Stock Market Video
Making a List, Checking It Twice
Do Not Project Prejudice Into the Process
In Case You Missed It
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In this week's Stock Market Video Mike Cintolo, Editor of
Cabot Market Letter
and
Cabot Top Ten Trader
, talks about the market's two-steps-forward, one-step-back
advance since its early June low, and also opines that, should
the rally kick into a higher gear, growth stocks are going to
have to lift off (as opposed to the defensive stocks that have
led thus far). Stocks mentioned include:
eBay (
EBAY
), D.R. Horton (
DHI
), Lennar (
LEN
), TransDigm (
TDG
), Amazon.com (
AMZN
), LinkedIn (LNKD)
and more. Click below to watch the video!
Making a List, Checking It Twice
Lists are fun to make and fun to read. I'm a sucker for a Top
Ten list of almost anything, from 10 highest-paid athletes to 10
worst cities for left-handed truck drivers. These lists are a
great way to get a discussion going, start an argument or make a
point. And the outraged responses to such lists when they appear
online makes them even better.
Every once in a while, when the MegaBucks jackpot gets big
enough, everyone at Cabot kicks in a dollar and we buy a wad of
lottery tickets. I know that there are people who have lists of
the things they will buy if we win. (I hate to tell them that, at
least from a statistical point of view, our chance of winning is
essentially the same whether we buy tickets or not. But it's fun
to dream.)
The kind of list I want to talk about briefly is a watch list of
stocks that you are interested in. This is not a buy list. It's
more like a group of stocks that have something interesting about
them, but don't have enough pieces in place to get you to the
buying point.
There are at least three reasons that you might have interesting
stocks and not buy them, but the best one is that the market
isn't ready yet. While the market timing indicators for both the
Cabot Market Letter and Cabot China & Emerging Markets Report
are positive today, this isn't anyone's idea of a roaring bull
market. (A quick viewing of Mike Cintolo's video above will give
you the idea.)
But the question I get asked most often when I'm talking about
watch lists is, "How the heck do you find growth stocks for the
list?" And I understand that, especially for neophytes, the stock
market looks like a blooming, buzzing confusion, a sea of little
fishes dominated by growth sharks like
Apple (AAPL)
, income whales like
Procter and Gamble (PG)
and value stocks with low P/E ratios and charts that are as flat
as tropical lagoons.
If you are really serious about developing a watch list from
scratch, all you have to do is go to your online broker's site
and screen the entire universe of stocks that trade on U.S.
exchanges as follows (it's easier than it sounds): 1) screen only
for stocks that trade for $10 or above, which will eliminate the
penny stocks and low-priced rabble; 2) screen what remains for
stocks that trade at least 400,000 shares a day, on average,
which will weed out the hyper-volatile small issues; 3) screen
for stocks whose price is higher than it was when the year
started, which will give you stocks in uptrends; and 4) screen
for stocks whose 2011 revenue and earnings came in higher than in
2010.
When you get done, you should have a list of interesting
candidates that you can weed further by investigating stories, by
digging into revenue and earnings trends and by seeking out the
strongest charts.
This will really work, and the time you spend will pay off
handsomely as you follow the progress of the stocks that survived
your multiple layers of screening. You will follow their
reactions to earnings reports, see how sensitive they are to good
and bad news, and get to appreciate the power of an innovative
product mix.
As a less-stressful alternative, you might also consider just
putting the stocks mentioned in the Cabot video review and Cabot
Wealth Advisories on your watch list. It won't be comprehensive,
but Cabot's editors actually analyze markets and stocks as a
full-time job, and I think we're quite skilled.
Note: I'm trying not to be too self-serving here, so I'm leaving
until last the suggestion that Cabot Top Ten Report will do all
of this dog-work for you, delivering the ten strongest stocks of
the previous week to you every Monday, complete with expert
analysis and fundamentals. But now that I've mentioned it, you
can check out this admirable research aid by
clicking here.
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Here's this week's Contrary Opinion Button. Remember, you can
always view all of the buttons by
clicking here.
Do Not Project Prejudice Into the Process
A simple admonition to confine your thinking to the facts, while
keeping personal biases at bay. Amateur investors typically fail
because they haven't learned to separate facts from personal
beliefs. [Editor's Note: Controlling your prejudices is probably
a good idea for almost any activity in your life, not just
investing, but I'm entirely too discrete to point that out. I'll
just add that one of my recent favorites among bumper stickers is
on the same theme. It reads: "Don't Believe Everything You
Think."]
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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 7/16/12 - Driving Off the
Fiscal Cliff
In this issue, I argued that the "Fiscal Cliff" of scheduled tax
cut repeals and spending cuts should encourage an interesting
policy debate, but probably won't. Stocks discussed: I
ntuitive Surgical (ISRG), Green Mountain Coffee Roasters
(GMCR)
and
Baidu (BIDU).
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Cabot Wealth Advisory 7/19/12 - Consistency is
the Key
In this issue,
Cabot Market Letter
editor Mike Cintolo passes along some investment tips based on
trying to improve his shaky golf game and looks at how earnings
season may set the tone for the market. Stocks discussed:
TripAdvisor (TRIP)
and
Zillow (Z).
Have a great weekend,
Paul Goodwin
Editor,
Cabot Wealth Advisory