Over the past two months, most of the stocks we've recommended
in Cabot Wealth Advisory have gone up.
On September 7, in an issue titled "Up, Up and Away, I
. It's up 19%" since then.
On September 9, Paul Goodwin, editor of Cabot China &
Emerging Markets Report, recommended
China New Borun (
. It's up 53% since then.
On September 13, I recommended
. It's up 36% since then.
And on September 16, Brendan Coffey, editor of Cabot Green
, which is up 26% since then and
American Superconductor (
, which is up 28%.
In hindsight, those were great recommendations. But in all
honesty, the real hero behind those gains is the bull market.
And as the old market truism says, "Don't Confuse Brains with a
We try not to, and by the same token, we try never to forget that
the market can go both ways. When it's rising, it lifts all
boats. And when it's falling, even the best companies'
stocks have trouble keeping their heads above water.
Right now, the tide is still coming in. Most boats are
being lifted, and I sincerely hope you're making the most of it.
Cabot subscribers certainly are. Just last week,
Whole Foods Market (WFMI)
, jumped 15% (!!) after reporting better-than-expected third
Las Vegas Sands (LVS)
just advanced 10 days in a row, for a gain of 37%. And
is up 85 points in the past four weeks! All these stocks
are in Cabot advisories now.
But knowing that the pendulum on Wall Street swings left and
right, I'm now expecting that some of the people who were
responsible for creating those recent highs will have to sit
through a period of … let's call it discomfort… before their
optimism is rewarded.
Now, I'm not trying to call a top here. I'm well aware that
trends tend to go farther than expected, and that stocks that are
overbought can remain overbought. Long-term, I'm as bullish
But the market is a two-way street … and for new investments
today, an argument can be made for taking the low-risk route,
particularly is aggressive investing if just not your
style. At Cabot, that means selecting something from Cabot
Benjamin Graham Value Letter, which uses the classic value
investing methodology that has worked so well for Benjamin
Graham, Warren Buffet and thousands of other patient investors
who have mastered the science of buying low and selling high.
The latest issue, which came out last week, had a special feature
on Undervalued Companies with Low Price-to-Book Value Ratios.
Editor Roy Ward rotates through six specific Special Features a
year, so he returns to this one twice a year, and the good news
is that over the past 62 months (the period we've published the
advisory) this is the best-performing selection criteria of them
all, even outperforming the Classic and Wise Owl models.
Roy wrote, "To select these stocks, we applied four additional
criteria to the stocks in our database:
• excellent financial strength
• increasing dividend payments
• low price-to-earnings ratios
• strong earnings prospects
The six stocks we chose present a wide range of industries: gold,
securities trading, semiconductor components, energy, personal
computer distribution and laboratory equipment and services."
And I'll give you one of them here. It's
Barrick Gold (ABX)
Roy writes, "Barrick Gold, based in Toronto, is the world's
largest gold producer with 26 mines in operation across five
continents. The company's new Cortez mine in Nevada is now
producing 15% of the company's total gold production at a very
low $300 per ounce. Barrick has additional low-cost mines ready
to start production during the next five years, which will lead
to higher profit margins. Earnings per share surged 87% during
the past 12 months and will likely increase another 17% during
the next 12 months. At 14.3 times forward 12-month EPS, ABX
shares are among the least expensive in the industry (Goldcorp,
Agnico-Eagle and Silver Wheaton sell at 33 times forward EPS or
higher). ABX is medium risk."
Should you buy it now? Maybe, but the right way to invest
in value stocks is to diversify, so that an unexpected dip by any
one stock doesn't hurt too much.
And Roy says, "We strongly recommend buying as many of the six
stocks as is practical to spread your risk. We encourage you to
invest in the new recommendations at current price levels and
hold until our next Low Price-to-Book Value Special Feature
appears in the May 2011 issue of the Cabot Benjamin Graham Value
Learn more about Barrick Gold and this proven value investing
Cabot Benjamin Graham Value Letter
Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory