Cabot Wealth Advisory for 10/2015
Is This The Buying Opportunity of the Year?
Investors love a bargain, and buying cheap stocks after a big haircut can be wickedly profitable. But they also know how painful it can be to be early—or late.
90% of Everything Is Crap
Theodore Sturgeon used to go to a lot of conventions and writers’ events where he answered questions, both in panels and in conversations in the lobby. He got tired of defending science fiction against charges of low quality, so he created Sturgeon’s Law* to explain. The Law says, “Ninety percent of everything is crap.” And when you think about it, you’ll have to admit that there aren’t that many genuinely excellent entries in any category.
The Problem with Hunches
Many people like to make decisions based on hunches; sometimes they’re called “educated guesses” and sometimes “feminine intuition.” And there’s some experimental support for the idea that snap judgments often prove quite sound.
Have Solar Stocks Bottomed?
Recent weeks have brought an abnormally high number of days when the Dow gained or lost 200 or more points, as the overwhelming majority of stocks joined in the trend of the day. What do I think about this volatility, and what does it mean for the future?
Is Facebook the New Apple? (And Two IPOs to Watch)
As my boss likes to say, “Trends often last longer than anyone expects.” That’s very true. But it’s also true that, once a trend ends, it takes a long time for investors to come to terms with it. That’s true of both major market trends—it takes months for the general public to get bullish or bearish after a big turn, for instance—but it’s also true when it comes to individual stocks.
How to Handle a Young Buy Signal
The good news for growth investors is that we have a new buy signal. (But it doesn’t mean that markets are out of the woods.)
Surfing Small Caps Provides a Wild—Yet fulfilling—Ride
There was a lot of anxiety in August and September. And the market uncertainty manifested into a pretty steep decline across global markets. My favorite asset class, small caps, was far from immune to the weakness. But like waves on the ocean, the market moves in cycles over time, and long-term performance is improved by buying in troughs, not at crests. That’s why I recently increased the size of a few long-term positions in my personal small-cap portfolio, and advised Cabot Small-Cap Confidential subscribers to do the same.
A Hot Oil Stock
With the bottoms of August and September behind us—and fear rekindled among numerous investors—is it possible that the market will continue to motor higher from here, possibly all the way to year-end? Yes, it is possible. But more likely—in part because it’s getting late in the year—is that any advance will be led by some fairly narrow groups of stocks, possibly featuring two distinct categories of stocks.
How is Tennis Like Trading?
Playing a competitive tennis match or tournament is a great deal like trading and investing these days. Going into a match, I rarely know the player, his style of play, or how I will approach the match. Similarly, these days in the market, every day is totally new, filled with unexpected swings. But as in tennis, in trading/investing you hit your best shots and put on your highest conviction trades—and over time, you will win out.
Chasing Returns? Wrong? Please!
Clearly, it’s in the interests of full-service brokerages to discourage you from making your own investing decisions. They make their money from commissions for trading your account and fees for managing your money. And the more they can count on keeping you in a standard mix of index funds, ETFs, sector funds and bond funds, the better they like it.
One Simple Thing You Can Do to Worry Less About Retirement
According to Gallup, having enough money for retirement is the most common financial concern in the U.S. In the 2014 survey, Gallup found that 59% of Americans are worried about not having enough money for retirement. That’s actually down from a few years ago, when over 66% of Americans were concerned about funding their retirements.
Are Commodities a Buy?
Getting to the market today—first we had the August 24 bottom, a month later we had the retest, and now we’ve got a rally that, while it’s not perfect, is certainly creating some winners. I think selective buying is okay. But what to buy? For my money, there are two methods of stock-picking that tend to work.
An Unprecedented Market? Hardly.
The message I have for you today is this: Make sure you have a system—or a well-thought-out plan—and follow it, no matter how unusual/scary/crazy the world gets. Cabot Growth Investor has a great system (plug alert!), but I don’t pretend to have the Bible when it comes to investing. What’s most important is that you stay grounded and follow sound principles that work year after year. Don’t overreact to the latest blip up or down in the market.
An Unexpected Emerging Market Takes Off
When I started writing about emerging markets, if I mentioned emerging markets to most investors, I get a polite, blank stare. And even among those who knew a little bit about emerging markets, suggesting that they actually buy a Chinese (or Indian or Russian) stock got the kind of reaction you see when someone bites into an apple and finds a worm … or, even worse, half a worm.
The Oprah Effect: Weight Watchers (WTW) Could Triple
Weight Watchers International (WTW 15.75) received a huge boost on the news that Oprah Winfrey had invested $43 million in the stock and will take a seat on the company’s board of directors and become a spokesperson. The news sent Weight Watchers’ stock price soaring 132% last week to 15.75. Here are my thoughts on the stock.
Beneath the Stock Market Surface
The market finished with a bang at the end of last week, spurred by excellent earnings news from technology leaders Alphabet (GOOGL), Amazon (AMZN) and Microsoft (MSFT). If you own the leaders, this is a rewarding market. But beneath the surface, all is not well.
Three Companies that are Reinventing Themselves
One of the trends that’s making headlines this earnings season is the success of companies that are adopting cloud-based technologies. While reading The Wall Street Journal on Monday, I noticed that Oracle (ORCL) CEO Mark Hurd spoke at the Oracle OpenWorld conference in San Francisco. Among his headline-worthy comments was the statement that Oracle now has virtually 100% of its portfolio rewritten, rebuilt and modernized for the cloud. That’s a big endorsement from a company with a $162 billion market cap. And Oracle isn’t exactly an outlier.
Fright Night and the Scary Market
It’s hard to ignore Halloween if you work in Salem, Massachusetts. And with the Big Day falling on a Saturday this year and the weather nice, it will likely be an even bigger deal than usual. A quick walk through Salem’s downtown at any time of year will reveal enough witch shops, fortune-tellers and scary museums to satisfy your taste for the weird.