The idea of supplying customers with recommendations based on prior shopping habits isn't all that new. If you've signed on for service with Blockbuster or Netflix, you know about the movie recommendations they hook you up with. (Mine right now include Pirates of the Caribbean and La Femme Nikita -- does that say something about me?) Shoppers on Amazon.com get a similar slew of suggestions based on previous purchases.
Investing in stocks may not exactly be comparable to renting a movie or buying a book, but with thousands of stocks out there, finding new ideas can often 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 is run by a computer hooked up to 50,000 hamsters on wheels, using calculations so complex they'd make Archimedes cry -- then churns out highly rated stocks for each player, based largely on prior selections and the current phase of the moon.
To give you a sampling of the kinds of ideas 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 |
Flagstone Reinsurance Holdings |
$1.1 billion |
***** |
Tuesday |
CRM Holdings |
$104 million |
***** |
Wednesday |
Loews |
$25 billion |
**** |
Thursday |
EV Energy Partners |
$438 million |
***** |
Friday |
America Movil |
$107 billion |
***** |
As smart as the CAPS Stock of the Day algorithm may be, 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 Loews.
With no real resolution or clear direction in the credit markets, many of the solid names in the insurance industry are still struggling. Much of the float that insurers invest to earn their returns goes into fixed-income securities. To earn a higher rate of return, many insurers have been investing in securities backed by assets that include the mortgages currently under fire. As a result, investors appear to be waiting for things to shake out, and they've been really cautious about the insurers.
While it lacks Berkshire Hathaway's
Among Loews' holdings are a majority stake in five-star CAPS stock Diamond Offshore Drilling
CAPS player Haas16111 is one of the 160 CAPS payers bullish on Loews, calling it "a nice mutual fund play with no loads." He goes on to say:
The sum of the parts discount protects this stock on the downside. On the upside, the different entities are all winners. I actually got into this as a more diversified way to get exposure to Diamond Offshore.
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 do it ...
More CAPS Foolishness:
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Netflix and Berkshire Hathaway are both recommendations of the Motley Fool Stock Advisor newsletter service. Berkshire Hathaway is also a selection of our Inside Value newsletter. Matt tried to give The Fool's disclosure policy a wedgie, but was overpowered by its incredible might. Don't worry, he learned his lesson.