Stock Market Video
The Four Things You Can Do in the Water
This Week’s Fortune Cookie
In Case You Missed It
In this week’s Stock Market Video, Mike Cintolo talks about the strengthening bull move that features many growth stocks showing great power. There are still a few yellow flags to monitor, but Mike reviews some recent breakouts (even if you don't buy shares, you should follow them), some big-cap growth names that are well positioned as we approach earnings season, and some other names near solid entry points. Click below to watch the video!
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There's a bold new bull market afoot, and the stock-buying frenzy has just begun. But before you even think of jumping into the market, you must read my Free report, 10 Best Stocks For the New Bull Market, otherwise you’re going to get blindsided.
The reason is simple: The new bull market of 2014 isn't going to be 2009-2013 all over again. And if you start doubling down on last year’s biggest winners, you're going to find the stock market a better place to lose a fortune than to make one.
For details, click here.
The Four Things You Can Do In the Water
Back in my university professor days, I used to speak to community and professional groups on communication topics. Inevitably, these talks often got around to putting communication into action. One image I used to explore the necessity of having an active communication strategy was The Four Things You Can Do in the Water. It goes like this.
If you’re in the water, there are four things you can do. The first thing you can do in the water is drown. Let’s keep that in mind, because if you do nothing when you’re in the water, you really can sink, die and disappear. The second thing you can do is float. It has the advantage of not drowning, but unless you trust the tide to put you on the shore or you think someone is going to come along and rescue you, that’s about all that can be said for it.
If drowning and floating don’t suit you, the third thing you can is swim! All of a sudden you have a direction, momentum and some control over your destiny. Good for you!
But there’s a fourth option, one that not many people think about. When you’re in the water, you can surf. Surfing is just finding a wave, paddling hard to get in sync with it, then riding along down its face for as long as it will carry you. If you can find a wave that’s heading in your direction and ride it successfully, you can outdistance even the strongest swimmer while expending just a fraction of the effort.
So, what does this have to do with investing? (You knew there had to be a connection, right?) Well, it wasn’t what I had in mind when I first wrote the image up, but here’s how it works.
The person who drowns is the person who does nothing with money. No budget, no plan, no savings, no investments. Nothing. Sometimes not even any income. This is the territory of huge debts and bankruptcy, which is the equivalent of drowning in the financial world.
The person who floats is the person who earns and saves. The more you save, the bigger your financial cushion is, but you hear stories every day about people whose savings have been blown away by illness or some kind of accident. Money in the cookie jar or under the mattress is better than nothing, but that’s the best you can say about it. With interest rates in the cellar, completely safe investments—an insured savings account or a Treasury bond—won’t even generate enough return to keep up with inflation.
The person who swims is the one who invests. Investing in anything from an equity index fund to a highly leveraged derivative always involves risk, and the relationship between risk and reward always follows the same formula. Low risk investments bring low potential returns. The more risk you are willing to take on, the higher the potential reward.
The surfer is the investor who figures out which direction the market is going and gets in step with it. This takes skill and nerve, and there is always the chance of wiping out. But if you ask an investor who has ridden a bull market what it’s like, the answers will be ecstatic. It’s not just the money—although that’s a huge part of it. It’s the sense of being locked in to a bigger movement. Growth investors who are in the market during a bull run will tell you that it’s an exhilarating experience. Skiers and snow boarders can get the same feeling, even though their waves are frozen.
Cabot’s growth advisories—Cabot Market Letter, Cabot Top Ten Trader, and Cabot China & Emerging Markets Report—use market timing to identify positive market conditions, telling you when the investment surf is up. Their advice is important when market conditions are positive. Knowing when to get into the water is how surfers—and investors—get maximum returns.
But the advice given by these advisories is especially important when markets turn bearish. Back in 2008, I had the portfolio of Cabot China & Emerging Markets Report 100% in cash—no stocks at all. And knowing when to get out of the water can be a huge benefit to both investors and surfers.
Markets are strong right now, with the major indexes pushing steadily higher. But, as much fun as that is, I suspect that there are many potential investors who are listening to the talking heads on cable TV and just can’t get past the warnings of bear attacks, financial meltdowns and economic ruin just around the corner. Personally, I doubt all predictions about the future. They’re all possible, but there’s no way to know which ones are correct until they happen.
That’s why Cabot’s approach to market timing makes so much sense to me. Knowing when to get out of the water gives you the confidence to get in and start surfing.
Note: I appeared on Moe Ansari’s Market Wrap radio program yesterday and discussed the prospects for emerging markets stocks in 2014. If you missed it, you can click here to listen.
Tim’s Comment: Challenge #1 in the investing world is not losing money, and some people fail to meet that challenge. But those who succeed get to tackle the challenge of managing their winners. And that can be very satisfying indeed.
Paul’s Comment: When markets are performing strongly, I usually hear from subscribers about which stocks to buy. But right now, I’m getting about as many questions about when to take profits and when to sell. For many investors, having a portfolio full of winners is every bit as stressful as holding a bunch of losers. It’s good to have rules about how to handle winners (the challenges of success), but they’re thin on the ground. Taking partial profits and using trailing stops are the best practices, but not easy to use.
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
In this issue, Tim Lutts, Chief Analyst of Cabot Stock of the Month, dips into Cabot’s history, showing how we used to draw stock charts by hand! Tim also continues his series on disruptive stocks. Best disruptive stock #3 is Twitter (TWTR).
Chloe Lutts Jensen writes in this issue about her new advisory, Cabot Dividend Investor, its IRIS stock-picking system and its role in helping retirees build a safe portfolio of income-producing investments. She also discusses the income advantages of preferred stocks.
Mike Cintolo, Chief Analyst of Cabot Market Letter, writes about the psychological need to be right, but the investor’s need to know how to handle being wrong. Growth investors who acknowledge their mistakes (sell their losers) make more money. Stock discussed: Canadian Solar (CSIQ).
Have a great weekend!
Chief Analyst of Cabot China &Emerging Markets Report
And Editor of Cabot Wealth Advisory
P.S. I’m going to be presenting a program on China at the World MoneyShow in Orlando, Florida on January 30, just before dinnertime. The conference kicks off January 29 and ends on January 31. If you need an excuse to go to Orlando to build up your strength to get through February, I’m glad to provide it. I hope to see you there.