In the spirit of New Year's resolutions, I'm going to share
some of Cabot's top tips, tricks and tools that you can use in
2011 to become a better investor. These aren't resolutions
exactly, but more like rules and tools to keep in mind when
1. Cut losses short (definitely rule #1 for growth stock
2. Search for strong sales and earnings growth (especially
triple-digit sales growth).
3. Search for revolutionary products with major benefits.
First Solar and Crocs filled the bill in 2007 and were our two
biggest winners. This year we've benefited from Green
Mountain Coffee Roasters' revolutionary Keurig single-cup brewer.
4. Heed the message of the overall market--never fight the
5. Never average down in growth stocks.
6. Be prepared for all contingencies (always have an exit
plan ahead of time).
7. Never try to buy at the bottom or sell at the top (if
you try, you'll just lose more money).
8. To avoid gut-wrenching volatility, stick with stocks that are
liquid (at least 500,000 shares traded per day or more).
9. Only put more money to work after your past purchases
are showing you a profit.
10. Be humble-making money in stocks is tough, so don't
kill yourself over one or two bad trades. Be thankful when you
hit a big winner.
11. Find an investing system that works for you, then follow it.
The best way to deal with stress from the market is to have a
game plan ahead of time. If you wait until things are blowing up
in your face, it's too late-by then, your emotions are out of
control and you're likely to do the exact opposite of what's
12. "Markets are never wrong; opinions are," is a quote from
Jesse L. Livermore, one of the most colorful, flamboyant, and
respected market speculators of all time. At Cabot, we agree
wholeheartedly with his comment and truly embrace this thinking.
And you should, too, if you want to become a successful growth
13. When looking for potential purchase candidates, examine both
the company's fundamentals and its stock's technical performance.
When analyzing the technicals, focus on the stock's momentum and
price chart, along with its volume pattern and 50-day moving
14. Find a company that has a big idea ... one that leaves few if
any limits on its future growth potential. It's these big ideas
that create an atmosphere that can push a growth stock to
15. Warren Buffett once said there were only two rules to follow
with your investments: Rule #1: Don't lose money. Rule #2: Don't
forget rule #1.
16. Our goal is to get you heavily invested while the market is
trending higher. During those times, when investor perceptions
are improving, investors are willing to pay more and more for
stocks. This is when you can make big money! But, of course, no
market moves in one direction forever. So, when the
intermediate-term trend of stocks is down, your best move is to
play defense. Easing up on new purchases, while building up cash
by selling your weakest stocks, is a good idea.
17. Be an optimist. In our more than three decades of publishing
investment advisories, we've seen many ups and downs for both the
market and our country. But after every tough event our dynamic
country and economy have eventually rebounded. So no matter how
bleak the situation, always stay optimistic because our country
and stock market will give you some dazzling opportunities!
18. Diversify your portfolio. For our Model Portfolio in Cabot
Market Letter, 12 stocks provide plenty of diversification for
your growth portfolio. Smaller investors can do well with as few
as five stocks, but you should never have all your eggs in one
19. Once you've invested in a stock, be patient. Recognize that
time is your friend. Frequently stocks don't go up as fast as you
might want them to. But if you can develop a persistent and
tolerant attitude coupled with plenty of patience, you'll have a
20. Buy growth stocks with strong Relative Performance (
) lines. RP studies are a superb way to identify successful
companies and to avoid problem companies. You should buy stocks
that are consistently outperforming the market. This is a good
indication that they are under accumulation, week after week,
month after month, and that the companies are succeeding. The
best investing tips come from the performance of the stocks
themselves. So ignore hot tips!
Send me your tried and true investing rules and tools by replying
to this email. And best wishes for your investing in 2011!
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This week, we're bringing you a Cabot Chart School video instead
of the usual Weekly Review because of the holiday. In it, Cabot
Market Letter Editor Mike Cintolo discusses portfolio management,
focusing on selling strategies. He weighs taking profits versus
trailing stops and discusses offensive versus defensive selling
tactics. This video is a classic, so don't miss it!
Click to watch.
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I Refuse to Let the Financial Media Send You to the Poorhouse!
Make no mistake about it-what happens in the new year will shock
the bulls, confound the bears, and make shrewd investors
rich. What you do now could make you 50% richer or poorer
in the next 30 days-and the financial media is telling you none
My new report reveals what you must do now to protect yourself
Get it today!
Until next time,
Editor of Cabot Wealth Advisory