Stock Market Video The Three Monsters Under Growth Investors'
Beds
In Case of Doubt Sound Convincing
Stock Market Video
Stock Market Video
The Comfort of Common Goals
Fashions and fads are skilled masters of enthusiasm
In Case You Missed It
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In this week's Stock Market Video,
Cabot Market Letter
editor Mike Cintolo notes that recent action from the Fed and the
European Central Bank has pushed the markets into a higher gear.
While it would have been better to get in when the market's tone
improved in August, there are still stocks that can be bought.
Google (
GOOG
), Ebay (
EBAY
)
and
Apple (
AAPL
)
are extended, but stocks like
LinkedIn (
LNKD
), Michael Kors (
KORS
), Lululemon (LULU)
and
Under Armour (UA)
are nicely set up or just out of bases. Commodity related stocks
like
Seadrill (SDRL)
and
Ensco (ESV)
are also attractive, as is the
SPDR Basic Materials Fund (XLB)
. Click below to watch the video!
The Comfort of Common Goals
I don't have any historical data, but I know that the practice of
senior corporate executives getting part of their compensation in
company stock has been around for a long time.
Compensation in stock is a win/win on every imaginable level, but
the biggest bonus, at least from the point of view of stock
investors, is that the practice aligns the executive's interests
with those of the investor. A CEO with a lot of stock has a
built-in reason for trying to increase the value of the stock.
Every dollar the stock price appreciates is like getting a raise in
pay, and if the exec chooses to hang on to them, the dividend
income also boosts total pay.
But during the Tech Bubble days, when the future was so bright that
you needed sunglasses to even think about it, the giving of stock
options began to gather momentum.
Stock options-agreements to sell a specified number of shares to
someone for a specified price at an unspecified future time-offered
a way for a company with no money to give key players a lot of
money, presumably some time in the future when the stock was
trading way, way above its option price. Needless to say, many of
those options wound up about as valuable as paper towels, but not
as useful.
These days, both stock and stock options are a hellaciously popular
part of compensation packages for senior executives, and the
justification for granting them comes right back to the incentive
they give for everyone to work hard to increase shareholder value.
(And, in fact, I always like to see that the C-level officers in a
company I'm considering have a significant equity stake.) It's not
that executives don't always have shareholder value in mind when
they make decisions, but it's easier to really believe it when
they're shareholders themselves.
Small moral: In the same way that owning stock or stock options
creates a strong connection between the fortunes of executives and
interests of stockholders, Cabot's way of doing business aligns our
interests with those of our readers, which is you.
Here's how that works.
Cabot publishes investing newsletters, and our revenue comes from
paid subscriptions. We don't accept paid advertising in our letters
and we don't put advertising on our website. We don't accept fees
from companies to promote their stocks. We don't handle money for
people. We're a private company, so we don't have stockholders to
answer to.
What we have are subscribers, and they buy our newsletters and
renew their subscriptions because they find them useful and they
make money by following our advice.
If people don't get value out of our newsletters, they don't renew
their subscriptions and we don't stay in business. No amount of
fanfare or sleight of hand can obscure that bottom line. If our
subscribers make money, we get to keep doing what we do.
And that's about as direct an alignment of interests as you're
likely to find anywhere.
And with all that said, here's a little fanfare.
The Cabot Market Letter, which is our flagship publication, is now
nearly 42 years old and still going strong. CML, as we call it,
does what most stock gurus say can't be done; it outperforms the
broad market year after year.
Cabot Market Letter is a growth stock advisory that uses market
timing to vary the amount of exposure that our subscribers have to
the market. If markets are in a foul mood and stocks are trending
down, CML's editor Mike Cintolo tightens up the loss limits on the
stocks in the Model Portfolio (which can have up to 12 stocks when
it's fully invested) and moves toward a higher cash position.
This shift in market exposure alone kept CML readers from tanking
along with the market in 2008.
Mike's stock picks are based on the strength of the stock's chart
(momentum), the attractiveness of the company's story and the
soundness of the underlying fundamentals like revenue, earnings and
after-tax profit margins.
The Cabot Market Letter tells you exactly what's going on in the
market, what each buy and sell is, how our market timing indicators
are faring, what stocks we have our eye on for future buying and,
more importantly, how we think about growth investing.
Subscribers receive weekly messages, with regular issues and
updates coming out on alternating Wednesdays. And occasionally,
there's news about a stock that needs buying or selling or
something happening in the market that's so urgent that we send out
a special hotline message.
More than anything, after all my years in the investment industry,
watching the cynicism and weariness of professional money managers,
what impresses me about the Cabot Market Letter is the degree to
which Mike really lives and dies by how the Letter is doing.
Tim Lutts and I also write part of each Letter, but it's really
Mike's baby, and he's as emotionally attached to the performance of
the Cabot Market Letter as he is to the fortunes of the New England
Patriots. And that's a lot!
The final thing I have to say about the Cabot Market Letter is that
it requires some commitment from its subscribers as well. You have
to be prepared to follow the rules, including both the fun part
(buying) and the sometimes not-so-fun part (selling).
If you let it, the Cabot Market Letter will change how you think
about growth investing. And it will put you in sync with Mike
Cintolo and the whole Cabot growth team.
I think it's a good idea.
---
Here's this week's Contrary Opinion Button. Remember, you can
always view all of the buttons by
clicking here.
Fashions and Fads are Skilled Masters of
Enthusiasm
Remember how excited investors were about Iomega? Taser? Crocs?
Every one of these stocks had a huge bull run, as sales and
earnings expanded and investors' expectations of the future were
ratcheted higher and higher. And every one of these stocks
collapsed when investors realized their projections were overly
optimistic, and that these fads, like others, would pass. The best
growth stock investors are happy to ride the wave of fashion as it
is building, but they're quick to exit when the uptrend falters,
knowing that enthusiasm can cool quickly.
[Editor's Note: Enthusiasm is a loaded word for those who follow
the market, usually denoting a phase when even non-investors are
clambering into equities. When the last person jumps on the
bandwagon, it's all downhill from there.]
Play the Market, One Stock at a Time
Are you interested in investing, but think you don't have the
time to watch the stock charts?
Do you want to get a taste of the money to be made from market
movements, but not put a lot of your hard-earned savings into
play?
How does one strong stock per month, with weekly updates in
your email sound?
Click here to learn more about our system that can give you
clear, easy to follow guidance backed by 42 years of
market-beating results
.
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 9/10/12-Expect the
Unexpected
Lou Gagliardi, the energy guru who edits
Cabot Global Energy Investor
, writes in this issue about really unexpected events, the "black
swans" that no one sees coming, and how to handle them. Stocks
discussed:
Seadrill (SDRL)
and
Pacific Drilling (PACD).
Cabot Wealth Advisory 9/11/12-How to Pick Good
Stocks
In this issue, Tom Garrity, the tireless researcher behind
Cabot Small-Cap Confidential
, tells how he first became fascinated by stocks and how he goes
about picking his little-known winners. Stock discussed:
AuthenTec Inc. (AUTH).
Cabot Wealth Advisory 9/13/12-It's All Psychology
Mike Cintolo, editor of
Cabot Market Letter
, argues in this issue that investors' own psychology makes it hard
to make money in the market, but that keeping a journal of your
trades can help you improve your returns. Stock discussed:
Ensco (ESV).
Have a great weekend,
Paul Goodwin
Editor of
Cabot Wealth Advisory
and
Cabot China & Emerging Markets Report