Aggressive Stocks for Retirement
A Powerful Chinese Stock
Investment advisors are a predictable bunch, and they dispense
almost identical advice.
• Start young! they tell you, pointing out that just $250 a
month in a Roth IRA starting at age 23 will have you within
spitting distance of a million bucks by the time you roll into
• Live a disciplined life-no Starbucks lattes or Cristal
champagne-buy the sensible used car and practice moderation and
blah, blah, blah.
• Diversify, take the long view, get a financial advisor, rotate
your tires and drink eight glasses of water a day.
It's enough to put you off your feed.
The fact of the matter is that by the time most people have
the time to think about it and any money to do anything with,
they're too old to start young. I came of age during the 1960s,
and for the four years I was in the Army and the six years I
spent in grad school eating cheap food and drinking cheaper beer
(Wisconsin Club at $0.99 an eight-pack!), retirement planning was
the last thing on my mind.
After I started teaching college, the pay was wretched and the
retirement plan was pitiful. I loved teaching, but financially,
things didn't pick up until I left teaching and hooked up with a
big Boston financial house, which was well into my theoretical
peak earning years.
I've been playing catch-up for a long time, and I'm getting a
little more comfortable with the idea of retirement, although I
imagine I'll probably follow in my dad's footsteps and work as
long as I can drag my bones out of bed. Life is just more
interesting if you stay useful.
But I suspect there are a lot of people out there who have
gotten sufficiently terrified about the state of their retirement
accounts only recently as their personal odometers have ticked
over into their fifth and sixth decades. And when they start
looking for retirement advice, what they run into is the "start
young, diversify, stay the course" crap that financial advisors
To paraphrase Warren Zevon (and there's a generational
touchstone if there ever was one), you're too old to start young,
but too young to retire now.
The mutual fund people (who make money by taking a yearly cut
off the top of what they manage for you) tell you to just keep
shoveling money into your diversified account and leaving it
there. And if you're a little older than you should be (given the
amount you have in your account), you need to shovel more.
But the mutual fund people and the financial advisors seldom
acknowledge that it is possible to beat the broad market by
strategically investing in growth stocks. The Cabot Market Letter
has done it for years. And when markets are in an uptrend, the
Cabot China & Emerging Markets Report can also gather
Personally, although I'm not a certified financial advisor, I
think that anyone who's concerned about the state of their
retirement funding ought to think about putting more of their
stock portfolio into growth stocks, with at least half of that in
aggressive growth stocks.
Managing an aggressive growth portfolio isn't easy. It takes
hours of study and analysis, and you have to be prepared to live
through some dismaying downmoves as stocks hit the rocks from bad
earnings reports, scandals, market downturns and inexplicable
failures to thrive. But if you have an advisory that will get you
out of the market and into cash when the tides turn against
you-as both the Cabot Market Letter and Cabot China &
Emerging Markets Report will-and a sell discipline that will cut
your losses short, you can do well enough to take control of your
retirement, rather than just drifting toward it like a canoe
heading for the waterfall.
Most people have been sold a bill of goods by the financial
industry. But you don't have to just sit there while management
fees and inflation let the air out of your retirement party
How do you get started? I can think of two ways. One involves
studying the market for years, discovering how to recognize bull
and bear patterns, learning how to pick stocks by reading charts,
interpreting fundamentals and analyzing business models, and
making decisions about how much money to put into each attractive
stock and how to manage your portfolio through the vicissitudes
of different market movements.
Or, alternatively, you can just take a trial subscription to
Cabot Market Letter
Cabot China & Emerging Markets Report
, two publications that have been doing exactly that kind of
study and analysis for decades.
People who've known me for a while know that I'm a serious fan
of the movies. I used to teach film criticism and for many years
I was a practicing critic, first in print, then on the radio. And
I'm approaching 20 years as the leader of film discussions at The
Music Hall, a non-profit theater and entertainment venue in
Portsmouth, New Hampshire.
I hope this doesn't tarnish my image as a knowledgeable, sober
and trustworthy writer about growth stocks, but there's not much
I can do about that. I fully expect to continue with my film
fascination for as long as I have the use of my eyes and
When I first came to work at Cabot, the one thing I was firm
on during my negotiations was that I would be allowed to come to
work late on the morning after the Oscars. And that's exactly
what I do every year.
I won't bore you with my Oscar observations, but I have one
anecdote that I think might interest you.
I ran an Oscar-picking contest among my co-workers at Cabot. I
edited the list of nominees down to 16 categories and told people
that they had to pick winners in at least five of them. The
winner would be the person with the highest percentage of
The strategies were all over the place. Some people made picks
in all 16 categories and several made only the required five
The winner was Tim Lutts, which wasn't a surprise to many of
the people at Cabot, who know him for a careful strategist with a
clear-eyed way of analyzing odds.
Tim picked in just five categories, sticking to ones that
either had a clear favorite or had just three entries. His final
score was 100%.
There is an investing lesson in this story, though, and it's
this. With only five bets down, if Tim had been wrong on just one
of his picks, he would have finished with just 80%, which would
have put him in third place, behind two people who picked all 16
categories and finished with scores of 82%.
The moral is that a concentrated bet, on the Oscars or growth
stocks, or anything else, is a riskier proposition than spreading
the money around a little. The smaller the number of bets, the
bigger the potential damage that each one can do. The more
concentrated your portfolio of issues, the closer to perfection
you have to get to make (and keep) your money. But I could also
argue that when you're right, you'll make big money.
My stock pick today is one that I've written about before,
Qihoo 360 (
, a Chinese company that makes security software for mobile
devices. Qihoo gets most of its money from selling programs that
battle viruses, adware and other malware and protect personal
information on phones and tablets. The company makes nearly
three-quarters of its money from ads on its mobile Web browser
and the other quarter from its protection software.
The boom in mobile devices in China has lifted Qihoo 360's
market cap to $3.6 billion on annual revenue of just $288
million, and the reason is that many investors see the company's
rapid market-share growth in Internet search as a huge
QIHU popped higher in August 2012 when it switched from Google
as the default search engine to its own search program on its
popular mobile browser. The sudden acquisition of a nearly 10%
market share (mostly taken from Google) grabbed lots of attention
and kicked the stock from 15 at the beginning of August 2012 to
25 on August 22. Another surge started in late December and the
stock surged to 33. But since the beginning of January, QIHU has
traded in a range with support at 30 and resistance at 33. This
kind of range-bound trading usually indicates a battle between
buyers and sellers, and it will probably come down to the results
of the company's quarterly report on March 5 to decide the
Right now, Qihoo 360 is one of a number of small Chinese
stocks that are making investors look more closely at the China
market. After years of global economic turmoil, the big emerging
markets are once again tempting targets, with GDP growth that
dwarfs anything in the developed West and economies that are
ready to explode higher when the woes in Europe finally resolve
All the best,
Editor of Cabot China & Emerging Markets Report
and Cabot Wealth Advisory