What About Disney (DIS)

 

Cold Beer at Akron

How Do You Find Peace of Mind?

A Stock with Major Downside Risk

Another Stock that's Hitting new Highs

---

Note: long-time readers may recognize the beginning of this column as something I wrote in 2009. It seems appropriate again today.

Back in 1944, journalist and playwright Mary Coyle Chase wrote the play “Harvey,” which ran on Broadway from 1944 until 1949 and then was adapted into a movie that starred Josephine Hull and James Stewart.

The play won a Pulitzer Prize; Jimmy Stewart scored an Oscar nomination for Best Actor (but didn’t win), while Ms. Hull took home the Oscar for Best Supporting Actress.

What this has to do with investing, we shall see.

Cold Beer at Akron


It starts with the phrase “cold beer at Akron,” which pops up in the following scene, where Elwood P. Dowd (Jimmy Stewart) has just explained about his best friend Harvey, an invisible six-foot, three-and-a-half-inch-tall rabbit, to Dr. Chumley, the director of the mental institution to which he has just been committed. Elwood has explained that Harvey (technically a pooka) is able to overcome both time and space and take you anywhere in the world for as long as you want. Hearing this, Dr. Chumley explains what he would do with this power.

CHUMLEY. I know where I'd go.
ELWOOD. Where?
CHUMLEY. I'd go to Akron.
ELWOOD. Akron?
CHUMLEY. There's a cottage camp outside Akron in a grove of maple trees, cool, green, beautiful.
ELWOOD. My favorite tree.
CHUMLEY. I would go there with a pretty young woman, a strange woman, a quiet woman.
ELWOOD. Under a tree?
CHUMLEY. I wouldn't even want to know her name. I would be—just Mr. Brown.
ELWOOD. Why wouldn't you want to know her name? You might be acquainted with the same people.
CHUMLEY. I would send out for cold beer. I would talk to her. I would tell her things I have never told anyone—things that are locked in here. (Beats his breast. ELWOOD looks over at his chest with interest.) And then I would send out for more cold beer.
ELWOOD. No whiskey?
CHUMLEY. Beer is better.
ELWOOD. Maybe under a tree. But she might like a highball.
CHUMLEY. I wouldn't let her talk to me, but as I talked I would want her to reach out a soft white hand and stroke my head and say, "Poor thing! Oh, you poor, poor thing!"
ELWOOD. How long would you like that to go on?
CHUMLEY. Two weeks.
ELWOOD. Wouldn't that get monotonous? Just Akron, beer and "poor, poor thing" for two weeks?
CHUMLEY. No. No, it would not. It would be wonderful.
ELWOOD. I can't help but feel you're making a mistake in not allowing that woman to talk. If she gets around at all, she may have picked up some very interesting little news items. And I'm sure you're making a mistake with all that beer and no whiskey. But it's your two weeks.
CHUMLEY. (Dreamily.) Cold beer at Akron and one last fling! God, man!
ELWOOD. Do you think you'd like to lie down for a while?
CHUMLEY. No. No. Tell me Mr. Dowd, could he—would he do this for me?
ELWOOD. He could and he might. I have never heard Harvey say a word against Akron.

Traditionally, a pooka (or puca) is a mythical creature of Celtic folklore, encountered in Ireland, the west of Scotland and Wales. Appearing in a variety of forms, from a sleek dark horse with yellow eyes to a small, deformed goblin to a huge hairy bogeyman, it enjoys confusing and often terrifying humans, but it is considered to be more mysterious than dangerous.

If you believe in pookas, you can conclude that Elwood P. Dowd is fortunate to have fallen into the graces of a particularly benevolent representative of the species.

More likely, however, is that he is an alcoholic and/or has lost touch with reality, and that can be debated until the cows come home. What is certain, however, is that the man is at peace with himself. While other characters in the story anguish over what to do and what not to do in a variety of social and personal situations, Elwood P. Dowd remains above the fray, pleasant, unflappable, unhurried and a friend to all, willing to lend an ear.

Dr. Chumley, meanwhile, finds real hope in the thought that Harvey might be his ticket to the peace of mind that Elwood so clearly enjoys.

And that’s the main point of today’s column … peace of mind, in particular as it relates to successful investing.

Peace of Mind

Peace of mind helps you to calmly and objectively evaluate the market environment and the opportunities for action … or inaction.

Peace of mind allows you to remember your long-term goals in investing, and not be sidetracked by ephemeral temptations.

Peace of mind allows you to accept failures with equanimity, and then carry on knowing that your system will triumph in the long run.

Peace of mind enables you to look beyond today’s headline news and focus on what’s really important.

Peace of mind, in short, enables you to stay calm and centered while you employ the tools that make your chosen investing system work.

But how do you find peace of mind?

