Why The Market Correction is Good
Four Impressive Breakouts
Tableau Software (DATA)
As everyone noticed, the market correction started just over a week ago.
There was nothing subtle about it. The uniformity was impressive, almost coordinated.
And it’s nice that there was a clear culprit for commentators to point to: the slowing growth of emerging markets, the weakening of their currencies, the risk that a financial cold would turn into the flu, etc.
If you’ve been reading me long enough, you know my next thought.
What they say doesn’t matter. The “reasons” don’t matter. What matters is what the market does, and what matters most to you is what the stocks in your portfolio do. That’s something you actually have control over! So focus on that, and let other people worry about the currency of developing nations.
So, what’s good about the correction?
Two things, mainly.
First is that because the correction has been so very visible, it’s reduced bullishness among all parties concerned—which means the bull market can live a little longer. Damping enthusiasm is a good thing. Contrary investors love a good scare story.
Second is that it gives us an excellent opportunity to identify the market’s strongest stocks. They’re the ones that hold up best when markets are crumbling. They’re the ones that rebound fastest. And they’re the ones, most important of all, that break out to new highs soonest.
Which brings me to the meat of this issue.
Four Impressive Breakouts
Facebook (FB) gets a lot of press. There’s so much information/opinion about the company that you can choose to believe whatever you want. But if you’ve been watching the stock in recent months, you could be nothing but bullish. FB broke out big-time last week and now people who weren’t on board are wondering how to get there. (Readers of Cabot Market Letter who followed Mike Cintolo’s advice are looking at profits of more than 60%.)
Harman International (HAR) makes and sells a wide variety of audio equipment under a wide variety of names. Roughly a third of revenues come from German carmakers, and it’s that rebounding luxury sector that is driving business these days. The stock had built a robust base in November/December, and climbed gingerly above it in January, but it was the fourth-quarter earnings report that sent the stock soaring. (If you bought when Mike Cintolo of Cabot Top Ten Trader recommended it in December, you’re looking at profits of 30%.)
Qihoo 360 (QIHU) is a Chinese provider of Internet security services, that’s expanded into games and advertising. The company boasts accelerating revenue growth and a beautiful chart. After building a very solid four-month base stretching from September into January, the stock broke out to new highs this week. (Acolytes of Paul Goodwin, the master of all things Chinese and the Cabot China & Emerging Markets Report, bought this last June at 44 and are enjoying profits of 125%.)
Royal Caribbean (RCL) is in the cruise ship business. Maybe you’ve been a customer. Hopefully you weren’t on the ship that returned early to New Jersey last week after 645 people on board (20%) got sick. What’s impressive is that in the face of this bad news, the stock hit a new high last week! (Mike Cintolo recommended RCL in Cabot Top Ten Trader a month ago, and readers who bought then are up 10%.)
These are four stocks you should be watching carefully, if you don’t already own them. And if you own stocks that aren’t performing as well (odds are very good about that!) you better have a good reason for not switching.
And maybe you should be following Mike and Paul a little closer!
For more details on Cabot Top Ten Trader, click here.
For more details on Cabot China & Emerging Markets Report click here.
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Surprise Winners for 2014
The market's recent correction gives us an excellent opportunity to identify the market’s strongest stocks which you can find in our just released free report, 10 Best Stocks For the New Bull Market. In it, you'll find our annual investment outlook and an inside look at 10 stocks we're targeting for money-doubling profits in 2014.
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 as the new bull market of the next few years will be driven by new companies in niche markets and not by ones that drove the 2009-2013 bull market to new heights.
Get the names of the 10 Best Stocks for the New Bull Market here.
Moving on, it’s time for the sixth installment of “Best Disruptive Stocks."
Ideally, these are companies that address a mass market, and thus have the potential to impact our lives for the better.
Ideally, these are companies that are young and not yet well known or well respected. Thus they have the potential for increased perception by investors as time goes by.
Ideally, these stocks are young and not widely owned. Thus they have the potential to be bought by more investors—especially institutions—and thus see their stocks soar over time.
All the Cabot analysts have made contributions to this list of 10, and the stocks are being presented in no particular order, though I am trying to feature them when they’re at good entry points. I hope you enjoy them.
Disruptive Stock Number Six
Tableau Software (DATA) came public last June, and in the months that followed, three things happened.
First, my daughter Chloe mentioned that she has a friend who uses the software regularly and loves it. Second, the stock earned a mention in Cabot Market Letter as a recent IPO worth watching. And third, we started using the software at Cabot, to better see and understand the patterns of our own business.
Note this is not about Big Data; this is more about medium data. It’s about replacing the expensive analytics software from firms like Oracle and SAP with a product that’s easier to use and is accessible on a desktop, on a network or in the Cloud. Revenue growth is accelerating (up 90% last quarter), while the number of customer accounts is soaring, up 1,500 in the third quarter alone.
Technically, DATA has a great pattern. After peaking at 78 in September, it traced out a long shallow bowl, eventually climbing out to new highs in January. The broad market’s pressure pushed it down as the correction began, but DATA bounced back very rapidly and a couple of days later the stock was hitting new highs. It wasn’t a massive high-volume breakout like Facebook’s but it has potential. In fact, the catalyst might be the release of fourth-quarter results after the market close tomorrow (February 4)!
Note: No Cabot advisory has recommended DATA yet, but Mike Cintolo of Cabot Market Letter is following it closely. To get regular updates on all of Mike’s recommendations, click here.
Yours in pursuit of wisdom and wealth,
Chief Analyst, Cabot Stock of the Month
And Publisher, Cabot Wealth Advisory