The collective power of thousands of investing minds is the driving force behind Motley Fool CAPS, an investor intelligence database and community of more than one hundred and ten thousand investors: professionals, novices, and every level in between.
One of the service's unique features is the ability to not only rate a company on whether you think it will outperform the market, but to express why you think it will, in as much detail as you want. These analyses, or "pitches," can be as simple as "This stock has a low P/E ratio," or as complicated as a multi-page, footnoted thesis. In the context of the overall assessment of the stock, a pitch is another data point to consider.
Throwing strikes
Useful analyses are those that give salient details about a company and its prospects -- on both the bull and the bear sides -- and the best ones earn recommendations. Not everyone can become famous picking stocks and detailing their reasons, as some of our CAPS members have, but we call those who merit the most recommendations for their analyses our "pitch-writing superstars." Let's look at these top investors and some of their best recommendations to get a sense of what makes up strong analyses and winning investing.
RonChapmanJr is not only a top pitcher who's received 85 combined recommendations so far for his pitches; he's also a top-rated All-Star with a 99.95 player rating while achieving nearly 74% accuracy on his picks. Here are a few of his most recent stock picks.
An intuitive choice
Things simply keep getting better and better for surgical robot maker Intuitive Surgical. Its latest quarterly earnings report dashed the hopes of many an investor hoping there would be a chance to pick up shares at bargain basement prices. Instead they shot up an additional 18% after the medical device company said it sold another 85 units of its da Vinci device and grew revenue 56% over last year.
Despite a share price in excess of $300 and a P/E ratio north of 60 -- better than rival Hansen Medical (Nasdaq: HNSN), which doesn't have a P/E ratio -- investors like CAPS member jmckearney find the broad moat protecting the Motley Fool Rule Breakers recommendation's position is virtually unassailable.
The barrier to entry is enormous, however the widest moat comes from the lead in the race [Intuitive Surgical] enjoys. Physicians like the data and outcomes and patients remember the catchy name at the coffee shop when they tell their friends about the robot. Risks include compression of the P/E and profit margin as market saturation in the U.S. inevitable occurs. I suspect the da Vinci will crossover into acceptance for more surgical specialties. Europe, Asia and other developed foreign markets are still strong growth opportunities.
A noble gesture
In the grand tradition of monarchs, the term noblesse oblige suggests that those of noble bearing have an obligation to do more. Rather than a life of indolence, privilege confers responsibility. Contract driller Noble is wearing its crown a little more heavily these days following a quarter that presented more than just a few challenges. Still it was able to maintain robust margins and the mind-set that the current commodities cycle is lengthening. It, and other drillers like Diamond Offshore (NYSE: DO), can't rest on their laurels, and Noble has suggested that industry consolidation is one way in which it can continue to grow.
As oil prices have eased, CAPS member agchris02 finds picking up Noble at discounted prices is nearly as easy as shooting fish in a barrel.
This is the easiest I've had in months -- I just bought in on my real portfolio as well. Shares have plummeted over the past few weeks as oil has declined. This company just announced 30% profit growth, and promptly lost 20%. Low P/E, lower PEG, steady growth, good long term potential.
Even if the price of oil is cut in HALF, I still like this.
Inside pitches
Now just because a top-rated All-Star investor writes a top recommended pitch for a company is no cause to go out and buy and sell those stocks. You still need to perform your own due diligence. But it's worth considering what they've said as you make your decision.
A Foolish stance
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Then step up to the batter's box of CAPS and make your opinions known. Since CAPS is a completely free service, throw as many pitches as you like at the stocks of your choice. You'll be helping your fellow investors to make better decisions.
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