Some people (perhaps Elwood P. Dowd) find it in alcohol, though there are obvious risks to that route. Some people find it in meditation. Others find it in prayer, therapy, conversation with close friends, walking the dog, helping others, cooking or simply enjoying a cup of fresh-brewed coffee.

Live long enough and you’ll likely find peace of mind in the knowledge that your past experiences will help you get through future challenges. After all, history doesn’t repeat itself, but it rhymes, so what you survived before you can survive again. And the mistakes you make once can teach you what not to do next time.

To make fewer mistakes in investing, however, and to achieve peace of mind through more rapid mastery of the material, I recommend education, particularly the education you can get from the LEARN pages of the Cabot website.  Click here.

The Market Trend is Down


Turning to the market, the major trends are down.

Which means two things to me when it comes to growth stocks.

One: You should consider selling (or shorting) some big well-respected long-term winners that have major downside risk.

Two: You should consider buying—if you’re still in the mood for buying stocks hitting new highs.

In the first category, one stock that comes mind is Disney (DIS). The company is known and generally respected by every American (75% of revenues come from the U.S. and Canada). And its stock is known to every investor.

But DIS to me looks ripe for a major fall. Since the 2009 market bottom, the stock has appreciated 494% (and that’s after the recent plunge).

In the process, it’s gone from deeply undervalued to overvalued.

Fundamentally, the company remains extremely well respected, even after the early August selling wave that reflected growing fears that cord-cutting would reduce Disney’s income from ESPN.

But technically, the action of the stock has been troubling, with two major gaps down on big volume, followed by anemic bounces.

Disney chart

As I write, the stock has crawled back up to its 200-day moving average, but that line is now acting as resistance, telling me the odds are that DIS has more downside ahead.

Bottom line: Major shareholders are selling DIS and it’s important to remember that when a stock is as well respected as DIS has become, there are very few potential buyers of the stock in the market, and a lot of potential sellers!

Stocks Hitting New Highs


If you’re in the mood for buying—after all, some stocks are still going up—I strongly advise prospecting in the list of stocks hitting new highs, where you’ll find performers like JetBlue (JBLU).

Here’s what Mike Cintolo wrote about JetBlue in last week’s issue of Cabot Top Ten Trader.

“JetBlue is thriving for a couple of reasons. First, the entire airline industry is getting a boost from low fuel costs and a gradually improving U.S. economy that has air travel on the increase. But the second reason, the really important one, is that JetBlue just runs its business better than its competitors. For instance, while the airline industry enjoyed a 7% margin expansion in Q1 2015 (vs. 2014), JetBlue made a 14% gain. And if you back the improvement in fuel costs out of that measurement, you find the industry actually fell back by 2% while JetBlue gained 2%. The company’s strategy of operating in high-value markets and offering superior service—the most legroom in coach, free TV and premium movies, Wi-Fi on all flights—is paying off. And the company’s new Mint Class first-class service is getting great reviews from coast-to-coast travelers. Earnings are projected to grow 166% in 2015, and another 13% in 2016. Airlines are doing well, but JetBlue is doing great.”

When Mike wrote that (last Tuesday), JBLU was trading at 25.

jblu

Now it’s more than a point higher, having gained in each of the past seven trading days. That’s powerful!

So you could just jump in here.

But a smarter move would be to be become a regular reader of Mike’s Cabot Top Ten Trader, so that you’ll not only be updated on JBLU every month, you’ll also read about nine other high-potential stocks every Monday!

For details, click here now.

Yours in pursuit of wisdom and wealth,

Tim Lutts
Cabot President, Chief Analyst of Cabot Stock of the Month


Timothy Lutts can be found on Google Plus.

Stock Picks

Loews Corp.

This undervalued stock has strong future earnings growth expectations.

Biogen

Biogen is the market-share leader in treating multiple sclerosis.

Weibo

One of Paul Godwin’s favorite stocks in his Cabot Emerging Markets Investor portfolio.

Cabot Wealth Advisory

Does Alibaba (BABA) Stock Measure Up to Amazon (AMZN)?

By Paul Goodwin on September 23, 2016

Alibaba (BABA) is the Amazon (AMZN) of China. But does BABA stock measure up to AMZN stock? Let’s break it down!Read More >

As Stock Market Trends Change, Invest in these New Leaders

By Michael Cintolo on September 22, 2016

History tells us that all stock market trends change, and if you don’t recognize the leaders of that change early, you risk missing out on the next big winners.Read More >

AMZN Stock vs. FB Stock: Which Is the Better Value Buy?

By J. Royden Ward on September 20, 2016

For the past five years, AMZN stock and FB stock have been two of the market's great growth stories. But could you make the case that either stock is still undervalued? Let’s break it down.Read More >