As any good investor knows, tips are best left for waiters. Ideas, however, are the lifeblood of any dedicated stock picker.
So where do ideas come from? Well, besides the stock-idea fairy, they come from various sources, such as stock screens and financial news sites. You can also add Motley Fool CAPS to the list. Among the many great features on CAPS is the Stock of the Day, which serves up a new stock idea to CAPS players on a daily basis.
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 uses calculations based on the tides and the position of Jupiter's moons -- is then run. It starts churning out highly rated stocks for each player, based largely on their prior selections (and on the first letter of the names of the last five teams to win major sports championships).
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 (out of 5)
|
|
Monday
|
Asta Funding (:ASFI)
|
$399 million
|
****
|
|
Tuesday
|
Unit Corp (:UNT)
|
$2.1 billion
|
*****
|
|
Wednesday
|
Talisman Energy (NYSE:TLM)
|
$18.6 billion
|
*****
|
|
Thursday
|
Emerson Electric (NYSE:EMR)
|
$45.2 billion
|
*****
|
|
Friday
|
Allied World Assurance Company (NYSE:AWH)
|
$3.1 billion
|
*****
|
Data from Motley Fool CAPS and Yahoo! Finance as of Dec. 24.
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.
Profiting from debt
With the ongoing problems in the mortgage market, we've been hearing a lot about consumer debt, and about the heartache that lenders face now that a growing number of debtors aren't paying on schedule. Much like Hidden Gems pick Portfolio Recovery Associates (Nasdaq: PRAA ) , Asta has built its business around snatching up some of this bad paper at deep discounts. Also not unlike Portfolio Recovery, the stock has gotten a lot cheaper since its summer highs, since nobody wants anything to do with debt right now. The high CAPS rating of both stocks, though, suggests that a second look may be warranted.
Movinonnon, who claims to own Asta shares, says:
Fear, fear, fear! [Asta] has been hammered recently by speculators afraid of the effects of subprime collapse. [Asta] is a debt collection company -- it buys charged-off receivables then collects the [money] -- this should be an opportunity for the company.
SmokeyJoeSmokin, a CAPS All-Star and another Asta shareholder, adds, "I anticipate that bad credit card debt will actually increase in the coming years, which is bad for the economy, but good for companies like [Asta]."
Consistent performance
If Asta is too far out on the risk spectrum for you, Emerson Electric may be a more comfortable choice. In business since 1890, Emerson has grown from a regional manufacturer of electric motors and fans to a major global supplier of industrial technology. Financially, the company has consistently remained profitable, even through the economic downturn at the turn of the century, and it has shown steady growth over the past few years. For its year ending in September, sales were up 12%, net earnings grew 16%, and -- thanks to a declining share count -- earnings per share grew an even faster 19%.
Top-rated Fool TDRH gave Emerson the thumbs-up in late September, noting: "Global outsourcing, lean manufacturing, total quality management are as much a part of [Emerson's] culture as you would see in an [Association for Operations Management] textbook."
But 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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