Inflation and the Stock Market
Best Revolutionary Stocks
As I start this email (on Friday afternoon), I’m just recovering from two days of intense interpersonal communication with the attendees of the Cabot Investor Conference. As a guy who often goes months without seeing a customer, the experience was gratifying, but draining. If you were one of the lucky attendees, I want to thank you again for attending. I think we all benefited enormously from the experience.
And if you couldn’t make the trip, well, I hope you make it next year.
Stocks discussed at the conference included:
Amazon.com, Apple, Bank of America, Bank of the Internet, Berkshire Hathaway, Coach, Cree, Crocs, eBay, Expedia, Facebook, First Solar, Ford, General Electric, General Motors, Google, Green Mountain Coffee, Home Depot, Halozyme, HomeAway, IBM, Intel, Iomega, Johnson & Johnson, Lennar, LinkedIn, McDonalds, Microsoft, Netflix, Orbitz, Qihoo, Osiris, Research in Motion, Stratasys, Starbucks, Stryker, SunPower, 3D Systems, Taser, Tesla Motors, Travelocity, Trinity, TripAdvisor, Walgreen, Yelp, YUM Brands and YY, to name those I can remember. And, of course, there were others discussed in the breakout sessions that I missed.
More important than the discussions of individual stocks—in my opinion—were the lessons on individual investing systems, which in the end, are all designed to help you increase your rate of success (your batting average), increase the size of your gains, and reduce the size of your losses. Following a proven investing system is the key to long-term success and the Cabot team gave the attendees a lot to think about.
Inflation is currently running about 2%, so if your investments aren’t bringing you that, you’re losing ground. Happily, anyone following the Cabot systems is doing far better than that this year. But many attendees at the conference were worried that inflation would increase! After all, the Fed has been pumping money into the economy for nearly five years, and lessons learned decades ago taught them all that the natural result of such stimulation is inflation.
Yet inflation remains low! We had quite a discussion on the topic, and there was no consensus, but since this is my soapbox, I get to tell you my ideas, which go like this.
People fear inflation today because it hurt them before and they are anxious to avoid such hurt again. But the money being pumped into the economy isn’t flowing at anywhere near normal velocity. Instead, it’s being used to pay off debt and to improve corporate balance sheets, and that’s because both consumers and corporations are uncertain about the future, and when people are uncertain, they are reluctant to invest in the future; they instead work to reduce risk in the present.
Now, economics being what it is, the questions about inflation are likely to continue for years. With so many varied economic factors influencing inflation, there’s no reason to expect a simple cause-and-effect relationship tied to money supply. But people, having learned a truth once—even four decades ago—are loath to give it up. In the meantime, the stock market continues to reward investors who have the courage to put their money into stocks. And I for one, think it’s a far better use of your time to look for great growth stocks than to worry about inflation.
For example, the last “revolutionary” stock I mentioned here, Qihoo Technology (QIHU), soared 10% last Friday! You can still read my recommendation here.
And now it’s time for today’s Revolutionary Stock, Quidel Corp. (QDEL).
Quidel is unusual in that it hasn’t been recommended by a Cabot advisory service since it appeared in Cabot Top Ten Trader in late 2005. It’s appearing here today because one of the Cabot editors nominated it (see here for how stocks qualified for this list of 10 revolutionary stocks LINK), but that editor hasn’t been able to recommended it because the stock doesn’t fit the parameters of that editor’s investment advisory.
Yet it has a good story!
Quidel is a mid-sized medical company specializing in rapid-detection tests for numerous diseases or condition states, including influenza, respiratory syncytial virus (RSV), fecal occult blood, Strep A, pregnancy, bacterial vaginosis, infectious mononucleosis, H. pylori, Graves' Disease osteoporosis and Chlamydia. Obviously, these are mass-market conditions where there’s great demand for faster, cost-effective detection.
Quidel’s major brand name is QuickVue; its minor brands are D3 Direct Detection, Thyretain, Sofia and AmpliVue. QuickVue in particular has excellent name recognition domestically and is getting increasing penetration internationally as well. At the moment, international revenues account for 14% of the company’s revenues.
And research continues. The company is developing a continuum of diagnostic solutions from advanced lateral-flow and direct fluorescent antibody to molecular diagnostic tests. And from time to time Quidel buys its way into important technology. In the quarter just finished, for example, Quidel acquired Biohelix, with which it had already collaborated in developing “a number of hand-held, disposable molecular assays using BioHelix's proprietary isothermal Helicase Dependent Amplification (HDA) technology.”
In the long run, there’s little doubt this acquisition will pay off. That’s because Quidel is no flash-in-the pan; this company has a long solid history of capable management. Not every quarter brings growth; in fact the second quarter of 2013 saw revenues decline 4%. But the long-term trend is clearly up. The company has been profitable every year of the past decade. And the stock’s chart is modestly positive as well.
That last quarterly report did kick off a mild wave of selling, which coincided with the broad market’s pullback, so the stock is now well below its 50-day moving average, looking for support between 24 and 25.
If you like the story, you could buy some here.
The weeks ahead will bring six more revolutionary stocks like QDEL, and I look forward to presenting them to you.
Yours in pursuit of wisdom and wealth,
Editor of Cabot Stock of the Month
P.S. The market leaders you'll find in Cabot Stock of the Month will help you double your money in the next 12 months. If they don't, you won't pay a dime.
Drawing on the expertise of the editors of Cabot Market Letter, Cabot Top Ten Trader, Cabot China & Emerging Markets Report and Cabot Benjamin Graham Value Investor, I pick the one stock that's most likely to perform well--given the current market conditions--in the months ahead.
That's the beauty of Cabot Stock of the Month. It gives us the opportunity to choose the best stock across all sectors, using our proven spectrum system. And with our double-your-money guarantee, you have nothing to lose and everything to gain.Here!
Best Revolutionary Stocks – 2013:
The previous stock in our revolutionary stock series was a late entrant to the Chinese browser/search business, but it’s gaining market share fast...
Our sixth revolutionary stock is one of the two leaders of the 3-D printing business; we all remember how the desktop printing revolution changed our lives, so it’s easy to imagine what 3-D printing could do...