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Wednesday, October 14, 2009
David Gardner :: Townhall.com Columnist
Our Supercomputer Loves These Stocks
by David Gardner
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When former world chess champion Garry Kasparov lost to IBM 's Deep Blue chess computer more than a decade ago, we at The Motley Fool had our own particular insightinto what had just happened.

Better yet, the insight -- translated into action -- has led us to pick numerous winning stocks in the years since. Below, I'm going to share with you five stocks our supercomputer predicts will beat the market going forward, and two that will not.

But first, let's go back to May 11, 1997
In a historic six-game match, Deep Blue and Kasparov were tied after five games. But in the closing Game 6, in springtime in New York City, the computer absolutely crushed the chess expert -- in less than an hour, it ran Kasparov off the board in just 19 moves. Kasparov had officially lost the storied showdown. Extremely ill-tempered afterward, he accused the IBM team of cheating. To his credit, he also asked for a rematch ... which has never happened to this day.

But back to the investment insight. The headlines after the match all basically read like so: "Machine Beats Man." To which we at The Motley Fool said: Yeah, right.

Because it wasn't really "the machine" that beat the man. It was dozens of IBM programmers and world-class chess experts all working togetherwho programmedthe machine that beat the man. Key difference. It was a whole bunch of humans all ganging up on Kasparov -- and even worse for him, they were harnessing the power of a supercomputer! Game over, baby. Looked at this way, you can see how it was really an unfair fight.

A few years later, in July 2001, I wrote an eight-page Word document that laid out how The Motley Fool could create an identical solution for investors. Start with the Fool community and its millions of visitors. From that, I hypothesized we could locate tens of thousands of superior investors. We would then build our own supercomputer, a database very similar to Deep Blue, except that ours would be filled with stock picks, not chess moves. By combining our human intelligence with our computer's great big brain, I believed we could program it to beat The Man.

Who's the man?
Who's Garry Kasparov in this metaphor? Take your pick: Either it's the S&P 500 market average, or a Wall Street analyst, or both. We believed that The Motley Fool community, working together with the help of a massive community intelligence database constantly refreshing itself with new data like a Doppler radar, would enable us to outperform Wall Street.

In October 2004, we began building it. We alpha-tested it privately for two years. We then launched it to a free public beta test in October 2006.

The stocks our supercomputer loves today
So what does the world's greatest investment community favor going forward? You'd probably like to know which moves Deep Blue is planning to unleash against Kasparov in their nextgame, if it ever happens. I can't tell you that. But I cantell you five stocks that Motley Fool CAPS believes will beat The Man over the next one to three years, with a line or two about why.

Here you are, in order of popularity on our system (measured by the number of stock picks made -- the database is now more than 3.4 million picks and growing):

Activision Blizzard (Nasdaq: ATVI) -- Leading video game publisher of hits like Guitar Hero, Call of Duty, and Warcraft. Petrobras (NYSE: PBR) -- Brazilian oil exploration and production giant. Aluminum Corp. of China (NYSE: ACH) -- Aluminum giant should benefit from Chinese stimulus package and increasing demand for the metal. Corning (NYSE: GLW) -- International exposure as hedge against U.S. slowdown. National Oilwell Varco (NYSE: NOV) -- Oilfield services giant generates substantial free cash flow.

Do your own research on these stocks, and decide whether you agree with "Deep Fool." And while you're deciding, here's my other promised freebie -- two popular stocks you may have looked at before, which our community does notbelieve will beat the market going forward:

Overstock.com (Nasdaq: OSTK) -- Near-chronic inability to generate earnings or free cash flow. Delta Air Lines (NYSE: DAL) -- Competes in a highly competitive industry with expensive capital requirements and vulnerability to oil prices.

On whom would you bet your money today? Kasparov, or Deep Blue?

From whom would you take your stock market advice today? A Wall Street broker, or The Motley Fool community?

But wait!
Before you answer, how promising might it be if I told you that at Fool HQ, we have experts like Garry Kasparov walking around usingour own Deep Blue (CAPS) to pick stocks? Continued...

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