Best Revolutionary Stocks
Happy Labor Day!
Originally, this holiday was created through the efforts of the American Federation of Labor—and made official by President Grover Cleveland—as a holiday to celebrate and honor the working class of America.
Today, the day is better recognized as part of the last weekend of summer, mainly because the influence of unions continues to shrink.
Consider these interesting stats:
Only 11.3% of American workers are in unions today, the lowest level in my lifetime.
In the private sector, the figure stands at just 6.6%, while in the public sector, the figure stands at 35.9%.
Looking at the chart, you can see that participation in the private sector has been falling for 60 years, while in the public sector, the picture is very different.
There was a huge boost to union membership in the public sector in the 1960s and 1970s, as white-collar workers embraced the job security of union membership as well as the political power afforded by unions. The participation rate has stayed fairly stable since then, but it looks like there is a slight downtrend developing, as states look to cut costs. Leaders in this trend have been Wisconsin, Indiana, New Jersey and Ohio, and I think the trend will continue.
After all, I’m a student of trends, and to me, the decline of private union membership simply precedes the nascent decline of public sector unions. And what will take the place of unions? Ideally, more cooperative partnerships between management and workers, based on shared goals and shared intelligence. It’s a long-term trend, hard to see if you’re too close to the action, but I do believe it’s under way.
In any case, I hope you’re enjoying this Labor Day. Me, I’m celebrating the start of the very last year of paying tuition for my children, something I’ve been doing for the past 19 years.
As to the stock market, we’re at an interesting spot here, a spot my father might have called “the Moment of Truth.” Of course, he was prone to exaggeration, while I like to think I’m prone to understatement.
In short, the conditions of the market over the past month reveal a serious divergence, which is usually a bad thing for the market, as it typically precedes major tops by weeks or months. At most major tops over the past century, this divergence has seen smaller stocks lose sponsorship while the big leaders (“the generals”) push on. At some point, as the generals see that there are no troops behind them, the advance collapses.
What’s interesting this time, however, is that it’s the generals—the previously safe, dividend-paying blue chips—who are lagging. And who’s leading the advance? The aggressive growth stocks, which don’t pay dividends but do promise (for now) a strong upward trend.
How this shakes out remains to be seen. It’s quite possible that the broad market will roll over soon (maybe fear of Syrian War is the scapegoat) and we’ll head for a traditional September-October low, which would present a nice entry point.
On the other hand, the weak action of the past month has already brought investor sentiment to a level that’s typically associated with market lows, which means there’s plenty of cash on the sidelines to fuel further advances, in which case the leading stocks—the aggressive stocks—just might keep leading. It’s a scenario very few investors expect, and thus it just might happen!
And if it does, what better place to put your money than revolutionary stocks?
You can see my original column on the theory of investing in revolutionary stocks here.
And now it’s time for another!
Today’s Revolutionary Stock is SunPower (SPWR), a leading player in the photovoltaic solar panel business. The stock was recommended back on June 3 in Cabot Top Ten Trader, which said this:
“San Jose-based SunPower is a leader in the rebound of the global solar-cell industry. Solar stocks were very hot in 2007, with government clean-energy mandates and subsidies for solar arrays that (especially in Europe) offered cash back for sending excess energy from individual arrays back to the power grid. The Great Recession put an end to subsidies, and excess production capacity and the Chinese solar industry undercut prices. Now, however, consolidation and bankruptcies have thinned the solar herd and the high cost of fossil fuel (in both monetary and environmental terms) has industries and governments looking at solar again. China (which has acute environmental needs for clean power) has doubled its solar subsidies to $1.1 billion and Middle East countries are reported to have $6.8 billion in projects in progress. SunPower specializes in large-scale designs and installations of its highly efficient panel arrays that feature 21.5% efficiency. SunPower is also getting a boost from rumors that giant conglomerate GE may have its sights on First Solar, the largest U.S. solar company in the U.S., as a takeover target. At this point, several turnaround trends are favoring SunPower and the entire solar industry.”
At the time, SPWR was trading at 19, having pulled back from a high of 24, and that was a great buy point, as SPWR went on to hit 28 at the end of July. But then came the market correction, SPWR dropped back to its 50-day moving average, and Cabot Top Ten Trader recommended selling, getting out with a profit of 16% in nine weeks. It was a good result—and Cabot Top Ten Trader, as the title says, is a trading advisory—but it was nothing to write home about.
Still, I see great promise in the long run, as the world transitions from an economy built on fossil fuels to one built on renewable energy, and I think the pullback to the 50-day moving average, which the stock sits slightly below right now, presents a decent buying opportunity.
Also, since that initial buy, SunPower reported a very impressive after-tax profit margin of 10.9%, its best in years, and a clear sign of capable management given the ongoing fluctuations in industry conditions.
For an update on this particular stock and other growth stocks recommended in Cabot Top Ten Trader, click here.
The weeks ahead will bring three more revolutionary stocks like SPWR, and I look forward to presenting them to you.
Yours in pursuit of wisdom and wealth,
Analyst, Cabot Stock of the Month
Best Revolutionary Stocks – 2013:
The previous stock in our revolutionary stock series 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...
Our eighth revolutionary stock is from a company whose goal is get the world to transition from its polluting fossil fuel transportation infrastructure to one based on highly efficient battery-powered transportation...