Stocks of the Week

The idea of supplying customers with recommendations based on prior shopping habits isn't all that new. If you've signed on for service with Blockbuster or Netflix, you know about the movie recommendations they hook you up with (mine right now include Planes, Trains, and Automobiles and La Femme Nikita -- does that say something about me?). Shoppers on Amazon.com get a similar slew of suggestions based on their previous purchases.

Investing in stocks may not exactly be comparable to renting a movie or buying a book on Amazon, but with thousands of stocks out there, finding new ideas can often be overwhelming. To help grease the ol' mental machinery, The Motley Fool's CAPS service recently started providing players with daily stock recommendations.

It works like this: CAPS members create a portfolio by rating some of their favorite (and least favorite) stocks. The super-secret stock-of-the-day algorithm, which I've heard is run by a recluse in the Andes with a 386 PC, is started by chanting an incantation to the beat of "Super Freak." It then starts churning out highly rated stocks for each player based largely on their prior selections.

To give you a sampling of the kinds of ideas that CAPS is doling out, here are the five recommendations the CAPS supercomputer spit out for me last week:

As smart as the CAPS Stock of the Day algorithm may be, it's still just an algorithm, so be sure to look before you leap on any of its suggestions. With that in mind, I thought I'd kick you off with some thoughts on a couple of these stocks.

Alliance burning it up
With $794 billion under management, AllianceBernstein is one of the largest asset managers out there. The company manages money for a variety of customers, including public and private employee benefit plans, endowments, insurance companies, and high-net-worth individuals. The company also manages a family of mutual funds and has in-house equity research (which we track on CAPS).

AllianceBernstein's stock also happens to be one of the best-performing stocks for The Motley Fool's Income Investor newsletter. The stock has returned 168% since it was added to the Income Investor portfolio back in 2004, and even after that run, it is still paying out a nice 4.7% dividend.

Most CAPS players who have rated the stock think there's still more to come. Multiple players cite the stock's dividend as a great reason to consider picking up shares. junkopadna, one of the bulls on the stock, thinks it's a good long-term buy: "The rich get richer. Them that manages the money for the rich get the richest!"

Enstar is a star
Enstar Group is the kind of stock that has likely flown way under most investors' radar. It's not a name you see splashed in the headlines or (I'm guessing here) shouted on Mad Money. But of the 39 CAPS players who have rated the stock so far, all 39 have given it a thumbs-up -- and 25 of those 39 are among the top 20% of all CAPS players.

The company is an investment vehicle focusing on buying up insurance and reinsurance businesses that have gone into run-off. It also provides consulting services to insurance companies and makes select investments outside of insurance.

The key to the company, as the Fool's own TMFMmbop points out, is the management team and board of directors, which includes Christopher J. Flowers and Rod Frazer. Frazer founded the investment bank Frazer Lanier back in 1976, and has been on the board of Enstar Group since 2001. If you don't know Christopher Flowers from his stint at Goldman Sachs (NYSE:GS), the name may still sound familiar from recent buyout news. His private equity firm, JC Flowers, is involved in the $25 billion buyout of Sallie Mae (NYSE:SLM).

CAPS All-Star reddingrunner likes the looks of the strong, steady run-up in the stock over the past six years and goes as far as to say "This may be as close to the perfect stock as there is!"

Now for the real question: Are you getting your own CAPS Stock of the Day selections yet? If not, what are you waiting for? CAPS is free, and getting your Stock of the Day pick is much more fun than having me get the Governator to track you down and give you a wedgie. And don't think I won't do it ...

More CAPS Foolishness:

• 5 Dynamic Dividend Stocks
• 7 Surprising 1-Star Stocks
• 7 Top Stock Blogs

Netflix and Amazon are Motley Fool Stock Advisor picks. You can find out why with a 30-day free trial of the newsletter.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Matt tried to give The Fool's disclosure policy a wedgie, but was overpowered by its incredible might. Don't worry, he learned his lesson.