Trivia, Devoxx and Statins
Helping You Become a Better Investor
HomeAway (AWAY): A Stock that’s Going Up
I have a lot on my mind today.
It starts with a trivia contest I participated in last week, with my two daughters and their husbands. Held at a local pizza joint, the pizza was good and the beer was better; I had an “export-strength woodland stout” named Babayaga, made by Pretty Things, a local brewery.
And the trivia? It was aimed at geeks, focusing on comic books, science fiction, television and movies.
The first question was “In the comic strip Nancy, what was the name of Nancy’s boyfriend?” I knew that one, and the young folks didn’t, but after that it got harder.
Other questions included:
What partner of Image Comics named his son Peter Parker?
What were the names of Bruce Wayne’s parents?
Who is the only actor to have appeared in Star Trek, Star Wars and Doctor Who?
Our team came in sixth out of nine, confirming that overall, we’re only moderately geeky.
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A few days later, I was browsing hot topics on Google Plus and came upon Devoxx, a word that meant nothing to me. I thought it might be a new drug (as I had also been reading about the new statin guidelines), but I was wrong.
Devoxx is a European conference aimed at geeks who work with Java, Android and HTML5. This year’s conference took place last week in Antwerp, the second largest city in Belgium, and coincidentally, a city where my wife and I enjoyed some great beer just last month.
I’m sure some of the Devoxx geeks would have done well in our trivia contest. (In scientific terms, the participants of both are sets with a fairly large intersection.) Me, I’m useless at Java, Android and HTML5.
But back to the statins—the experts in the American Heart Association and the American College of Cardiology now want more of us to take them! At the same time, they’re throwing out those cholesterol target levels they said were so important for the past 12 years, admitting there never was any scientific rationale behind them! Which should make any thinking person ask, “So why should I trust you this time?” Particularly since we know that behind your advice is lobbying by drug companies who want to keep us buying their wares, regardless of their efficacy and side effects.
Which brings me to the biggest healthcare question of the day, the botched rollout of the Healthcare Marketplace.
I went to the site for the first time last week—just to try it out—and here’s what happened.
After choosing Massachusetts as my state, I was sent to the Massachusetts Health Connector site.
Now, you should know that Massachusetts has been at this a while. In fact, as part of his campaign to support the Healthcare Marketplace, President Obama visited Massachusetts just three weeks ago to praise Massachusetts for leading the way. (He also got in some campaigning for local politicians.)
Well, I clicked on individual and families—then waited.
Gave some information—then waited some more.
Gave some more information—then waited some more.
It felt like I was back in 1994, when the Internet was slow and creaky. It certainly didn’t feel like 2013, when every large corporation on earth has mastered the use of the Internet to serve, and sell to, their customers better!
After a few more minutes of clicking and waiting, this is what I ended up with.
Maintenance in progress?! This is the kind of message you expect to encounter at three AM on a Sunday! That’s when maintenance should be done, not before noon on a weekday.
So what’s the thread that binds these stories about geeks and healthcare? The common theme, in my mind, is expertise.
There are people who are expert at Star Wars trivia.
There are people who are expert at Java and HTML5.
There are people who are expert at concocting drugs to achieve specific outcomes.
There are people who are expert at selling those drugs.
But when people venture into fields beyond their area of expertise—like me at the geek trivia night—they tend not to do very well.
I’m not going to dwell on any of these fields further, particularly the topic of the Healthcare Marketplace. A lot has been said about that already. And I’m not an expert! But I am an expert in the field of investment advice, and that’s my topic below.
Trivia Answers: Robert Kirkman. Thomas and Martha Wayne. Deep Roy.
Cabot was started more than 43 years ago because my father wanted to help people become better investors. I was a teenager back then, and I didn’t really understand the part about helping people; I thought investing was about making money, and selling newsletters was about making money.
But as the years went by, and my participation in the business progressed from family member paid with ice cream to part-time employee to full-time employee to owner, I grew to embrace my father’s ideas about helping people, which go like this.
