Two Sectors that are Working
By
Timothy Lutts, Chief Investment Strategist and Editor of
Cabot Stock of the Month Report
For Cabot Wealth Advisory, 2/28/08
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One of the stars that we steer by at Cabot is Jesse Livermore's maxim, "Markets are never wrong; opinions are."
A more negative idea is conveyed by the aphorism, "The market will do all it can to separate you from your money."
Today, these ideas are particularly important because we appear to be at a major turning point, a changing of the guard, if you will, and if you don't heed the market's message, you risk discovering that it has taken some of your hard-earned money.
The fact is, most leaders of the last bull market are toast.
Google is 37% off its high.
Apple is down 37%, too.
Crox is down 66%.
VMWare is down 52%.
Baidu.com is down 40%.
Garmin is down 51%.
Sigma Designs is down 59%.
Riverbed is down 60%.
All these stocks had great growth stories and great charts last year. Most still have very good growth stories this year. But that doesn't mean they're good investments.
They've been bad investments for months, and those who maintained otherwise, and bet otherwise, have found themselves separated from some of their money.
So what's working? Two sectors.
First are
natural resources, a strong indication that inflation will be a serious fact of life in the months ahead. We've written about some stocks in this area in recent issues and will almost certainly write more in the future.
Second are
select international growth stocks, an indication that, in general, rapid growth is still possible in fast-growing countries such as China, India and Brazil.
Now, both these sectors run contrary to many Americans' natural tendencies. Most of us have been conditioned to think that growth companies that add value to their products through human intelligence (particularly in the fields of technology and medicine) are better investments than companies that simply pull stuff out of the ground and sell it. And most of us have a natural bias to believing that American ingenuity, markets and laws enable companies to succeed more easily here than elsewhere.
But the market today is telling us otherwise, and if you choose not to share this view, well, refer back to those first two quotations.
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