Investing Words of Wisdom; A Buy Recommendation

 
Greetings from Florida!  In my first Cabot Wealth Advisory, I introduced you to my value approach and mentioned that the system is based on the teachings of the father of value investing: Benjamin Graham.  I strongly urged you to diversify your portfolio by including a mix of growth stocks and value stocks.

I use a couple of value approaches to find stocks that are selling at bargain prices.  I described the first approach in my Cabot Wealth Advisory last month, and if you missed it, you can find it here

Wise Owl Model

My second value approach is called the Wise Owl Model, so named because I wanted everybody to think that the approach is wise.  (Clever, eh?)  The methodology is based upon a meeting between Benjamin Graham and my former college professor, Dr. Wilson Payne. 

In the meeting, Benjamin Graham and Dr. Payne developed a method for estimating the intrinsic value of a company. From that came methodologies for calculating the Maximum Buy Price and a Minimum Sell Price.  Dr. Payne then taught me and many other students how to estimate buy and sell prices.  The estimated prices are not perfect, but when intelligent analysis is added, results are outstanding.

My goal in the Wise Owl Model is to find sound, high-quality companies with positive outlooks.  Buying industry leaders with annual 20% to 30% price appreciation potential makes sense to me, especially if losses are few and far between. 

The system is not infallible (none is), but as Benjamin Graham once said, "Investors do not make mistakes, or bad mistakes, in buying good stocks at fair prices."

--- Advertisement ---

Not Even a Downturn Can Deter Cabot's Emerging Markets Letter

Cabot China & Emerging Markets Report continues its reign as the top performing financial newsletter with a gain of 61.5% for the year ending March 31. Marketwatch's Peter Brimelow recently commended this achievement saying, "Editor Paul Goodwin seems to have performed this feat by relying on a simple indicator and by a very disciplined approach to stock selection."

These methods have been used to pick many past winners, such as:

Vimpel - up 62%
Aluminum Corp. of China - up 68%
CDC Corp. - up 84%
Baidu - up 96%
Ctrip - up 143%

Click the link below to find out the secrets to win big by investing in emerging markets.

https://www.cabot.net/info/cem/cemid01a.aspx?source=wc01

---

Ward's Words of Wisdom: Buy an industry leader at a low price and sell at a higher price.  Buy low and sell high--it's that simple!

---

Stryker Corp.

My stock recommendation for today is Stryker Corp. (SYK).  The company develops, manufactures and sells specialty surgical and medical products.  The company's orthopedic division makes hip, knee and other implants.  Stryker also makes surgical drills and saws, medical video cameras and instruments for implants.  Stryker derived 38% of sales last year from international markets, which are expanding rapidly.

SYK is in an industry with above average growth and has taken advantage by spending heavily on new research.  The resulting steady stream of innovative products has produced rapid growth during the last several decades.  I expect 20% actual earnings growth during the next several years led by new orthopedic implant products.

A steady stream of new health care products for an aging population coupled with well-managed cost controls should push SYK's share price substantially higher in 2008.  The stock is a bargain at 21.5 times next 12-month EPS.  The dividend yield is low at 0.5%.  I expect SYK shares to advance to my Minimum Sell Price of $90.78 within one to two years.

The stock market is performing noticeably better now, and I advise buying a mixture of growth and value stocks to keep your portfolio balanced.  SYK is a leader in the health care industry with strong growth potential, and at a very reasonable price.  I strongly recommend buying SYK at its current price.

Sincerely,

J. Royden Ward
Analyst and Editor of Cabot Benjamin Graham Value Letter

---

Editor's Note: Stryker is featured in the latest issue of Cabot Benjamin Graham Value Letter, and updates on it (and other value stocks) will be provided in the newsletter until the stock reaches its Minimum Sell Price.  In the newsletter, you will find all the tools you need for value investing, the same tools developed by Benjamin Graham and used by Warren Buffett.  Click the link below to learn more.

https://www.cabot.net/info/bgv/bgvir00.aspx?source=wc01

P.S. If you'd like to discuss this or any other issue of Cabot Wealth Advisory with your fellow subscribers, go to the Cabot Forum, http://www.cabot.net/forum, and register a unique username and password. You can also ask one of our editors a question in the Ask the Editors section, and your question might even appear in a future issue of Cabot Wealth Advisory. So head on over to check it out, and keep reading to see if your question appears!

---

Headline News

Stock Picks

Shopify

Shopify (SHOP), which came public in May of last year, is a new leader.

Facebook

Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

Amazon.com

For AMZN to be undervalued, the stock would need to fall to 393. 50.

Cabot Wealth Advisory

The Emerging Market Stock You Ought to Own

By Paul Goodwin on September 27, 2016

The company I’m talking about (the one that you probably don’t own) is the largest Chinese instant messaging company. It is a giant in its own right, with a market cap of $262 billion and annual sales of over $19 billion. The company grew revenue by 28% in 2015 and routinely boasts after-tax profit margins over 30%.Read More >

Tesla Model 3 vs. Chevy Bolt: Which Affordable Electric Car Is Better?

By Timothy Lutts on September 26, 2016

The Tesla Model 3 and Chevy Bolt are the first two affordable electric cars with a driving range of more than 200 miles. Let’s see how they stack up - and what they could mean to Tesla Motors (TSLA) and General Motors (GM) stock. Read More >

Does Alibaba (BABA) Stock Measure Up to Amazon (AMZN)?

By Paul Goodwin on September 23, 2016

Alibaba (BABA) is the Amazon (AMZN) of China. But does BABA stock measure up to AMZN stock? Let’s break it down!Read More >