The Motley Fool's CAPS investing service is one of the newest additions to the investing community at Fool.com, and it's another great way for investors to work together to beat the market. One of the features in CAPS allows users to set up a blog to talk about their picks, investing strategies, market views, or what they just had for lunch (if they so desire). I've scoured through some of the most recent CAPS blog posts to bring you some of the great content the players are putting out.
Are analysts' ratings contrarian signals?
Starting off, I found a post from ElViking, a player ranked in the top 1% of CAPS. He shares:
"So what's the best strategy for an individual trader when a downgrade comes out, and the stock swoons? My theory is you've now got the same company selling at a lower price. If you were unfortunate enough to hold it during the downgrade, standing pat, (or doubling down) seems the best strategy. And if a stock on your watch list is downgraded and dips? Buy, buy, buy!
"I see two major cases where I wouldn't follow this strategy. The first is when a growth stock is downgraded. A lot of stocks move on momentum, and a downgrade can kill the momentum of a stock that has soared in the previous months. I also wouldn't sell when holding a troubled 'value' stock that is issued an upgrade. Said upgrade can frequently be the catalyst that moves the stock back up to a 'fair' value.
"... For the long term investor, analyst upgrades and downgrades are just noise, to be ignored."
I tend to agree that it can be difficult to buy right on the heels of a Wall Street upgrade -- though I consider myself in the "seeing them as noise" camp. However, I would point out that the Wall Street analysts we track through CAPS have done pretty well in a bunch of cases. Roth Capital, for instance, is ranked No. 47 overall in CAPS. If you're into staying up-to-date on what Wall Street is saying, you can check out the color commentary from Rich Smith in his ongoing "Upgrades and Downgrades" series.
You can read more from ElViking here.
"My investment philosophy"
I'm always interested to hear about how other investors go about picking stocks, so I couldn't help but check out piyopiyo13's blog post with the above title. Piyopiyo13 writes:
"1) Any stock is worth buying given the right price. Sometimes the right price is zero.
"2) A good story alone is not grounds for buying a stock. Crack open the 10-Qs and 10-Ks and do some work.
"3) Only buy a stock if you will be just as happy to see it go down as up. Don't be afraid to double down if your thesis still holds true.
"4) Always leg into positions. You can be happy to see a stock go down only if you have the funds to buy more.
"5) It's never too late for a stock to outperform. A 30% gain two years from now still results in a respectable CAGR of 14%."
It would be hard for me to disagree with any of that, though I may be hard-pressed to say I'd ever be "happy" to see one of my stocks go down. I've also always been a big proponent of the idea that there there's a right price for everything. Even with a stock like Heelys (Nasdaq: HLYS ) , where I don't think particularly highly of the underlying business, there's definitely a price at which I would consider buying the stock. It's a price that would probably make most current Heelys shareholders cringe, though.
You can tune into more from piyopiyo13 here.
Where will the housing bubble go from here?
Rounding out this tour, I stopped by the blog of Allstar13913. True to his name, Allstar13913 is a CAPS All-Star and is looking toward the Alt-A lenders to boost his score further:
"Over the last few weeks, the market has seen subprime lenders lose significantly, bounce, lose some more, and now these lenders are holding steady significantly off their 52 week highs.
"Where does the market go from here?
"I theorize that the investment banks, including many that made the Alt-A (or liar) loans will be the next hit in the housing crunch. I believe that in the coming months delinquencies and foreclosures will increase in this housing segment in large numbers.
"I believe H&R Block's mortgage investment arm, which is currently in talks to be sold, will be found worthless by the buyers and when this happens its shares will crater.
"Indymac and FirstFed both have made huge bets on the Alt-A market, and I believe that when the numbers come in and the housing bust widens, they will be the first ones in the ravine."
As I mentioned in a previous article, Fool co-founder and Rule Breakers head honcho David Gardner got the idea to short the subprime lenders in his CAPS portfolio by keeping an eye on what people were saying in the CAPS blogs. Could this be a similar call?
You can check out more from Allstar13913 here.
Now it's your turn! Get off the sidelines, join CAPS, and start up your own CAPS blog to share your knowledge and insights with the rest of the CAPS universe.
Fool contributor Matt Koppenheffer shares some thoughts of his own on his CAPS blog. He does not own shares of any of the companies mentioned. The Fool's disclosure policy does not have its own CAPS blog, but if it did, it would be more insightful than Ben Graham and more poetic than Shakespeare.