4-Star Stocks on the Upswing

• Report this Comment On January 29, 2009, at 3:42 PM, pondee619 wrote:

  I went to the CAPS page, on January 28, 2009, and did an advanced search. I first check all five star stocks. There are 1080 of them. There are 1080 stocks in each category. I then did a search in each star category for those stocks that did better than -36% over the past year. I believe that over the past year the S&P was -36 or -37%. Here is what I found.

  Out of 1080 stocks in each category:

  445 five star stocks beat the market:

  466 four star stocks beat the market:

  503 three star stocks beat the market:

  476 two star stocks beat the market: and

  522 one star stocks beat the market, as measured by the S&P over the past year.

  What do these results tell us about that "coveted five star ranking"? (it came in last)

  Beating the market is nice, but Making money with positive returns is even better. The advanced search allow you to find stocks with a return of 3% or better over the past year. Over the past year, as of January 28, 2009:

  155 ONE star stocks had a return of 3% or better

  121 TWO star stocks had a return of 3% or better;

  96 THREE star stocks had a return of 3% or better;

  77 FOUR star stocks had a return of 3% or better; and (GET THIS)

  46 FIVE star stocks had a return of 3% or better.

  Beating the market or just getting a positive return in this dreadful year five star stocks came in last.

  Over the past year, according to CAPS advanced screener, on Jan 28, 2009;

  837 ONE star stocks had a negative return for the past year;

  905 TWO star stocks had a negative return for the past year;

  944 THREE star stocks had a negative return for the past year:

  968 FOUR star stocks had a negative return for the past year: AND

  992 FIVE STAR STOCKS HAD A NEGATIVE RETURN FOR THE PAST YEAR.

  This is astounding. Five star stocks had the fewest winners and the most losers.

  For 1/29/09 the break down of stocks flat to positive for the past full year is:

  Five star 93

  Four star 105

  Three star 134

  Two star 173 and

  ONE star 222

  I then thought that, perhaps, CAPS is a short term market timing device. The following results pointed this way recording the number of stocks in each group showing flat to positive returns for the last 30 days and/over the past year

  5*=561/59

  4*=510/48

  3*=515/90

  2*=495/91 and

  1*=470/115

  Five stars win over a 30 day period but fall substancially behind over a longer period.

  Can we please stop giving CAPS any weight in picking our holdings? I believe that the Fool is doing its readers a dis-service by touting this game as a useful tool in stock picking. Unless, short term trading is your forte. A 52% chance of picking a 30 day winner in five stars over a 43% chance in one stars.

  I look forward to any constructive debate showing that my findings may be in error

• Report this Comment On February 19, 2009, at 9:26 PM, Xitopie wrote:

  WOW! pondee619, if your analysis holds true, I am astonished and have to give you a big thanks for this eye opening analysis.

  Anecdotaly, I had noticed that lots of CAPS members that rated stocks 5-star did not really have good investment thesis or depth in their explanation for rating stocks that high.

  Thanks.

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