Yearly Video Review
An interview with Thomas Garrity
With Money To Burn One Finds A Match
In Case You Missed It
For this week's Stock Market Video, the last one of the year,
I decided to do something a little different and look back at all
that has happened in 2012.
This is not our regular Cabot weekly review but a whole year
in review. Paul recites a poem that recaptures both the high- and
low-lights of the year. I hope it proves to be useful and brings
up a smile. Click below to watch the video!
This is the first in a series of interviews with Thomas Garrity,
Analyst and Editor of the limited-subscription newsletter, Cabot
Small-Cap Confidential. A lifelong investor, Tom has been a
stockbroker, stock analyst, venture capitalist and portfolio
manager. His long career and varied experiences taught Tom to
make investments only when the odds of winning significantly
outweigh the risks. He applies this philosophy to every stock he
recommends in Cabot Small-Cap Confidential.
Tom's disciplined investment methodology uses a series of
qualitative and quantitative metrics that are evaluated for each
company under his investment consideration. The company's
products must target large markets, the science or technology
must be proven, the balance sheet must be strong enough to
support research or investment activity, and the idea must be
strong enough to attract future institutional investment.
Tom's analysis results in a portfolio of stocks of companies
that are pioneers in their areas of business. In most cases,
these companies are creating whole new micro-industries,
providing essential tools for an entire industry's growth.
Because these stocks have little or no institutional or research
coverage, Small-Cap Confidential subscribers can acquire
significant positions in these companies more cheaply than if
their stocks were widely followed.
How would you describe the ideal Cabot Small-Cap
Good question, and fun to answer because the ideal Small-Cap
investor is a lot like me!
The ideal Cabot Small-Cap Confidential investor absolutely
loves making money. And their passion for earning money lies
entirely in the pursuit. It's all about unearthing the investment
and getting paid for the research effort.
Whether novice, well-seasoned or professional, the successful
Small-Cap investor is well aware that investing isn't about
reaching into your pocket and finding an instant win lottery
ticket. Instead, he or she knows that you need to work at
investing to making money at it.
The successful Small-Cap investor realizes that investing is
like running your own business. Some stocks (inventory) are going
to get sold at a sizable profit, while others stocks
(merchandise) may be sold at just at or above cost, or even for
less than what was paid.
The Small-Cap investor also knows that to be a prosperous
investor means having more checks in the win column than in the
I know from my own experience that chance favors those who do
the most comprehensive due diligence-so with the right stock
research, Small-Cap investors greatly increase their chances of
realizing multi-bagger home runs.
The point I want to drive home about the ideal Small-Cap
investors is his understanding that getting an informational edge
when it comes to stock analysis is of paramount importance.
He knows that the right or wrong stock selection can sometimes
have life-changing effects-and that's why the Cabot Small-Cap
Confidential investment strategy is steadfast.
Successful Small-Cap investors don't try to be
jacks-of-all-trades, applying many techniques for picking winning
stocks; instead they stick with the tried and true strategy.
What's certain is that Small-Cap investors are patient,
willing to sit tight long enough to earn enormous profits when
the stock separates from the pack.
Small-Cap investors prefer to invest in shares of companies
that have exciting new ideas, game-changers in new themes or
trends-and always, these new products or services serve a very
Lastly, Small-Cap investors only invest in companies in which
risk variables can be quantified, thereby avoiding hunches or
half-baked concepts, and focusing on companies with a high
likelihood of providing tremendous upside performance.
A Cabot Small-Cap Confidential investor might be a beginning
investor, trader, stockbroker, portfolio manager or the
eat-drink-and-sleep-investing variety (like myself).
But one definite characteristic of the successful Small-Cap
investor is that he's focused on the outfield bleachers-the big
ideas that are lurking behind left, center or right field.
Furthermore, the Small-Cap investor is also patient,
understanding the value of getting another chance at bat in order
to round the bases.
But most important, the Small-Cap investor recognizes the
power of gathering high quality, company-specific research in
order to win the ballgame.
What's an example of a Cabot Small-Cap Confidential
(formerly known as Lanoptics) in September 2007. EZchip is a
manufacturer of network processing units (NPUs), which are
programmable integrated circuits that combine the
cost/performance of a static function ASIC chip with the
programming flexibility of a microprocessor. NPUs go inside
Ethernet switch routers.
I chose to invest in EZchip after studying the market timing
for its products, the significant customer need which its product
solved, the captive OEM partnerships the company had already
formed and the cost of the overall solution provided.
EZchip's NPUs were slotted in the line cards of routers
designed by companies like Cisco, Juniper, Ciena, Alcatel and
Marvel. (Routers are in charge of connecting and moving traffic
around data/voice/video networks.)
Routers were getting choked up trying to accommodate the
bandwidth demands on the central processing units (CPUs). The
EZchip NPU soon became in high demand by network equipment
providers for its ability to relieve the bottleneck on the CPU by
integrating pipelined operations and it was inexpensive relative
to comparable technologies.
We sold EZCH in August 2011 for a 60% gain.
Here's this week's Contrary Opinion Button. Remember, you can
always view all of the buttons by
With Money To Burn One Finds A Match
If it's true, the best defense is to avoid being in a position
where there's money to burn … which means keeping your money
working in the market, or at least earmarked to work.
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 12/24/12-- Best Dividend
Stock Picks of 2012
In this issue, Dick Davis Digests editor Chloe Lutts lists the
best-performing Dividend Digest Top Picks of 2012. Stocks
Marathon Petroleum Corp. (
), McCormick (
Cabot Wealth Advisory 12/26/12-Investing in
In this issue, Cabot Stock of the Month editor Tim Lutts
writes about Bruce Weiner, collector of Microcars. Tim mentions
that even though he likes microcars, he will continue to invest
in stocks. He names the second stock to hold forever --
Jamba Juice (
Cabot Wealth Advisory 12/27/12- Two Blasts from
In this issue,
Cabot Benjamin Graham Value Letter
editor Roy Ward talks about the importance of Book Value when
researching stocks. Stocks recommended:
Corning, Inc. (
) and Xerox (XRX)
Happy New Year!
Cabot China & Emerging Markets Report