The Motley Fool Patents Technology with Potential to Predict Stock Performance

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Motley Fool CAPs crowdsources individual investor knowledge to beat the S&P

Returns by CAPS Rating

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The Motley Fool has received a U.S. patent for technology that quantifies investor sentiment and generates stock ratings that have demonstrated the ability to predict future stock price performance.

This technology, called Motley Fool CAPS, was the idea of Motley Fool co-founder David Gardner. Since 2006, Motley Fool CAPS has tapped the collective brainpower of more than 170,000 individual investors to create proprietary ratings on more than 5,600 stocks.

“Wall Street might have a hard time believing that those participating in CAPS, individual investors of all people, have a powerful collective brain for picking stocks,” said David Gardner, co-founder of The Motley Fool. “While there’s no ‘magic formula’ for identifying winning stocks, Motley Fool CAPS has demonstrated that it can be a great research tool that can help you find market beating opportunities. We’re all looking for an edge and, working together, we have shown that we can beat the market as a community of investors.”

According to a 2009 study by the Harvard Kennedy School, researchers from Yale and Harvard found “consistent evidence that CAPS picks yield information that predicts future stock market returns for individual stocks.”

The accuracy of CAPS goes beyond the fact that the highest rated 5-star stocks do well and the lowest rated 1-star stocks underperform. Not only have 5-star rated stocks beat the S&P 500 by 51 percentage points since inception of Motley Fool CAPS, the 4-star rated stocks performed slightly below 5-star stocks but above 3-star stocks. Two-star stocks hovered around the S&P 500 and 1-star stocks consistently underperformed, losing to the S&P by 34 percentage points.

More than 170,000 individual investors participate in the Motley Fool Caps community by actively rating stocks online at Last year alone, CAPS investors made more than 840,000 “picks” and collectively rated more than 5,600 stocks. CAPS ratings are available for free online and anyone is welcome to participate in rating stocks. Every month, more than a million people research a company’s CAPS rating online.

For more information or to schedule an interview with a Motley Fool spokesperson, contact Alison Southwick at asouthwick(at)fool(dot)com or 703-254-1475.

About The Motley Fool:
Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to bucking the status quo and building the world's greatest investment community. Every month, 5 million savvy investors rely on the Motley Fool’s expertise and guidance through, The Motley Fool book series, newspaper column and subscription newsletter services.


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Alison Southwick
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