Want to know one secret to high returns in the stock market? It's not about picking stocks that go up; it's really about picking stocks that don't go down, and picking stocks that don’t go down big-time.
Avoiding big losses will dramatically increase your returns and may be easier than finding big winners. All well and good, you say, but how do I know which companies are the next Circuit City (NYSE: CC) or Thornburg Mortgage (NYSE: TMA)?
One way is to piggyback off of other smart investors, such as the All-Star investors in CAPS, The Motley Fool's interactive stock-rating database.
All-Stars have a ranking of 80-plus out of 100, meaning their picks are outperforming 80% of the more than 60,000 rated CAPS members. The top players have accuracy levels of well over 60% and are so good they have received media attention, so it pays to follow what they do.
We can easily search for their least favorite picks using the handy CAPS screener. For example, a search for …
- At least 100 All-Star "underperform" picks
- And stocks rated one star (the lowest) out of five stars (the highest)
… returned the following:
|
Company Name
|
Current CAPS Rating
|
Market Capitalization ($ m)
|
All-Star Underperform Picks
|
All-Star Outperform Picks
|
Price-to-Book (TTM)
|
|
Capital One Financial (NYSE: COF)
|
*
|
14,931
|
164
|
124
|
0.54
|
|
Fifth Third Bancorp (Nasdaq: FITB)
|
*
|
6,278
|
152
|
64
|
0.62
|
|
MGIC Investments Corporation (NYSE: MTG)
|
*
|
774
|
119
|
39
|
0.27
|
|
M/I Homes (NYSE: MHO)
|
*
|
231
|
157
|
21
|
0.64
|
|
Northwest Airlines (NYSE: NWA)
|
*
|
2,089
|
100
|
35
|
0.60
|
Source: Motley Fool CAPS as of October 13, 2008. TTM = trailing 12 months.
It's probably a good idea to stay away from these stocks. I’m all for being a contrarian, but the All-Stars are the savviest members in all of CAPS.
See if any of your stocks are rated "underperform" by CAPS All-Stars by heading over to the CAPS site yourself.
In the coming weeks, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. The service, which just launched, will rely heavily on proprietary CAPS “community intelligence” data to establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
What do the unfolding financial crisis and ongoing market volatility mean for your money? The Fool's here with answers. Get the best of our daily commentary and analysis in your inbox simply by entering your email address in the box below.
Terms & Conditions
RSS Headlines
Fool UK