Stock Market Video
This Week's Fortune Cookie
In Case You Missed It
In this week's Stock Market Video, I look at the perplexing
state of the market, with the major indexes running merrily to new
highs, but with many leading growth stocks either stuck in the mud
or in declines. There are other technical warning signs to consider
as well. But there are opportunities in the sectors that are
providing the power behind the market moves, and I take a look at
Click here to watch the video!
The stock market is always trying to separate you from your
money. Everybody knows that. And today, with the major indexes
continuing to climb while many leading growth stocks are stumbling
and tumbling, it's truer than ever. Personally, though, I think the
market is equally good at separating you from your sanity.
My favorite crazy-making tactic on the part of individual stocks
is an issue that trades sideways for weeks and then breaks out with
a 10% gain in one day. Sometimes this is because of a good earnings
report or other news and sometimes there's no obvious reason.
When it happens, I tell myself that I can't buy it now because
it's too extended. So I figure I'll buy it when it corrects
Tomorrow comes and the stock continues to soar. Now I really
can't buy it.
And when the stock finally corrects for a day or two, it's so
high above its moving averages that it makes more sense to wait for
the averages to catch up.
This isn't just a random rueful comment. This has actually
happened to me more than once.
And it seems to me to be one of a matched set of frustrating
regrets that can take the sun right out of the sky for growth
The first regret is: "The stock has gone up, I can't buy it."
The second regret is: "The stock has gone down, I can't sell
If you've been following the examples and advice that Cabot's
growth analysts provide in these Cabot Wealth Advisories, you know
that the first regret isn't true. There are lots of rules for
finding good entry points in stocks.
But the second regret is the really important one. It's not only
not true, it's actually dangerous to your portfolio.
Psychologically, of course, being unwilling to sell makes a lot of
sense. If you own a stock that has gone down in price, it's hard to
just sell it when it triggers your loss limits.
Selling forces you to admit that the stock isn't working.
Booking the loss is a pain in the pocket book and a bitter pill for
But, as we've said here time and time again, if you can't set
and stick to a sell discipline, you might just as well throw your
money into the back yard and let the birds make nests out of it. A
portfolio without a sell discipline is like a bucket with a hole in
The first regret-difficulty buying-is a little less common, but
it's a good one for growth investors to spend some time with. I
took a long, long look at Baidu (
) back in June after it made a run from 85 to 104, but didn't
advise subscribers to Cabot China & Emerging Markets Report to
buy, even though the stock had made three upward surges along the
way. I was worried that I had missed the blastoff in BIDU.
Fortunately, the stock pulled back to 90 in late June and early
July, forming a classic double bottom. So when the stock regained
its momentum and gapped up to 105 on July 16, I was ready for it. I
put a buy on the stock and the portfolio bought it at 110, just
before it gapped up on an excellent earnings report.
BIDU is now trading just above 160, and has been consolidating
at his level since the beginning of October. It's nice when regret
at not buying turns into a good buy.
There are plenty of other regrets, of course. China &
Emerging Markets Report's portfolio was shaken out of Vipshop
) last May after the stock spent two months trading sideways at
around 30. VIPS ultimately came out of that consolidation in July,
and has now run from 30 to 80. But a quick look at the chart will
show that this rally has frequently been punctuated by sizable
corrections that make it just about impossible to buy back.
But that's the way the market is. As I said before, regret at
not buying is sharp. But the losses that accompany your regret at
not selling can be a real body blow for your portfolio.
As usual, what the regret-filled investor needs is a dose of
tough love. If you can't sell your stocks when you should, you're
going to have a tough time as a growth investor. If you can't find
buy points for stocks that make sense to you, well, Cabot can help
with that. There's a kind of attitude that is shared by every
successful growth investor I know, and it is optimistic,
forward-looking and able to shed disappointments like a meter maid
These are good traits to emulate, and Cabot's growth letters are
written by investors who have them. If that sounds good to you,
we'd be glad to give you a hand. In Cabot China & Emerging
Markets Report I search for strong emerging markets stocks with
good profit potential.
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Here's this week's Fortune Cookie. Remember, you can always view
Fortune Cookies here
Contrary Opinion buttons here.
I'd be a bum on the street with a tin cup if markets were
" Warren Buffett
Tim's Comment: America's most respected investor exaggerates,
but there's much truth in his words. It's only because humans are
irrational (and markets thus inefficient) that equity prices
fluctuate between undervalued and overvalued. It's Warren's ability
to recognize value in what other investors are selling that has
brought him great success.
Paul's Comment: If markets were always efficient, equity
investing would be about as exciting as watching television with
the set unplugged. Not everyone can be as good as Warren Buffett at
finding and exploiting the hidden value in companies, but the time
and attention you devote to doing your own research can pay off
quite handsomely. And the investment advisors who deny that anyone
can beat the market on their own should pay more attention to what
Warren has accomplished.
In case you didn't get a chance to read all the issues of Cabot
Wealth Advisory this week and want to catch up on any investing and
stock tips you might have missed, there are links below to each
Cabot Wealth Advisory 11/25/13-Tesla Motors: The
Car, The Company and The Stock
Tim Lutts, Cabot Stock of the Month's head honcho (and owner of
a Tesla S), uses this issue to do a comprehensive review of the
Tesla story and the fortunes of its stock, including a tentative
projection of what the stock will do next. Stock discussed:
Cabot Wealth Advisory 11/26/13-Google and C.R.
Bard: Growth and Value Stocks
In this issue, I round out my survey of ten stocks that have
characteristics that make them attractive to both growth and value
investors. Rising stock prices have pushed many stocks out of their
value range, but there's still potential there. Stocks discussed:
C.R. Bard (BARD).
Cabot Wealth Advisory 11/28/13-Thanksgiving and
In this issue, value chief Roy Ward of Cabot Benjamin Graham
Value Investor shares one big reason he's thankful this year and
tells why it's so important to be prepared for whatever the market
throws at you.