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The sequel to Oliver Stone's 1987 classic "Wall Street," a movie
that I've been looking forward to seeing for some time, was
released last week. The original starred Michael Douglas as the
ruthless Gordon Gecko (whose character popularized the motto
"Greed is Good") and Charlie Sheen as Bud Fox, a young, too-eager
stockbroker caught up in trying to get to the top at any price.
The sequel tacks a question mark on the end of Gecko's famous
motto, appropriate since we watched the financial system and
stock market essentially melt down in the 2008-2009 bear market
and recession. The movie deals largely with the financial crisis,
but there's some romance, father-daughter strife and gorgeous
shots of New York City thrown in as well. (There are also some
great self-referential scenes for those original "Wall Street"
In one scene of the sequel, Gecko discusses what has been termed
tulip mania and is seen by many as the first real bubble. The
peak of tulip mania occurred in the 1630s, long before the dotcom
boom and bust and before people thought houses would indefinitely
appreciate in value, but it can still teach us lessons.
Bubbles occur when large groups of people (like investors) behave
irrationally. They almost always spell trouble.
The tulip bubble was a classic. Prices for bulbs reached
ridiculously high levels-at the peak, some single bulbs sold for
many times the yearly wages of skilled workers-and as in all
bubbles, the prices eventually collapsed.
This has happened again and again since, because each time people
believe things will be different. We all know what happened when
housing prices became inflated and people were leveraging toxic
debt: Banks failed, the stock market plummeted and many people
lost their jobs.
My advice to you is to stay away from overinflated sectors and
industries when selecting investments. Beware the mob mentality
that comes with bubbles. It's very difficult to go against the
crowd, but that contrarian thinking can save you from losing your
shirt the next time this happens. And there will be a next time
because many people still believe that "Greed is Good," no
This week, Cabot Small-Cap Confidential Editor Thomas Garrity
alerted to me a list of the 10 best-performing semiconductor
Tom was so excited about the list because it includes three of
his newsletter's picks:
, up 105% this year;
, up 103%; and
, up 97%. These gains are nothing to sneeze at. And they
demonstrate the power of small-cap stocks.
You've probably never heard of any of these stocks, unless you're
a Cabot Small-Cap Confidential subscriber, but these gains show
they are worth a look. Keep in mind that Tom recommends stocks
for the long term.
All three of these companies are part of the fabless
semiconductor industry. This highly profitable sector includes
companies that research and design semiconductors but license out
the actual manufacturing to others.
I'll start with EZ-Chip, Cabot Small-Cap Confidential's first
recommendation three years ago. The company (formerly LanOptics)
was started in 1989 and is headquartered in Israel. EZ-Chip is in
the business of developing Ethernet network processors for
networking equipment. As consumers use more and more data from
the Internet, EZ-Chip works to find ways to deliver it better and
faster. EZ-Chip released record second quarter results in July,
with revenues increasing 123% over last year to nearly $15
Cabot Small-Cap Confidential first recommended QuickLogic,
founded in 1988 and headquartered in California, in late 2009.
The company is the leading provider of customizable semiconductor
platforms for mobile devices. And as more people buy smart
phones, QuickLogic is sure to benefit. In August, the company
announced fiscal results of the second quarter, with revenues up
123% year-over-year to $6.5 million.
Ramtron, recommended in early 2008, was founded in 1984 and is
headquartered in Colorado. Ramtron combines the best attributes
of volatile and non-volatile memory to create superior
semiconductor memory called Ferroelectric Random Access Memory,
or F-RAM. And the company has strong patents to protect its
products. Ramtron announced second quarter revenue that was up
66% over last year to $18.3 million.
Now remember that small-cap stocks can be volatile, so don't just
go out and buy these. Do some more research, or better yet,
subscribe to Cabot Small-Cap Confidential, where you'll find
complete write-ups on all of these stocks (and more).
In honor of this great performance, we're extending our Limited
Time Anniversary Price Rollback for Cabot Small-Cap Confidential
until October 4. But hurry, this offer will end on Monday!
Click here for details.
In this week's Stock Market Analysis Video, Cabot Top Ten Weekly
Editor Michael Cintolo says that the stock market had a great
September, but it has experienced some distribution recently.
Mike says this is normal after such a big run. Stocks discussed:
) Baidu (
), Netflix (
), Amazon.com (
), NetApp (
), Riverbed (
Under Armour (
Watch the video!
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Until next time,
Editor of Cabot Wealth Advisory