Learn How to Invest the Cabot Way

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Know What to Look For

Doom & Gloom Sells Optimism Pays

Stock Market Video

In Case You Missed It

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I can't draw. Even my stick figures are so terrible that I long ago figured there was no point in me attempting to improve in the visual arts. So it was a bit surprising that, in 2007, The Eagle Tribune Publishing Company hired me as a copy editor/page designer. The editing half was easy enough, seeing as getting a degree in journalism forced me to become a good editor. However, the design half was an immense struggle to wrap my brain around because, as I said, I don't have a talent for the visual arts.

It took about four solid months of practice and mistakes before I could eventually look at a blank news page and fit each element exactly where it needed to go. My pages would never win design awards, but were solid enough for publication.

My design sense has remained heightened since I left that job. I can immediately tell where someone has gone wrong with a newspaper or magazine and, more importantly, how to fix it. The reason? I know what to look for.

Knowing what to look for is even more important when it comes to stock picking. This is because, unlike me as I learned page design, you don't always have the luxury of making mistakes over and over again to figure out how to choose a good stock.  My poor designs could be fixed by more experienced coworkers; there's no recourse if you make a poor stock choice beyond selling your position and limiting your losses.

So what can you do to learn how to pick good stocks? One idea is to read books about investing. I'm currently in the middle of an interesting one myself-- One Up on Wall Street by Peter Lynch and John Rothchild. Originally published in 1989 and re-released in 2000, the book consists of Lynch, who used to run the Fidelity Magellan Fund, explaining how the amateur investor has the opportunity to "scoop" the professional simply because he's an amateur. It's a fascinating look into how traditional investment thinking can guarantee mediocre returns by being too restrictive about where you can and can't put money.

There are also headier books about investing, such as Security Analysis by Benjamin Graham and David Dodd. You'll recognize Graham's name from the Cabot Benjamin Graham Value Letter ; he created the value investing system that editor Roy Ward uses. A caveat: Only read Graham's book if you're interested in value investing.

Reading a book is my personal preference for learning something new, but maybe you're more the visual type or don't want to spend the 10 hours (on average) it takes to read a book. I can't fault you for that--not everyone has the time to sit down and read, and I'd definitely suggest dedicated reading time if you pick up an investment book.

Might I then suggest a video presentation instead? Video takes less time than books, and there's also the benefit of information presented in smaller chunks than 20-page chapters.

That's why Cabot Market Letter and Cabot Top Ten Trader Editor Mike Cintolo tapes the Chart School series of videos--to educate the beginning investor in easy-to-digest pieces on topics such as what to look for in a stock, market timing and portfolio management.

His latest offering in that series, How to Find, Buy and Sell Growth Stocks the Cabot Way ( click here to watch ), details the precise system that Mike uses to find growth stocks for inclusion in his two newsletters. Paul Goodwin uses the same system in Cabot China & Emerging Markets Report.

The video is a bit lengthy at 17 minutes, but Mike covers a wide range of topics sure to be interesting for the beginning investor. One of these is a description of the SNaC approach to growth investing--Story, Numbers and Chart--which offers a solid method of picking growth stocks. If a company meets all the right metrics in the SNaC method, then chances are you've got a big winner on your hands.

I won't go into extensive detail about the video, since that would mean you didn't have to watch it, but suffice to say it's well worth spending time on. Mike explains the topics in clear, easy to understand language. This is a huge bonus ... I can't even count the number of times I've given up on watching jargon-heavy instructional videos. Those make it sound like the presenters are more interested in showing off how smart they are than teaching an actual topic.

All of these suggestions for educating yourself on investing are attuned to one thing, which I hope has come clear by now: knowing what to look for when it comes to picking stocks. Even if you're not the one managing your own portfolio, knowing what to look for can still help when you meet with your investment professional; that way you're able to understand what he or she says as to why a particular investment was picked.

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DoomGloomSells
Here's this week's Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.

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 doesn'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.

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In this week's Stock Market Video, Cabot Market Letter and Cabot Top Ten Trader Editor Mike Cintolo discusses that asking about corrections misses the point of the bull move going on right now. The real key now, Mike says, is getting into the right stocks at the right time. Featured stocks: Apple ( AAPL ), Priceline ( PCLN ), Francesca's ( FRAN ), Buffalo Wild Wings ( BWLD ), CA ( CA ), Seagate (STX), D.R. Horton (DHI) and Lennar (LEN) .

Screenshot 3-23-12

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 issue.

Cabot Wealth Advisory 3/19/12 - You Have To Treat Options Differently

On Monday, Cabot Options Trader Editor Rick Pendergraft discussed the ways options are treated differently than stocks. Rick also outlined why options are priced the way they are. Featured stock: Lam Research (LRCX).

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Cabot Wealth Advisory 3/22/12 - Don't Trade Your Stocks So Often

On Thursday, Cabot Benjamin Graham Value Letter Editor Roy Ward discussed the results of a Hulbert Financial Digest study that showed stock portfolios performed better when frozen versus extensive trading in each year. Featured stocks: PepsiCo (PEP) and Royal Bank of Canada (RY).

Happy Investing,

Matt Delman
Editor, Cabot Wealth Advisory



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AAPL , BWLD , CA , FRAN , PCLN

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