How to Develop the Right Investing Attitude
Leading in Several Growth Sectors: Corning (
Benefit from the Rapid Growth of 3G: Qualcomm (
Buy Low and Sell High
During my decades of experience advising investors and writing
about stocks, I have learned many lessons. The first lesson is to
buy low and sell high. We have all heard that saying before, but do
we always follow it?
I found out very quickly that I couldn't buy right at the lowest
price for a stock and sell when a stock reached its highest point.
I sure tried hard, though. After many disappointments, I began to
settle for buying near low prices and selling near high prices,
realizing that undervalued stocks can move lower than I might
imagine, but eventually recover or move higher.
Develop the Right Investing Attitude
What about stock choices that don't work out?
In the business of investing, even in rapidly advancing stock
markets, we are bound to have a few positions in our portfolios
that behave badly. Prudent investors, though, learn to deal with
their disappointments, knowing that getting it right a majority of
the time will lead to good results. Novices, however, tend to let
stock losses steer them toward negative attitudes which can then
lead to irrational decisions. Experienced investors develop an
investment plan and stick with the plan through thick and thin.
Lately I've been on a roll. Since mid-November 2012, the stock
market has risen steadily, which certainly helps. Most of my stock
recommendations have advanced nicely. The exceptions bother me, for
sure, but overall, my subscribers and I are beating the stock
market indexes and are mighty pleased.
I write the Cabot Benjamin Graham Value Letter and the secret to
my success is finding high-quality stocks at bargain prices. I do
this by screening … just as Ben Graham prescribed. My screening
methodology enables me to whittle my 1,000-stock database down to a
few buy candidates.
If you pay attention to the fundamentals, and you buy at
reasonable prices, profits will add up quickly!
Speaking of profits, I'm going to boast a little here. My most
recent sell recommendations generated very pleasing results!
In the January 2007 issue of Cabot Benjamin Graham Value Letter,
I advised my subscribers to buy eBay at my Buy Price of 29.70. On
January 25, 2013, I recommended selling eBay at my Sell Target
Price of 56.00 for
a gain of 86.6%
compared to a gain of just 6.1% for the S&P 500 for the same
In the November 2010 issue of Cabot Benjamin Graham Value
Letter, I advised my subscribers to buy LKQ Corp. if its stock
price fell to my Buy Price of 10.61. Three weeks later, when LKQ
declined to 10.61, my subscribers jumped in. On February 8, 2013, I
recommended selling LKQ at my Sell Target Price of 23.66 for
a gain of 123.0%
compared to a gain of just 27.7% for the S&P 500 for the same
In the August 2011 issue of Cabot Benjamin Graham Value Letter,
I advised my subscribers to buy Celgene at my Buy Price of 54.11.
The stock took off. On March 6, 2013, I recommended selling Celgene
at my Sell Target Price of 110.77 for
a gain of 104.7%
after just 19 months. The S&P gained only 28.6% during the same
My system is simple: buy high-quality stocks when they are
undervalued, and sell when the stocks become overvalued.
Buy low and sell high-it doesn't get any simpler!
I'll be explaining my value investing system in depth at the
Cabot Investors Conference in August, and I hope you're planning to
attend. The focus of the Conference is education, and the goal is
to make you a stronger and more profitable investor. Cabot
subscribers from 19 states and Canada have already registered at
the Early Bird rate, which expires Sunday, March 31. If your goal
is more profitable investing, click here for all the Conference
In keeping with my theme of buying low and selling high, I am
recommending Corning and Qualcomm these days. Both stocks are
currently selling below my buy target prices and both stocks have
price to earnings ratios (P/Es) currently less than their 10-year
norms. Both companies operate in the technology sector.
The technology sector has underperformed many of the other stock
sectors during the past 12 months. I believe tech stocks will
perform very well during the next several quarters, because
companies need to upgrade their technology to compete more
If I am right, Corning will advance from its current price to
24.40, a gain of 88% in two to three years. Qualcomm could climb
from its current price to 91.80, a gain of 40% in one to two
Corning (GLW: Current Price 13.00)
with headquarters in Corning, New York, was founded in 1851. The
company evolved from an old-line housewares company, known formerly
as Corning Glass Works, to a leading maker of liquid crystal
display (LCD) panels, fiber optics and emission control
Corning is operating in several leading growth sectors: making
glass for flat-screen TVs, smartphones, tablet computers and other
electronic devices; manufacturing fiber optic equipment used by the
telecommunications industry; and developing pollution control
products to meet new emission standards.
After two years of declining profits, Corning is poised to
increase sales and earnings. I expect sales to increase 6% and EPS
to climb 14% during the next 12 months ending 3/31/14. New
products, such as Gorilla Glass, an extra strong and clear glass,
and ultra-thin Willow glass could easily push sales and earnings
higher than expected. Fourth-quarter Gorilla Glass sales soared
68%. The innovative glass can now be found in one billion handheld
and electronic devices worldwide.
GLW shares sell at a 10% discount to book value, sport a low
current P/E of 10.9, and provide a dividend yield of 2.8%. The
current P/E of 10.9 is well below GLW's 10-year average P/E of
12.2. The company's balance sheet is very strong with low debt and
$4.15 per share in cash. GLW's stock price will likely reach my
Minimum Sell Price of 24.40 within one to two years. Corning is
medium risk because sales and earnings are volatile.
Qualcomm (QCOM: Current Price = 65.33)
designs, manufactures and markets digital wireless telecom products
and services based on Code Division Multiple Access (CDMA)
technology. Products include global positioning systems (
) and integrated circuits and system software for wireless voice
and data communications. The company also licenses many of its
5,700+ patents and intellectual property to manufacturers of
Qualcomm continues to benefit from the rapid growth of 3G (third
generation or Tri-Brand 3G) wireless technologies and smartphones
in emerging markets, including China. Globally, 85% of wireless
networks support 3G technologies.
The next-generation super-fast 4G LTE (Long Term Evolution)
technology will be quickly adopted in many parts of the world.
Qualcomm is now the leading provider of LTE technology which is
expected to reach 560 million customers in 2016 from the current 40
Qualcomm's integrated circuit chipset, called Snapdragon, helps
power Apple's iPhone 5; Google's Android-based smartphones,
including the popular Samsung Galaxy series; and Microsoft's new
Windows smartphones. Qualcomm's technology is also used extensively
in notebook and tablet computers.
Management believes Qualcomm will continue to achieve large
market share gains and therefore raised revenue and earnings
guidance for the next several quarters. Sales will likely advance
19% and EPS will climb 18% during the next 12 months.
At 15.7 times latest 12-month EPS, QCOM shares are clearly
undervalued. The current P/E of 15.7 is noticeably below GLW's
10-year average P/E of 17.5. The balance sheet is very solid with
no debt and lots of cash to fund product research and expansion
projects. QCOM is very low risk.
I will continue to follow Corning and Qualcomm, as well as many
other undervalued, high-quality companies in the Cabot Benjamin
Graham Value Letter. The Special Feature section of next month's
letter, available April 11 to subscribers, will feature Undervalued
Canadian Companies. I hope you won't miss it!
Editor of Cabot Benjamin Graham Value Letter