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Hi RaptorD--

You wrote,

>I'm curious as to why you would put so much emphasis on CAPS. It seems to be at the opposite end of the spectrum of M/I.... Is CAPS just an addition to your prior methodology, or is this a fundamental change in direction for you?

Yes, the inclusion of CAPS data as a way of visually prioritizing a field of candidate stocks definitely is part of a shift in my thinking about a strictly Mechanical Investing approach. But the main indicator of that shift is my interest in the BMW method, which starts with two mechanical indicators (low RMS and at least a 30-year history) and then adds human judgment (DD). I now think including human judgment is essential.

I include the CAPS data, first, because I have a lot of confidence in the people who participate in TMF boards. On the Mechanical Investing Board and on the BMW Board I see hundreds of honest, inquisitive, skeptical, generous, smart people working hard to find ways to make good decisions. CAPS seems to offer a (mechanical) way to include the collective judgment of TMF participants in selecting candidate stocks.

Second, this article by Mark Robertson over on the Manifesting Investing web site got my attention:

Robertson writes,

"You've done some fairly careful screening. Your targets for projected return, quality, financial strength and growth have been met... but your list still numbers 16 stocks or so and you don't want to perform full studies on all of them. Have you ever yearned for another filter that would further reduce the total while incorporating the expectations of a whole bunch of successful fundamental investors?

"I have. And so have you.

"I think I've found a meaningful resource for precisely this purpose. We'll continue to explore and test but the Motley Fool's CAPS 'experiment' has been an integral part of the Solomon Selection process for over a year now. Up to that point in time, the relative return (actual vs. S&P 500) had been 180 basis points with some disappointments. Since implementation of some external indicators (including CAPS) the relative return is 820 basis points. Needless to say, the results are intriguing and we'll continue to monitor them carefully."

So there you have it. I'm not absolutely sure that CAPS data helps make better decisions, but I suspect that it does more often than not.

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