen stocks. The more refined I can get my data the better, but only as a place to start. With that said, I have a concern about the CAPS system as it relates to the scores and how the higher rated players are weighted when it comes to rating a stock.

I know no one on these boards so I'm not pointing fingers or passing judgment. However, it seems, at least on the surface, that one can become highly rated rather quickly by closing winning positions and "locking in" accuracy. Look at the highest rated players and see how many ended picks have been accurate versus the number active that are accurate. It appears that the system can be manipulated toward higher accuracy, which in turn gives a player a better score.

Granted, those players made an awful lot of accurate picks, and I see no fault in closing a pick once your opinion of the underlying stock has changed, but many are being ended in relatively short order as compared to the time frame of the pick. I also know the time frame has no bearing on the pick in CAPS, it's just there for reference. I would find the players closing winning positions to be more honest, however, if the time frame chosen when the pick was made more closely matched the time frame the pick was active in their CAPS portfolio.

I have been a Fool member since 2001 or so, and only just began rating stocks myself, so I do not see myself as a guru or even a good stock picker. I do, however, own most of the stocks that I rate.

This is not a rant or a call to arms, just one Fool's view of what might be a CAPS flaw.
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No. of Recommendations: 3
johnnyvol,
That has come up before in community discussions of CAPS, usually in the context of "reloading" - ending a pick and then remaking it in the same direction. About a year ago TMFCrocoStimpy did some data dives about that, and this is what he found:

[T]he effect of reloading is quite small. Only ~60 players had their overall ranking change by more than +-5, and NONE of the players in the leaderboard were in this group.

There is more if you want it in his post here: http://boards.fool.com/Message.asp?mid=25942642&sort=use... and on the CAPS Beta Board: http://boards.fool.com/Messages.asp?mid=24210606&bid=117....

Fool on,
Chris
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No. of Recommendations: 3
Hi johnnyvol,

Your concerns about CAPS are justified. We have, however, taken measures since CAPS launched in 2006 to reduce the ability to "game" the system.

For instance, accuracy doesn't count unless you close your pick with more than 5 points of market outperformance -- originally it was just > 0. There's also a seven day minimum on each pick before it can be closed. If someone can consistently outperform the market by 5 percentage points, obviously they're doing something right and deserve to be included in the All-Star group.

Sure, some players rapidly change their picks while others (like yours truly) use a "buy and hold" strategy. This diversity of strategy helps keep the CAPS data "fresh" while keeping emphasis on the long-term business prospects.

By the way, I like your approach to the CAPS data -- a "place to start." We also use CAPS that way here at PRO -- for idea generation and idea confirmation/rejection.

Hope this helps.

Foolish best,

Todd Wenning
PRO analyst
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johnnyvol,

I am curious why you are shown as a "new" member since you have been here since 2001...

Great question and great answers...

Anne
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Anne,

I'm embarrassed to admit that this might very well have been my first post on MF. I'm more of a lurker but recent events have spurred me into action, so to speak.

I sold my business two months ago and am working very hard to remain retired (I'm 39 btw) and I see actively managing both a short term and long term portfolio giving me the best chance. Hence, my renewed interest in MF and my joining the Pro community.

John
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Chris,

"About a year ago TMFCrocoStimpy did some data dives about that"

I'm just amazed that we have someone around with the screen name "CrocoStimpy!"

Rich
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