The CAPS Stock Rating

Motley Fool CAPS is the most exciting development for me during my lifetime as an investor. The Internet has already done many great things for us. It has allowed us all to get free stock quotes, real-time stock charts, free 10-Ks on EDGAR, and all of the discussion and blogs we could want.

But ... never before has community intelligence been brought to bear across the entire long tail of the stock market. Never before has any service been able to put even half the number of ratings on stocks that CAPS does today -- it now features ratings on more than 4,400 stocks, and it even rates them against each other. And the number is always growing.

The rating in action
A CAPS rating indicates a stock's potential to outperform the S&P 500 as determined by our community. Five-star stocks are the highest-rated ones in CAPS, while one-star stocks are the lowest rated.

Some of the ratings might be surprising at first glance. You'll find that a supernova stock like Google (Nasdaq: GOOG  ) receives only one star and the indomitable Apple (Nasdaq: AAPL  ) gains just three. Meanwhile, relatively obscure stocks such as Unit Corp. (NYSE: UNT  ) and Mueller Water (NYSE: MWA  ) carry five stars and are among the highest-rated stocks in our entire CAPS universe.

This all makes sense, however, when you consider the philosophy that underlies CAPS. These ratings are merit-based -- we construct our stock ratings based on the transparent, accountable calls of more than 50,000 Fools, and we weight those stock picks based on the ratings of the people making them. That's right, CAPS stock ratings show you the best ideas from the best stock pickers, and the "best" are the one's who've earned the right to be called so. They're not just people with a Wall Street business card, or their own TV shows. In fact, CAPS already has thousands of investors in the community who rate far more accurately than Jim Cramer or Merrill Lynch. (We track all of these professionals with their own pages on CAPS -- including the TrackJimCramer page, where we type in everything he says on his TV show. Curious to know whether he's right even half the time? Take a look.) Accountable stock-picking: fully tracked, rated, ranked, and scored. A new meritocracy is emerging, and it's based not on your talk, but on your walk.

The secret sauce
Just like Colonel Sanders or Coca-Cola, we keep the precise "recipe" for our stock ratings proprietary. Simply put, however, the ratings rely on three factors:

  • The calls for the picks (e.g., outperform or underperform).
  • The time frames for those picks.
  • The ratings of the players making the picks.

It's fairly simple, yet it's very powerful by being so simple. So have a look at the rating for any stock you may own or are looking at -- plus more than 4,400 others! And get into the game by contributing your own intelligence and opinions! Rate seven or more stocks, and you'll receive a rating along with nearly 28,000 other players. Simply click here to get started. CAPS is a free service.

For more on CAPS:

Coca-Cola is a Motley Fool Inside Value pick. Take a peek at our value-focused newsletter service free for 30 days.

Fool co-founder David Gardner does not own shares in any of the companies mentioned. The Motley Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (473)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 08, 2009, at 7:35 PM, oldnassau67 wrote:

    "These ratings are merit-based -- we construct our stock ratings based on the transparent, accountable calls of more than 50,000 Fools, and we weight those stock picks based on the ratings of the people making them".

    So, then, someone with lots of time and algorithms could run the old "half-and-half" scam to skew the results. Create, for example, a 1024 stock pickers: half say stock XYZ will go up; half say, down. Then, 256 say ABC will go up; 256, down. Then, 128........ Eventually, that "someone" will control a number of heavily weighted stock pickers who have been consistently correct to [whatever the power of 2 that he started with] times.

  • Report this Comment On January 02, 2010, at 2:25 AM, TimoDOZ wrote:

    I got to this point following a thread that started with a yahoo quote for "PAL". As usual he Fool fools us again with a tease and no useful intuitive remarks about PAL and why it advanced +11% in the most recent 2 days of trading. Palladium broke through a technical resistance of $400 as it broke through $300 last early Oct. After gaining a foot hold at $300 it quickly consolidated near $290. PAL a palladium miner with out any palladium production. A sleeping giant? Only the most diligent researching of Fool resources will even give a hint at the basis of the Fool's tease to try and sell their endless list of pulp with no comprehensive investment advice whatsoever.

  • Report this Comment On October 08, 2010, at 7:11 PM, marlian wrote:

    your recent post on bsdm was factually state that bsdm has had no recent the following.SALT LAKE CITY--(BUSINESS WIRE)--BSD Medical Corporation (NASDAQ: BSDM - News) (the “Company” or “BSD”) announced today that Dalian Orientech Co. Ltd (“Orientech”), the Company’s exclusive China distributor, has ordered two BSD-2000 Hyperthermia Systems (BSD-2000). The BSD-2000 System utilizes BSD’s proprietary synchronous phased array technology to non-invasively target therapeutic heating (hyperthermia) to certain cancerous tumors, including those located deep within the body. Clinical studies have shown that hyperthermia treatment can kill cancer cells directly as well as increase the effectiveness of other cancer therapies, including radiation therapy, for the treatment of certain tumors.

    Hyperthermia cancer therapy has a strong following in China, and Orientech controls about 65% of the market. The Orientech sales force covers 23 provinces. After shipping the two systems, the Company will have sold 19 BSD-2000 Hyperthermia Systems to Orientech.

    you should apologize for shoddy research

  • Report this Comment On October 11, 2010, at 2:32 PM, melegross wrote:

    In other words, CAPS ratings are worthless. They are just the opinion of people who know little about what's actually happening.

  • Report this Comment On February 01, 2011, at 1:01 PM, JRMtwo wrote:

    I like the CAPS rating and its ability to follow the trend of others. However picking winners in the stock market requires a lot of work. The CAPS is just one of the factors that I might use in selecting a stock to put into my portfolio. Or when to sell the stock. One of the factors that is hard to determine is what others are doing. The hard facts may indecate that the stock is a good buy but the gain will depend upon a lot of people buying the stock.

  • Report this Comment On December 19, 2011, at 4:57 PM, oldutch34 wrote:

    will wait and see how it compares with my holdings

  • Report this Comment On May 13, 2012, at 4:50 PM, somebo wrote:

    The Motley Fool recommends Netflix on every possible occasion. Yet, it has only 2 CAPS stars. How to reconcile this with the claim that most Fools think that NFLX will outperform?

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