The world was different back in 1963.
Coca-Cola introduced Tab, its first diet drink.
George Wallace became governor of Alabama, proclaiming,
"Segregation now, segregation tomorrow, and segregation forever!"
John F. Kennedy, and then Lee Harvey Oswald, were assassinated.
And the Dow Industrials finished the year at 764.
1963 also marked the occasion of the first Contrary Opinion Forum
in Vermont, a gathering helmed by author Humphrey B. Neill (The
Vermont Ruminator) and money manager Jim Fraser and dedicated to
exploring the utility of contrary opinion in the investment field.
The following year my father, Carlton Lutts, attended the annual
gathering, a feat he repeated some thirty-five times in the
I began attending in 1986, and over the years I've learned a lot
... and forgotten a lot. Over the years, I've also
acquired--and kept!--94 of the lapel buttons that have been
distributed at the Forums, each one bearing a pithy statement that
is usually applicable to the business of investing.
These 94 buttons adorn the wall of my cubicle, providing
inspiration ... and sometimes reminding me that I still have a lot
to learn. And today I'm going to write about four of them.
"Doom & Gloom Sells; Optimism Pays."
In the news biz they say, "If it bleeds, it leads." People
are attracted to bad news, especially when it's happened to
others. Good news, on the other hand, is boring, and it won't
sell newspapers. But to be a good investor, you've got to
look for the good news, even learn to anticipate the good news, as
optimists do. That's because stocks go up more on the
anticipation of progress than on the news of progress.
"Excitement is Highest as the Roller Coaster Goes Over the Top."
My father loved this one. The message: When everyone's
excited, the market's usually near a top, at least
shorter-term. As I write this, I can clearly remember the
euphoric state of mind of my colleagues and customers at each of
the past five major market tops. And just as clearly, I know
that state of mind will recur at the next major market top.
When it comes, you should mentally begin to prepare for the coming
"Patience Precedes Profits."
Alliterative and simple. Patience means waiting to buy until
a growth stock sets up in a high-potential pattern. Patience
means waiting to buy until your value stock gets cheap
enough. And patience means holding patiently as your stock
climbs, until you get an exit signal.
"Wisdom Begins With Wonder."
This saying has been attributed to Socrates, and as a proponent of
never-ending education, I like this one a lot. Of course,
wonder is only the first step. After wonder comes research,
analysis, synthesis, experience and then (sometimes), wisdom.
In the near future, you'll be able to see all the buttons, as well
as explanation, on our Web site. When they're there I'll let
There's one more button on my wall that says, "Winds Blow Hard On
High Hills." I don't find it particularly applicable to
investing, but it is certainly applicable to real life. Just
ask Tiger Woods, Mark Sanford and Elliott Spitzer, to name a
few. Wealth is nice (though it won't buy happiness), but fame
can bring added challenges.
As to the stock market, I want to start by reviewing my column of
March 8, four weeks ago.
On that day, the title of my Cabot Wealth Advisory was "Six Hot
Chip Stocks for the Spring Bull Market." In the article, I
told you why chip stocks were a good bet at this point in the
market cycle, and I highlighted six that were attractive at the
They were Atheros Communications (
), Cree (
), NetLogic Microsystems (
), Power Integrations (
), Skyworks Solutions (
) and Volterra Semiconductor (
And how have they done since?
Very well, up an average of 7.9%, while the S&P 500 is up 4.2%.
And on March 22, I mentioned CREE again, saying it "looked
Well, I hope you listened because today CREE vaulted more than 8%,
breaking out of a beautiful tight base (the kind Cabot Market
Letter editor Michael Cintolo loves) at 70 and pushing close to 77.
The "news" that sparked this move was an analyst upgrade. But
the stock would never have made the move if it didn't already have
so many of the qualities we look for, including strong sales and
earnings growth, huge mass markets, great institutional sponsorship
and a tight chart pattern. I touched on many of these
qualities a month ago, when I wrote this:
) is a leading manufacturer of LEDs (light-emitting diodes).
These are the lights that will eventually take over from
incandescent and compact fluorescent lights because they are far
more efficient and last far longer. The company has grown
revenues every year of the past decade but one (2007) and it
maintained profitability throughout 2008 and 2009. In the
latest quarter, revenues grew 35% to $200 million, while earnings
jumped 90% to $0.38 per share. After-tax profit margin was
All that still applies. The only difference is that CREE has
just completed a textbook one-month base. With this new
breakout, the uptrend is alive and well ... and there's more upside
To get regular current advice on the stock, I recommend a
subscription to Cabot Market Letter, edited by Michael
Cintolo. Mike recommended the stock to his readers back on
March 10, when it was trading at 70.
Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory