I make a concerted effort to focus on the positive of life.
Like most folks, I find that's sometimes easier said than done,
but it's worth working at. Thanksgiving, of course, is an ideal
time to reflect on all there is to be thankful for. It's not hard
for me this year: I have two ebullient girls, Lila, nearly 3, and
Phoebe, 13-months, and a great wife of 10 years. Now that the
weather has turned chilly, Lila can't stop talking about wanting
to go skiing again, while Phoebe just can't stop talking. One of
my brothers beat ampullary cancer this summer; that's a big one
on the thankful list. There's my own health, of course, even
those 20 extra pounds I carry I'm grateful for because they come
from abundance much of the world cannot enjoy.
I'm thankful for the people I work with at my publisher Cabot
Heritage and my subscribers and readers, such as yourself. Lots
of good things. And less important things too: the Yankees, the
national champion Boston College hockey squad, books printed on
paper, sparkling wine, the fact people still admire my baseball
(now softball) swing. I'm even thankful for the government, even
if its members act more and more like an embarrassing relative
you have to tolerate at holiday time.
Let me focus on where we are now, as investors, with that
government. As Editor of the Cabot Green Investor, a newsletter
dedicated to alternative energy, energy efficiency and organic
lifestyle stocks, I've been hearing some concern about the fate
of Green with the results of the November election. In fact,
according to the New York Times, a candidate to head the House
Energy committee, Congressman John Shimkus, dismisses global
warming on biblical grounds: God promised he wouldn't destroy the
world by flood again, so the icecaps can't melt. Certainly it
hasn't been hard to divine the Republicans aren't fully on board
with combating global warming and encouraging alternative energy.
But I am here to tell you an important thing: To make money in
Green stocks, we don't need the government.
Don't get me wrong. Certainly the government can help and I fall
fairly squarely in the camp that alternative energy can be an
economic driver superior to the Internet if we as a nation focus
on it. We've done some of that recently, for instance, $100
billion of the stimulus passed in 2008 is directed to Green
energy and energy efficiency. It is the largest energy bill ever
passed in American history, according to respected energy analyst
Daniel Yergin (who won a Pulitzer prize for his excellent book on
oil, The Prize).
We're seeing great benefits from that, especially in
next-generation batteries-an area American businesses will be a
dominant leader in within two years. Of course, the government
didn't help out in other ways. One year ago a lot of very smart
money on Wall Street was betting heavily on two things happening
in 2010: Carbon cap-and-trade and healthy incentives for trucks
to use natural gas, since it burns over 70% cleaner than diesel.
Neither happened, and with the likes of Shimkus having a say, we
shouldn't wait for them.
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So why am I so optimistic about Green right now? Because even
during a year like this one, with its "flash crash," Irish bank
trouble and our own battle against (depending on the time of
year) deflation/stagflation/inflation, we've done pretty well.
The Green portfolio of my newsletter, Cabot Green Investor, is up
14% year-to-date (as of end of day 11/18/10), including open
positions. That's even better when you look at the market. The
best four Green mutual funds, for instance, are down an average
of 5% this year, with the best not even close to our performance.
The Green stock benchmark, the WilderHill Clean Energy Index, is
down 11% year-to-date.
I credit the combination of the time-tested Cabot method for
market timing and the hard fundamental research we perform. Each
issue, subscribers get our market outlook, updates and two
featured Green stocks with out research, our opinion, and a
discussion of technical indicators and whether-and when-they tell
us to buy.
One example is ReneSola (
). We bought the Chinese solar panel maker in July at 7 when we
saw two major factors converge. One was trading data telling us
the market was starting to turn bullish on the stock again,
including the fact ReneSola finally pushed over its 50-day moving
average for the first time in a year. The other was fundamental.
As we wrote at the time: "Recently, it was trading at a
price-to-earnings (current 2010) ratio of under 8-a level more
appropriate for a second-tier coal stock-and that was before the
company adjusted its revenue guidance upward last Thursday for
the second time in the past three months."
We sold our position in ReneSola two weeks ago when we saw a
high-volume break of support at the 50-day moving average and
walked away with a 54% profit, one of the highest gainers in the
portfolio this year. As of this writing, shares have fallen
another 22% since we advised subscribers to sell. ReneSola looks
to be a good company, and we may very well buy it again one day,
but we know from the history of the markets that it could be a
very long time before we'd be back at a 50%-plus gain in the
stock again if we sat on it.
We've had a few losers too this year-that's unavoidable. But we
have a policy of selling to cut our losses and preserve our
ammunition to fight another day. In general, when a stock falls
20% from our purchase price, we sell. Why is this important?
Simple math tells the story. Lose 20% on a $1,000 and you have to
see gains on the remaining $800 of 25% to get back to break-even.
Lose 50% and you need gains of 100% to get back to break-even.
So if you bought the WilderHill Clean Energy Index at the start
of the year you now have to hope it gains 13% to get back to your
starting point and 28% to catch up to where we are with the Cabot
Green portfolio. Covering the past three years since we launched
the newsletter, the WilderHill needs to gain 172% and the four
best mutual funds need to gain 67% to catch up to where the Cabot
Green Investor portfolio is now. And trust me, we're not standing
still. And for that I am thankful too.
I am also optimistic for Green because of a number of factors
converging in coming months and years. I've discussed a lot of
them at length in prior columns so I won't belabor them here, but
they include some fantastic technological innovations in Green,
rising oil prices thanks to coming demand and the weakening
dollar and the fact many governments do recognize the dangers of
global warming and the other environmental hazards fossil fuels
create. Here's another: $33 trillion in new spending will be
needed in the next two decades to meet world energy needs,
according to the recently released World Energy Outlook from the
International Energy Agency. That's a lot of opportunity for
Green and it brings me to my stock suggestion for this edition:
MasTec is a long-established firm out of Florida that had been
known mainly for installing DirecTV satellite dishes. Management
made a successful effort to de-emphasize that business three
years ago, so while DirecTV sales continue to grow, today they
are far less significant as a percentage of sales. Powering
growth are Green areas such as building the electrical
infrastructure for solar farms and wind turbines. In its latest
quarter, four of MasTec's top 10 customers were using the company
for wind turbine projects and the company will claim 25% market
share of the U.S. wind business this year. MasTec is also a
growing player in constructing new natural gas pipelines. Through
2012, energy industry projections are that 6,000 miles of new
pipeline will need to be built. MasTec expects to be competitive
in bidding for every one of those $1 billion or so in projects.
Adding to business nicely is booming business in helping AT&T
expand its cell phone infrastructure to meet iPhone customer
demand. The technicals look promising too, with shares recently
experiencing a crossover of the two upwardly trending moving
averages, often a very bullish signal.
Here's hoping that will be one more thing to be thankful for.
Whatever you're doing this Thanksgiving and whatever your
circumstance, I hope you take the time to reflect on the good
fortune life has brought you.
All the best,
For Cabot Wealth Advisory
P.S. Cabot Green Investor, is up 14% year-to-date, including open
positions. That's even better when you look at the market. The
best four Green mutual funds, are down an average of 5% this year
and the Green stock benchmark, the WilderHill Clean Energy Index,
is down 11% year-to-date. Learn more about this