I received a private alpha invitation to check out SocialPicks, a new Web 2.0 / Social Web application seeking to be the new way for people to share stock picks and research. Users can get investment ideas from friends, see who else follow their advices, and see everyone’s performance over time. Members can also recommend stocks, and let your track record speak for themselves.

InvestorGeeks had previously blogged a positive informative preview of the service so I will defer to it rather than rehash all the details. You’ve come here for the Investorial point-of-view and that’s what I aim to deliver!

For those of you still in the dark, Web 2.0 is the internet’s next incarnation where social applications help facilitate networking services among its users. Some famous examples include Flickr, Wikipedia, Digg and del.icio.us.

Quantity vs. Quality
Don’t reinvent the wheel! What did those great Web 2.0 sites do well? Flickr had all types of photographers but it has attracted many great pictures and photographers. Wikipedia is a great source of information, Digg showcases popular articles that are considered great by its voters, and del.icio.us allows users to share websites that they felt were great. So what should a stock research site have? Great research / analysis of course!

Even in this private beta, you will find no shortage of member reviews and stock picks already in the system. But the quality of those reviews can leave much to be desired. For example, I found this single-sentence analysis on Amazon’s stock:

“It’s a good stock that’s undervalued because of stupid short-term thinking “

Simple, straight to the point; yet NOT what you want in an analysis! I surfed around for more stock analysis and were surprised to find a few obscure value-plays such as 2 analysis on Handleman Co. I’m not sure if they were also followers of Irwin Michael, who picked Handleman as his value-favourite at one time. Compare Irwin’s analysis to these 2 examples!

Analysis #1: At $8.50 a share, that’s a market cap of $171 million.. net book value is $221 million.. they are profitable, pay dividend and buy back stock. It’s business may be in trouble down the road, but it’s seems to be a good cigar butt type of investment hear due to low valuation. Do own research.

Analysis #2: This company is simply hated. How else can you explain its valuation? It trades at a significant discount to book value. Its P/S ratio is 0.1 - no, it’s not a typo - 0.1, P/E and price-to-cashflow are single digit numbers. I realize that it does not compete in a terrific segment, but with growing revenues (by acquisition), the company is growing its share of its category, it’s buying back stock by the truckload, has low debt ratio, so no worries about a cash crunch and I wouldn’t be surprised if it gets taken private.

The problem with the SocialPicks reviews is that their amateur tones don’t share the entire story; leaving gaps wider than a hockey player’s teeth. The onus is up to the reader to intelligently decide what to do with this information, and more often than not, emotions can take over for that impulsive buy or sell. Also, this system may be susceptible to pump-and-dump spammers who can easily abuse SocialPicks for their own gains. The quality of analysis and quality control is simply not there yet.

Wisdom/Stupidity Of Crowds?
The basic premise of SocialPicks is to share knowledge and facilitate the whole “wisdom of crowds” philosophy for picking stocks, and that’s where it excels! However, I love to play the contrarian role and also believe that the majority of the irrational masses can get things wrong (or at least over-exxagerate positives and negatives). So why would I benefit from doing research where the masses gather?

Similarly, what would I (being contrarian) gain by revealing my stock picks? I’m not a trader either. Fundamentally, stock forums and stock research sharing sites diverge from my own investing philosophies. However, that doesn’t mean a contrarian doesn’t have a reason to “keep an eye” on the mass opinion. Just less of a reason and different motivation. There is however a reason I would really like SocialPicks, and that is ……

Blogger Publicity
I’m going to reveal secret to stock bloggers everywhere…. SocialPicks is a great tool to publicize your blog! For example, I took my previous post on Tim Hortons, copied and pasted an excerpt while leaving a referencing URL leading back to my blog. Search engine optimizers may also want to cash in on this loophole to promote your stock-picks blog!

Jim Cramer Again??
I’ve always blogged negatively about Jim but it was funny to see his name on SocialPicks’ feedback page. The interesting question they asked was “Do You Watch Jim Cramer?” with the following choices you can use to answer:

Yes - almost every episode!
Yes - occasionally
No - but I know it
No - huh? Who’s Jim Cramer?

How about an answer along the lines of “I don’t care for his advice or antics”? I see that even Standford students/alumni (where the SocialPicks founders are from) are not immune to the reach of Jim Cramer.

Thumbs Up Or Down?
Though I am not able to whole-heartedly say that SocialPicks is a research site that I would use (at least not until the review quality improves). It is a fresh, well-executed idea that the major financial sites can strive towards. Sites like Google, Yahoo, TheStreet, Motley Fool, MarketWatch, StockHouse would benefit by learning about this new concept of social networking with its interactive advantages over traditional forums.

I want to appreciate Jason Fang for inviting me to participate in the alpha testing. I would like to reciprocate by giving out SocialPicks invites to the first 8 people to leave comments for this article. But it’s not that easy! You have to comment on what you would be excited to experience / learn by joining SocialPicks. The first 8 commenters will receive invitations from me shortly!

[Editor's Note: A warm welcome to the readers from the Carnival of Investing #26 where this article has been featured. Stick around as there are more investing articles right here at Investorial!]