The world is full of people who’ve made their money doing other things, from running restaurant franchises to designing nuclear submarines to running hospitals to building houses. The range of careers in the country is mind-boggling.
But most of those careers do not prepare people for the very important job of growing their savings through sensible investing. Furthermore, far too many people don’t spend enough time on the job. As a result, they don’t get to retire free from worry.
Understanding this, my job is to help those people learn the skills they didn’t learn in their primary careers. So in addition to giving specific investing advice in our paid advisory services, we also work very hard to teach people, so that they understand the logic behind the advice, and so that eventually, should they want to devote even more time to investing, they will be able to do it themselves.
One of the challenges, however, is that everyone has a different level of experience. Some of our readers started investing last week, while some have been doing it for decades; indeed, a fair percentage of our readers are professionals in the industry.
So some people need to hear the basics from us, while others want the finer points.
Today, I’m going to talk to the beginners by focusing on the most important rule of investing in growth stocks.
RULE #1: IF IT’S NOT GOING UP, DON’T BUY IT.
Every week, I get questions from readers asking me to look at a stock, often a young stock that’s not well known. And in the vast majority of cases, the stock is not going up.
For example, last week someone asked me about Fuel Cell Energy (FCEL), a stock that we did well with in the heady days of 1999-2000. But look at the chart of FCEL since then.
It’s been a rough new millennium for FCEL. And this year, even with the tailwind of a broad bull market, FCEL hasn’t been able to get above last year’s high. (That low price is also not a good thing, but I’m going to focus on the price trend today.)
Obviously, when someone asks me about a stock like this, it’s because they’ve heard the company has great growth potential. Maybe they’ve even done additional research and been intrigued by what they found. But when I see a chart like this, I don’t even want to hear the story—or in this case see what Fuel Cell Energy has been doing for the past decade—because the stock is telling me that investors as a whole are not accumulating this stock.
And why do I care if other investors are accumulating the stock?
Because investing is all about putting the odds in your favor, and if a stock is not going up, the odds are very good—no matter how good the story sounds—that it will keep on not going up. And that’s not a stock you want to own.
Contrarily, if a stock is going up, the odds are very good that it will keep going up. That uptrending chart means investors as a whole are becoming more optimistic about the stock, and buying more at higher prices. And once a trend like this gets started, there’s no telling how far it can run (see TSLA earlier this year).
Which brings me to today’s recommendation—a stock that’s going up.
I last wrote about HomeAway back in July; it was the first of my Ten Revolutionary Stocks. (If you’d like a copy of that list, just reply to this email and ask.)
HomeAway is the Expedia of vacation rentals, providing a quick and safe way for travelers to connect with individual property owners looking to rent out an apartment, vacation house, RV, houseboat, etc. It’s the top online rental site in the U.S., France, Germany, Spain, Britain and Brazil. And it’s growing fast. The company’s most visible competitor is Airbnd, but Airbnb makes money by charging the renter, while HomeAway gets paid by the property owner, and that’s worked out to be the superior business model, in part because it brings yearly renewals.
Back in July, when I wrote about the stock, it had been basing since March, following a big four-month spurt higher, and was trading at 31. I wrote, “Today it pulled back to touch its 50-day moving average. I think this represents a decent setup short-term, and probably a great opportunity to get on board what has the potential to be one of the best revolutionary stocks of our time.”
Well the timing was good, but not great, because AWAY fell to 28 in August and it hit that support level again every month since. But two weeks ago, the company released an excellent third-quarter earnings report, which brought buyers running. The stock gapped higher on huge volume, closing at 34 on the first day. And last Friday it hit 39!
So, you could simply jump on the stock here, but unless you’re an expert, I sincerely recommend that you take your cues from one of my expert analysts, like Mike Cintolo, Chief Analyst of Cabot Market Letter, who first recommended HomeAway.
Mike will work hard to get you into stocks going up, ideally just before they do what HomeAway did! For details, click here!
Yours in pursuit of wisdom and wealth,
Chief Analyst of Cabot Stock of the Month
Publisher of Cabot Wealth Advisory