I don't know whether Bill Withers had stocks on his mind while writing "Lean on Me," but I decided to take his advice anyway and lean on my CAPS brothers when I needed stock ideas. There are great investors participating in Motley Fool CAPS, our investing community of 50,000-plus, including more than 31,000 rated players. My mission was to find them and glean from their stock picks.
In order to find the strongest CAPS investors, I went to the database's Top Ten lists and looked at average scores, accuracy and number of picks. This led me to players like WCWlooky, RedneckRoleModel, and TMFCHarris.
In all, some 60 players matched my criteria and I decided to track their collective performance, including only the stocks that had received five or more CAPS ratings from members of the group. Since August 2006, 103 stocks have met that criterion.
Among the stocks are:
|
Stock |
Start Date (After 5th Pick) |
% Outperform S&P 500 |
Current Caps Rating (out of 5) |
|---|---|---|---|
|
Buffalo Wild Wings |
8/28/2006 |
137.23% |
**** |
|
Dawson
Geophysical |
8/29/2006 |
106.41% |
***** |
|
PetroChina |
11/17/2006 |
22.16% |
***** |
|
Unit Corp |
3/22/2007 |
20.83% |
***** |
|
Baker Hughes |
2/5/2007 |
18.24% |
***** |
|
Select Comfort |
8/25/2006 |
(32.31%) |
*** |
|
Kongzhong |
1/19/2007 |
(46.66%) |
**** |
The average score of the 103 stocks in my study was 20.57%. The best gainer was Buffalo Wild Wings, which has beaten the market by 137.23% since late August 2006, when it received its fifth CAPS pick. Another small cap, Dawson Geophysical, is also beating the market by more than 100%.
As the small caps giveth, so they taketh away ...
Two of the worst picks made by the group of "high average" pickers were also small caps: Select Comfort and Kongzhong, both losing by more than 30% to the market in the given time frame.
Three stocks around the median score were PetroChina, Unit Corp, and Baker Hughes. All three are beating the market by more than 18%.
Feast or famine
Based on this study, it seems that when these "high average" CAPS investors are right, they're way right, but when they're wrong, it's a bit ugly.
Eighty-two out of the 103 stocks outperformed the S&P 500, and by an average of 30.22%. However, the 21 that underperformed the S&P 500 did so by an average of 17.10%. This variation isn't surprising, given that the majority of the index was made up of small- and mid-cap stocks.
Foolish bottom line
So what does leaning on a brother do for a CAPS score? Well, my study showed that had I picked only the stocks with five or more picks by my CAPS brothers, my accuracy would be nearly 80%, my CAPS score would be up by 2,118.62 and my average pick score would be 20.57, securing me a spot in the top 20 CAPS investors.
My advice is to lean on a Foolish brother today for great stock ideas for both your real and virtual portfolios. Check out CAPS for some great investing ideas from more than 31,000 rated players talking about 4,700 rated stocks.
Buffalo Wild Wings, Dawson Geophysical, and Select Comfort are all Motley Fool Hidden Gems picks. Unit Corp is a Stock Advisor pick. Both newsletters are available for a free 30-day trial.
Philip Cooney is enjoying his internship at The Motley Fool and will continue slicing and dicing CAPS data until he is satisfied ... or until his CAPS score becomes unbearable. Philip does not own any shares of the companies mentioned. The Fool has a disclosure policy.
