The Difference Between the Weather and the Stock Market
Handling Transitions from Bulls to Bears to Bulls
A Chinese Stock with Excellent Prospects
Today, while the New England winter is letting us know that it will get as cold as it darned well pleases, I’ve been thinking about the difference between the weather and the stock market.
This has been the snowiest February on record in New England. While snowfall is notoriously variable, most estimates of our total frozen precipitation run over 100 inches.
And when I checked the weather app on my iPhone this morning, it said the temperature was –11 degrees. That’s cold, no matter where you live.
Veteran New Englanders are supposed to be laconic about the weather, just taking it all in stride, shoveling what needs to be shoveled and driving down streets that are narrowed by berms of snow as if it were the most normal thing in the world.
That’s a crock. The fact is that New Englanders complain about the weather constantly, blaming Canada for every Montreal Express or Polar Vortex that comes our way and railing against slick sidewalks, frozen fingertips and huge piles of snow that turn progressively browner from auto exhaust as the season wears on.
Just because we have parkas, snow blowers, snow tires, big hats, snow boots and thick gloves doesn’t mean we enjoy this #@*&!
Maybe that’s one reason that, when the sun comes out in this region and the thermometer tops 80º, it takes no time at all for New Englanders to head for the beach. Even if it’s been cloudy for so many weeks that webs are growing between their toes, people in New England know that when the sun shines, they’d better slap on the sunblock and look for a spot on the sand for towels and coolers.
But it’s a little different with rainy stretches in the stock market. Even after the major indexes have shown some good strength and have climbed back into convincing uptrends, many investors continue to sit on the sidelines. And many of them will continue to sit while loads of money is being made by people who are climbing back on the bandwagon.
The real shame is that some will persist in shunning the market until the rally has gone on for so long that everyone is happy and totally optimistic about stocks. Maybe there will even be a cover story in Time magazine about the new, improved stock market.
So these folks will finally jump into the market … just as it begins to peak, stalls out and starts the correction process that will wipe out all late arrivers, which is what it always does.
Some legendary investor—sources suggest that it was Baron Rothschild in the days following the defeat of Napoleon at the Battle of Waterloo—said that “The time to buy is when there’s blood in the streets.” And another more recent market wit added, “… even when it’s your blood.”
If you take that to mean that it’s a good time to buy when assets are extremely oversold, it’s probably true. But what’s true for a massively wealthy banking family isn’t necessarily true for individual investors.
And if you take the quote to mean that you should try to buy the market at the bottom, then it’s not only false, it’s impossible!
If you would like to know how to make the transition out of a choppy market (like the one we’ve been in) with confidence, I have a suggestion. And it should come as no surprise to you that it involves a Cabot investment advisory.
The suggestion is based on the fact that Cabot Market Letter has 44 years of experience getting growth investors out of bear markets and into cash, and then out of cash and back into bull markets. The method has nothing to do with intuition, economic predictions or the Magic Eight Ball.
The Cabot Market Letter’s Cabot Trend Lines, Cabot Tides and the Two-Second Indicator have been honed and refined to make sure you never, repeat NEVER, miss a major bull move and never stay heavily invested during a major bear move.
Bull markets are a great phenomenon; they make you feel smart and they make you money. And the confidence that comes with following a proven market timing system only adds to the experience. With the Cabot Market Letter and its award-winning timing system, you will know the Bull when it arrives—and when he leaves.
And as for New England, we assume that summer will get here eventually. After the snow melts and the mud dries up, we’ll let you know.
For my stock pick today, I’m recommending a Chinese web portal called NetEase (NTES). The company operates a very popular, full-service portal that offers a huge menu of services, like news, weather, sports, entertainment news, email and a host of other services and connectors.
But what sets NetEase apart from its competitors is its reliance on online games for its revenue.
Here’s what the stock’s writeup in the January 19 Cabot Top Ten Trader had to say about it.
“The Internet has transformed Chinese society, and is continuing to do so. NetEase is a Chinese web portal that offers the same mix of news, weather, sports, entertainment, email, social media, commerce and ads that you find on Yahoo or any other full-service portal. What sets NetEase apart from its rivals is its emphasis on gaming, especially multiplayer games. The company has been active in mastering the transition from PC-based games to games played on mobile devices, which is where the Chinese web is heading. Investors are pleased that revenue growth increased from 21% in Q2 to 32% in Q3, with earnings growth climbing from 8% to 10%, respectively. NetEase recently announced a strategic partnership with Sinotrans, a Chinese logistics services provider, to speed delivery of goods that customers order from outside China, but the impact of that alliance won’t show up for a while. Analysts are looking for revenue of $518 million when NetEase reports Q4 results, with EPS of $1.53. NetEase also pays a dividend with an annual yield of 1.3%. The NetEase story has good scale and excellent prospects.”
If NetEase seems like the type of stock you’re interested in, you can buy it right here and watch it carefully—it's the type of momentum growth stock that can rise and fall quickly. Or you can subscribe to Cabot Top Ten Trader and chief analyst Mike Cintolo will tell you exactly what to do.
Or if you’re interested in the fastest growing stock on earth, consider a subscription to my advisory, Cabot China & Emerging Markets Report.
Chief Analyst, Cabot China and Emerging Markets Report
and Editor of Cabot Wealth Advisory