The Last Thing Growth Investors Need to Hear Now


Stock Market Video

The Last Thing Growth Investors Need to Hear Now

This Week's Fortune Cookie

In Case You Missed It

In this week’s Stock Market Video, Cabot Chief Growth Analyst Mike Cintolo discusses the market in detail, talking about his short- and longer-term stance; Mike is mostly focused on playing defense (he even mentions a couple of potential short ideas), though sees continued volatility in the short-term and a sector or two that's resisting the decline. Most of all, Mike relays a few stocks that are holding up well, and explains what he'll be looking for from the market in the weeks ahead.


The S&P 500, the Dow and the Nasdaq have fallen below their moving averages and they’re not showing any signs of a quick bounce back. In fact, it’s more likely that the moving averages themselves will have to drop to get back in touch.

The chart of the S&P shows the large-cap index’s plummet and its two attempts to recover that have ended in tightening ranges. You can also see the green 25-day moving average falling quickly and even the long-term 200-day beginning to heel over.

SPX chart 

My contention today is that the last thing a growth investor needs to hear right now is someone predicting which way the market will move next.

And the predictors are running wild.

Fortunately, the confident assertions about what the market is going to do are completely at odds with one another.

The permabears warn that the market is just biding its time before it corrects even lower. A whole lot lower! Their arguments make some kind of sense; after all, China could implode, Greece could explode or the Fed could derail the U.S. economy. Right?

At the same time, the permabulls see the market ready to bounce back like a super ball, roaring to new highs at 2,200! The U.S. economy is healthy enough to go on its own for a while and the market’s correction has created a ton of value setups. Right?

Either one of these crystal ball readings could be right. Or, there could be a third outcome, which is for the market to hack around between 1,890 and 2,000 for weeks or months until the weak hands are shaken out and the S&P builds a new base and—in its own good time—gets moving again.

And the headline-seeking experts making these predictions will be happy to claim credit for getting it right. But that makes as much sense as the guy playing the even numbers at the roulette wheel taking credit for being right when the little ball stops on 2.

Just keep this in mind. Any move you make to either increase or decrease your market exposure based on someone’s prediction of what will happen is based on a guess. Or maybe a hunch. Possibly a suspicion. Or maybe it’s really just wishful thinking.

The only thing you can know for sure about the direction of the market is what it’s doing right now. And right now, it’s loitering around well underneath its 25-, 50- and 200-day moving averages. That means the momentum of the market is against you, or any other growth investor with an itchy finger that wants to hit the BUY button. Unless you have a ton of cash on the sidelines or a stock in which you have a boatload of confidence, don’t do it.

In the immortal words of somebody, “Don’t just do something, stand there!” And tune out the voices of gloom and doom and the voices of sunny optimism. Stick with the reality principle.

(Value investors: enjoy your season in the sun! The falling market has created some tempting bargains, and it’s time to go looking for them. Or, you could just subscribe to Cabot Benjamin Graham Value Report and let value expert Roy Ward guide you to the value mine. You can do that by clicking this little button here.)

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies and Contrary Opinion buttons.

fortune cookie“Thinking is a momentary dismissal of irrelevancies.”—R. Buckminster Fuller, American engineer (1895-1983)

Tim's Comment: These days, the greatest irrelevancies seem to come from the Internet, something Fuller never had to contend with; I have little doubt that 99% of the investment “content” found on the Internet is just noise. But if you can avoid that, and simply focus on implementing a proven investing system (whether it involves growth stocks, value stocks, mutual funds, ETFs, options, or a combination of these) you can be a successful investor.

Paul's Comment: I once knew an high-level trainer at a big computer company who said that executives only needed to be awake for five or ten minutes a week to earn their keep. The rest of the time they were either talking (which they could do in their sleep) or listening with one ear. But when they needed to actually make a decision, they were fully alive and awake, and that’s what they got paid for. I think Fuller understood completely. It only takes a moment of clear thinking (including about investing) to get the job done. The rest is just due diligence.

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 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 9/1/15 – Apple vs. Tesla

Cabot Stock of the Month’s Tim Lutts revisits his assertion that Apple (AAPL) is past its prime but Tesla is just coming into its own. Tim also motors through the history of driving up Mt. Washington. Stock discussed: Vantiv (VNTV).

Cabot Wealth Advisory 9/2/15 – How to Make Money in Any Market

Nancy Zambell, the trail boss for Investment Digest and Dividend Digest, discusses the wide range of strategies for thriving in a down market, including value stocks, options, defensive sectors and many more.

Cabot Wealth Advisory 9/3/15 – Five Questions to Ask Before Buying a Stock

In this issue, I write about how investors (me included) tend to define ourselves by the stocks we buy. My five questions will help you decide if a stock is right for you. Stock discussed: Dr. Reddy’s Laboratories (RDY)

Paul Goodwin can be found on Google Plus.

Stock Picks


This stock could rise 50% before becoming fairly valued.

This hot technology company is growing like a weed, thanks to products that speed up cloud communications.

This stock is somewhat well known, but far from well loved.

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