Stock Market Video
This Week's Fortune Cookie
In Case You Missed It
Stock Market Video
In this week's stock market video, Mike Cintolo takes some extra time to talk about his trend-following indicators, where they stand now, and when new buy signals could show up. He also dives into numerous resilient growth stocks (more and more are beginning to separate from the pack), which could be the first signs of new leadership for the next bull move.
This may be a bit of a rant. Bear with me.Apple’s new product announcement this week was a big deal. When a company’s market cap is hovering around $640 billion, its gross profit was $70.5 billion in the past year and its stock is held by 2,157 institutional investors, it can’t be anything but a big deal.
And for investors with a taste for bigness, there’s nothing wrong with owning a little AAPL. After all, it pays a nice dividend (1.9% annually) and it’s trading at a very reasonable 13 times earnings. And it’s unlikely to drop the ball in a big way.
But for any growth investors out there who have their eye on AAPL, I’ve got to ask, “What the heck are you thinking?”
Apple’s revenue growth has dropped from 45% in 2012 to 9% in 2013 and 7% in 2014. Yes, that rate has increased in the last four quarters. But do you really think there is a ton of appetite for Apple shares out there that hasn’t been satisfied. AAPL is now a component of the Dow, for Pete’s sake! Even Roy Ward, the value guru who writes Cabot Benjamin Graham Value Investor has gotten the hint. Here’s the message he just sent to subscribers: “Apple (AAPL 112.57) was transitioned to the Cabot Value Model in last week's issue, because I now consider Apple to be a value stock rather than a growth stock. Apple will no longer appear in the Enterprising Model.”
AAPL may well get back on its bicycle and ride higher, but if you really expect it to be among the leaders in the next year, you’re (probably) fooling yourself. (Note: I could be wrong, and if I am, I hereby authorize you to send me an email saying, “I told you so!” Just reply to this email.)
My final piece of evidence is a three-month chart of AAPL and (just below it) a similar chart of the S&P 500. You see AAPL’s peak at 133 on July 20 (which was the stock’s fourth attempt to get above resistance at 133–134 dating back to February) and the slide that began on July 22. Then you see the big S&P-aided collapse that started on August 18. AAPL had already made a fair correction, so it didn’t plunge as deeply as the S&P, probably one benefit of heavy institutional support.
And here’s the S&P.
But what really interests me is the parallel action of AAPL and the S&P since the August 24 low. Both charts show a wedge-shaped consolidation in a tightening range. It makes it pretty obvious, I think, that AAPL and the S&P are being moved by broad market forces, with Apple’s special sauce playing very little role in its stock’s price movement. And AAPL’s failure to show any movement after its well-received product announcement seals the deal.
So if you want to be a growth investor—something I heartily recommend for anyone who’s willing to listen to what the market, the charts, the stories and the fundamentals have to say—STOP OBSESSING ABOUT AAPL! Until it shows that it can outperform the market and take out its old resistance at 133–134, it’s just another big stock that did well last year.
If you want to know what the new leaders are (at least after the market coughs up this hairball it’s currently choking on) Cabot has growth advisories in several pleasing flavors that will help you find the growth stocks that are actually growing.
This Week's Fortune Cookie
“Often the difference between a successful person and a failure is not one has better abilities or ideas, but the courage that one has to bet on one's ideas, to take a calculate risk—and to act.” Andre Malraux
Mike’s comment: I love this maxim because two things are key for successful investing. The first, of course, is taking action. Too many investors need to see confirmation (higher prices/better news before they buy, or lower prices/worse news before they sell) before taking action, which costs money. The second key, for growth investors, is to take concentrated positions; if you make a huge gain but only have a 1% position, what's the point?
Paul’s comment: Having the intellect to control risk means nothing if a person lacks the courage to take that risk. If an investment is absolutely safe (I can’t even think of an example of such an investment), it has risk in it. That goes for everything from the sock under the mattress and T-bills to day trading. I think someone is missing a bet by not having a T-shirt on the market that says, “Got Risk?” If you don’t, your portfolio is stuck in quicksand.
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 9/8/15—How To Protect Yourself from This Market Now
Chloe Lutts Jensen, Chief Analyst of Cabot Dividend Investor, discusses how the use of a bond ladder—a series of bond or bond funds with staggered maturity dates—can protect your portfolio in a rising interest rate environment.
Cabot Wealth Advisory 9/10/15—All My Thoughts on the Market (plus Cocktails!)
Chief Analyst Mike Cintolo, who helms Cabot Growth Investor and Cabot Top Ten Trader, runs down his thoughts on where the market might go, and for fun, reveals his favorites from summer cocktail ideas sent in by readers.
Chief Analyst, Cabot China & Emerging Markets Report