Strong Market: This Week’s Stock Market Video
Is Your Portfolio Ready for Summer?
This Week’s Fortune Cookie
In Case You Missed It
In this week's Stock Market Video, I discuss the mild paradox of having a strong, healthy market-as measured by the major indexes, which are at or near new highs-but relatively few leading stocks. I point out a group of stocks that are hanging around their old resistance levels and a few strong stocks that have actually broken out to new highs. The best idea is to buy the breakouts or look for the new highs. Don't miss the list of leading stocks on my watch list. Click below to watch the video.
Is Your Portfolio Ready for Summer?
About three months ago, as many of us in New England were still enjoying our wool shirts and down jackets, I started to see the annual wave of stories on the Web telling me how to achieve my perfect bikini body by June.
I laughed. As always.
It's not just that a bikini isn't gender appropriate for me. It's that the job of making me look good in a swimsuit of any kind would take a bit longer. Maybe a lot longer.
But with the longest day of the year now behind us and a long stretch of (potentially) sunny days ahead, I got to wondering what those "Bikini-Body" articles would look like if they were directed at stock portfolios. Here's what I came up with.
Dear Portfolio: Lose the Flab!
Portfolios, like bodies, can get their own equivalents of thunder thighs, muffin tops, cankles and junk in the trunk. These unsightly accumulations are made up of losing stocks that you haven't had the courage to sell, underperforming stocks that are just hanging around doing nothing and stocks that duplicate exposure to particular sectors or industries. (I've even talked to people who have old stocks in their portfolios whose company names they can't remember. Bad. Very bad.)
Your job is to put your portfolio on a strict diet, maybe even performing liposuction on the losers, laggards and redundancies that are ruining its waistline. Your portfolio will start to look better immediately.
Dear Portfolio: Eat Right!
A portfolio is what it eats, of course, and cutting out non-nutritious edibles is another key to shaping up. If you have penny stocks in your portfolio, ask yourself if you have a really good reason for them to be there. Are there recommendations that you got from a relative, an in-law or a frothing head on cable TV? These are the equivalent of empty calories and your portfolio will feel better if you cut them out of its diet.
What you're looking for when you select stocks to feed your portfolio are issues that fit your investing style. If you love growth stocks, buy the best; look for great stories, strong fundamentals and charts that show increasing enthusiasm among buyers. If value stocks are more your style, seek out the best combination of low valuation and good projected earnings growth you can find.
But whatever your investment style is, be sure you know the rules and follow them.
Dear Portfolio: Get Some Exercise!
A stock portfolio's natural habit is just to sit around and do nothing. (That doesn't mean that the stocks in it are all doing nothing, but portfolios don't trade themselves.) Managing a portfolio, especially one that's growth oriented, requires that you be prepared to make trades when necessary, which is more or less the equivalent of exercising it. The more aggressive the portfolio, the higher the turnover rate as you give losers the boot sooner rather than later and remain on the lookout for better-performing issues to put into their places.
In a way, it's too bad that portfolios aren't forced to put on what the Victorians called "bathing costumes" and parade around in public. The threat of having to reveal their shape might be as effective in developing healthy portfolios as it is in forcing human bikini wearers to shape themselves up.
Here's this week's Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.
Tim's Comment: Not knowing Howard Scott, I deduce that he had a dim view of capitalism, and research proves that somewhat correct; Scott advocated for societal change through the short-lived Technocracy movement. Still, the point about lack of capital resonates. Without capital, not only can't you form a corporation, you can't become an investor. Thus acquisition and preservation of capital is paramount.
Paul's Comment: I would classify this remark as more of a wisecrack than a pearl of philosophical wisdom, but Scott (an engineer who advocated for technocracy) wrote it in 1933, which explains a lot. In the depths of the Depression, heads of corporations were regarded by many as rapacious profiteers, not as heroic super-entrepreneurs as we see them now. Perspective makes a big difference.
Don't Miss out on the Next Stock of the Decade
We have several stocks in our sights right now that could turn out to be the next Monster Beverage, which handed our subscribers a 974% return. If you want to get in on the ground floor, sign up now for a 90-day trial subscription to Cabot Small-Cap Confidential. But hurry-there are only 10 spots available in this limited-circulation advisory.
Click here to order now.
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.
Cabot Wealth Advisory 6/23/14-A Horserace: SolarCity (SCTY) vs. Alstom
Tim Lutts, head honcho of Cabot Stock of the Month, writes in this issue about GE's attempt to take over French giant Alstom and the government's efforts to foil the deal. Tim also points out that SolarCity (SCTY) is a younger, more energetic competitor that's poised to push Alstom aside. He also gives the sixth in his series of 10 Stocks to Buy and Hold Forever. Stock discussed: Cardiovascular Systems (CSII).
Cabot Wealth Advisory 6/24/14-One Stock That's on the Move
In this issue, I present one of my periodic warnings that "the market wants to take your money," which is both heartfelt and true. I also talk about a stock that I regard as a core holding for anyone interested in China. Stock discussed: Baidu (BIDU).
Cabot Wealth Advisory 6/26/14-An Insider's View into Insider Trading
Jacob Mintz, Chief Analyst for Cabot Options Trader, uses this issue to look at insider trading, especially as it's reflected in unusually high options volume ahead of buy-out proposals. Jacob's proprietary scanning techniques detects these options surges and lets ordinary investors profit by following the whales into the trades.
Have a great weekend,
Chief Analyst, Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory