The collective power of thousands of investing minds is the driving force behind Motley Fool CAPS, a leading investor intelligence community. Membership has actually grown to more than one hundred 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 or underperform 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 multipage, 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 by picking stocks and detailing their reasons, but we call the investors 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 and get a sense of what makes up strong analyses and winning investing.
floridabuilder is not only a top pitcher who has received more than 620 recommendations for his pitches, but also a top-rated All-Star, with a 99.90 player rating. Here are a few of his most recent stock picks.
|
Company |
CAPS Rating (5 max) |
Call |
CAPS Score |
Pitch |
|---|---|---|---|---|
|
Akamai |
**** |
Outperform |
2.91 |
|
|
AMR |
* |
Outperform |
2.01 |
|
|
Genco Shipping & Trading |
**** |
Outperform |
(8.54) |
|
|
ICO |
***** |
Outperform |
(4.02) |
|
|
iShares Dow Jones U.S. Home Construction |
* |
Outperform |
(4.23) |
|
|
Lehman Brothers |
* |
Outperform |
15.33 |
No pitch |
|
National City |
* |
Outperform |
13.72 |
No pitch |
|
Ultra Financials ProShares |
** |
Outperform |
(9.09) |
|
|
Wachovia |
** |
Outperform |
(7.91) |
No pitch |
|
Washington
Mutual |
* |
Outperform |
3.86 |
No pitch |
Source: Motley Fool CAPS. Score is by how many points a call is beating (lagging) the S&P 500 index.
The ghost of Bear Stearns
Generally seen as the next in line after the once-venerable Bear Stearns collapsed, Lehman Brothers has managed to hang on through a series of financings, layoffs, and demotions at the highest levels. Now there's talk that the only way to save the brokerage house is to sell it.
Top-rated CAPS All-Star JDSancho isn't buying it, but he thinks there are better opportunities out there than this value trap.
[Lehman] just issued stock at $28 (after denying liquidity issues, mind you) and the stock falls to $23. That does not sound like a company I, or any one else, would like to own for the long haul. The main bear case revolves around another Bear Sterns situation. I am not quite that negative, but I would not buy [Lehman] here. I think it's a value trap. [JPMorgan] or [Goldman Sachs] are much better buys.
He's also found himself on the opposite side of floridabuilder with Washington Mutual, which he believes will fall yet again when the next wave of writedowns comes to pass.
My underperform pick rests on the fact that [WaMu] already knows there will be more write-downs in the future. They can announce that fact now, but when the write-downs hit the headlines in the future, investors will bail, regardless! That's just how the market is. There will be continuous pressure on this stock, as well as other S&Ls for a long time.
A regional opportunity
CAPS investor ChimpInvestor believes regional banks have taken too much of a beating and believes that National City is in no danger of completely imploding, though it's virtually priced that way. Here's part of a much longer pitch:
[O]f the 7 multi regional banks i green thumbed i don't feel any are in jeopardy of going in bankruptcy... that is being saved for the S&Ls, private banks and one region banks.... however, dilution and write offs will occur over the short term... so either you play the technicals for 3 months and get out when you hit your price point or you ride this for multiple years... not sure which one makes more sense, depends if we bounce or if we drift sideways and slowly move up...
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 or 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
Step up to the batter's box of Motley Fool CAPS and make your opinions known. Because CAPS is a completely free service, throw as many pitches as you like at the stocks of your choice. Or, use CAPS as a resource to find out what other investors are saying about stocks you're interested in. Either way, CAPS is for you.
