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:
|
Day
|
Stock
|
|
CAPS Rating (out of 5)
|
|
Monday
|
Canadian National Railway (:CNI)
|
$25.7 billion
|
*****
|
|
Tuesday
|
Holly (NYSE:HOC)
|
$4.1 billion
|
****
|
|
Wednesday
|
Kaman (:KAMN)
|
$756 million
|
*****
|
|
Thursday
|
TESSCO Technologies (NASDAQ:TESS)
|
$108 million
|
*****
|
|
Friday
|
Diodes (NASDAQ:DIOD)
|
$1.1 billion
|
****
|
Data from Motley Fool CAPS as of June 29.
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 Canadian National.
Reconsidering railroads
When big-time investors start getting interested in a certain sector, the rest of the market tends to take notice. And when it comes to big-time investors, there aren't many in the same class as Warren Buffett and Carl Icahn, who have been showing some real interest in railroad stocks.
During this year's Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) annual meeting, Buffett, prompted by a shareholder question, discussed some of his thoughts on the railroad business. In short, he said that the industry's competitive position has improved in relation to trucking, largely thanks to rising fuel prices. He noted he still doesn't expect railroads ever to be a sensational business, but the sector is much better than it was 25 to 30 years ago, so he can expect a reasonable return on capital.
Canadian National is a Class 1 railroad, which puts it in the same class as Burlington Northern Santa Fe (NYSE: BNI ) , which Buffett has been buying, and CSX, which is Icahn's primary railroad target. In total, Canadian National operates 20,300 route miles in the U.S. and Canada and serves a number of industries, including petroleum, forest products, and grain and fertilizer. The company also has a good amount of business in intermodal transportation -- deliveries that use multiple forms of transportation, such as rail and trucking.
For even more railroad info, my Foolish colleague Brian Pacampara recently took a closer look at the industry and highlighted some of the railroad favorites on CAPS.
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 picks is much more fun than having me get California's Governator to track you down and give you a wedgie. And don't think I won't do it ...
More CAPS Foolishness:
Netflix, Amazon, and Berkshire Hathaway are
Motley Fool Stock Advisor
recommendations. Find out why with a 30-day free trial. Berkshire Hathaway is also an Inside Value newsletter selection.
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.
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