The idea of supplying customers with recommendations based on prior shopping habits isn't all that new. If you've signed on with Blockbuster or Netflix, you know about the movie recommendations they hook you up with (mine right now include Spider-Man and Say Anything -- does that say something about me?). Shoppers on Amazon.com get a similar slew of suggestions based on their 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 daily stock recommendations.
It works like this: CAPS investors 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 uses so much computing power it requires its own nuclear generator -- is then run. It starts churning out highly rated stocks for each player, based largely on their prior selections and the current phase of the moon.
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
|
Market Cap
|
CAPS Rating
|
|
Monday
|
ICO (:ICOC)
|
$410 million
|
*****
|
|
Tuesday
|
Horsehead Holding (NASDAQ:ZINC)
|
$781 million
|
****
|
|
Wednesday
|
Mechel Open Joint Stock Company (:MTL)
|
$10 billion
|
*****
|
|
Thursday
|
iShares MSCI Taiwan Index (NYSE:EWT)
|
$3.1 billion*
|
*****
|
|
Friday
|
Masimo (NASDAQ:MASI)
|
$1.7 billion
|
****
|
Data provided by CAPS and Yahoo! Finance as of Oct. 18; * used instead of .
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'll offer some thoughts on ICO.
Getting in on materials
It's clear that the CAPS Stock of the Day algorithm has decided that I need more exposure to materials. Horsehead Holdings produces zinc products (as it ticker symbol kindly points out), and Mechel is a miner and steel producer, while ICO manufactures specialty resins and provides toll-processing services.
Grouping the three together is a bit loose, though, because the resin powders and concentrates that ICO makes are a far cry from the metals that the other two work with. ICO's products are used in a wide variety of end products such as toys, auto parts, and water tanks. Rotational molding -- a method of molding plastic where a plastic powder is melted in a rotating mold -- is one of the company's key markets.
Now this is hardly exciting stuff, but the stock has risen more than 100% over the past year. So do CAPS players have any thoughts on what is so great about ICO? Many simply like the stock's valuation metrics. Others, such as CAPS player hhasia, have gone a bit deeper. Hhasia, who claims to have bought the stock in real life as well, noted the strong financials and the high level of insider ownership for ICO. And hhasia also pointed out that "the international segment ... will continue to drive revenues."
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.
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