Stocks of the Week

The idea of supplying customers with recommendations based on shopping habits isn't new. If you've signed on for service with Blockbuster or Netflix, you know about the movie recommendations they hook you up with. (Mine include Spider-Man and Say Anything -- does that say something about me?) Shoppers on Amazon.com get a similar slew of suggestions based on their purchases.

Investing in stocks may not exactly be comparable to renting a movie or buying a book on Amazon, but with thousands of stocks out there, finding new ideas can be overwhelming. To help grease the ol' mental machinery, The Motley Fool's CAPS service recently started providing players with daily stock recommendations.

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 I've heard uses so much computing power it requires its own nuclear generator -- is then run. It then starts churning out highly rated stocks for each player based largely on their prior selections and the current phase of the moon.

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

Monday

Koninklijke Ahold

$17.5 billion

*****

Tuesday

Shanda Interactive (Nasdaq: SNDA  )

$2.6 billion

*****

Wednesday

Capital Southwest (Nasdaq: CSWC  )

$488.8 million

*****

Thursday

Berkshire Hathaway (NYSE: BRK-B  )

$196.6 billion

*****

Friday

ProAssurance (NYSE: PRA  )

$1.8 billion

*****

Data from Motley Fool CAPS and Yahoo! Finance as of Oct. 12.

As smart as the CAPS Stock of the Day algorithm is, 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 Berkshire Hathaway.

There are a number of fine stocks above, but it's hard to overlook the fact that the CAPS algorithm has pointed out that I have yet to give a green thumbs up to Berkshire Hathaway's B shares (as opposed to the nominally higher priced Berkshire Hathaway (NYSE: BRK-A  ) A shares). Although it was highly contentious at the time, the B shares were created originally to widen the number of investors that could afford to invest in Berkshire.

Although the B shares trade at "just" $4,234 per share versus $127,100 per A share (closing prices last Friday), investors get partial ownership of the same great enterprise that made the name Warren Buffett synonymous with investing excellence. Although the company continues to operate under the cloud of what will happen when The Buff is no longer around, Berkshire continues to perform, and so does the stock. Over the past five years, investors in the B shares have gained 80%, or 12.5% compounded per year. Recently the shares have caught a bit of a tailwind -- since mid-July shares are up 16.4%. Not bad for a nearly $200 billion company.

It's hard to find a CAPS player with anything bad to say about Berkshire, whether A or B shares -- of 1,672 ratings on the B shares only 15 think the stock will underperform the market. CAPS player RutledgeAvenue thinks investors should "buy, buy, buy" and calls Berkshire a "sublimely diversified value play." CAPS All-Star pencils2 echoes the sentiment; the player "wouldn't feel more comfortable with any company as a long-term holding than Berkshire Hathaway." pencils2 adds that it's the philosophy of Berkshire that makes it so great, and is confident that success will continue even after Buffett moves on to his ticker tape parade in the sky.

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 ...

More CAPS Foolishness:


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