Stock Market Video 2/24/2012

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In this week's Stock Market Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says it's hard to argue with a market that's going up. Paul also talks about the "wall of worry" and how you can act contrary to investor fear to make money. Featured stocks: Seaspan Corporation (SSW), Apple Inc. (AAPL), China Mobile Ltd. (CHL), Caterpillar Inc. (CAT) and HDFC Bank Limited (HDB).


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Dear Fellow Investor,

When I'm talking to people about investing in emerging market stocks, I'm always aware that I have two choices. The first is to spout statistics:

*    About China's 1.3 billion people
*    The build-out of Internet access
*    The rising power of the Chinese consumer
*    The country's decade of double-digit economic growth
*    Colossal investment in infrastructure.

There's no doubt that these are impressive factors, and they certainly point to a national economy that's in high gear. But I don't think they tell the whole story.

If a growing economy automatically produced stock market gains, an investor's job would be very simple. You could just buy an ETF for that country and watch the money roll in.

But stock markets are too complex to reward that strategy, as investors are always looking ahead by six months or so. And just drawing a straight line that extends the current trend is almost sure to miss the mark.

As the emerging markets develop, their economies often rocket ahead, lifted by industrialization, urbanization, entrepreneurship and foreign direct investment. 

And the stocks of the companies doing business in these countries can blast off right along with them. This is what investors in Baidu (BIDU), China Mobile (CHL) and (CTRP) found out a few years ago.

That's when Cabot China & Emerging Markets Report beat all investment advisories hands-down, doubling readers' retirement money four times in seven years.  

Just last year:…

Our top auto stock was up 127% in four months.
Our top entertainment stock was up 113% in 10 months.
Our top Internet stock was up 106% in six months.
Our top social networking stock was up 115% in five months.

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Our Amazon-like online retail stock is up 36% in three months.
Our flash sale online retail stock is up 35% in two months.
Our online games stock is up 23% in one month.

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Paul Goodwin Signature

Paul Goodwin

Editor, Cabot China & Emerging Markets Report



[ Music ] 

>> Hi. I'm Paul Goodwin, the Editor of the Cabot China and Emerging Markets Report and this your Cabot Weekly Video Review. 

It's been a good week. It's hard to argue with a market that's going up. Take a look here at the Halter USX China Index, which is the basis of the Cabot China Timer and you'll see that the index is sitting above its 25 and 50 day moving averages with a 25 day just about catch up to it, which will be the first test of whether it can -- after two or three weeks of moving a little sideways, test of whether it will get support from that moving average. Take a look at the S&P 500 and you'll see that after, you know, about two weeks of trading sideways a couple of weeks ago, that it's back in its winning ways. 

When we talk about markets climbing the wall of worry, I don't know that people necessarily know what that means. What it means is that as markets are going up, people are afraid of everything. People are afraid that, you know, Apple is going to collapse, people are afraid that China's going to implode, people are afraid that Greece is going to default. They're always worried about things. So as markets go up, it's always to some commentator's advantage, they can get headlines by saying, "oh here's what's going to go wrong and here's why you want to do this," but the fact of the matter is the only time you really need to worry about what the market is worrying about is when it's not worrying about anything. Because when people are no longer worried and everybody's piling in, you know the market is near a top. 

Now, we do think that the market may be due for a little pullback. It may need to correct slightly, but as long as there are plenty of worries to go around, we also know that there's plenty of money sitting on the sidelines, especially from large institutional investors and they're not going to miss this rally. So, we may be in for a very interesting sort of a "grind it out, here we go" sort of a bull market. 

So, at this point, you should be moving toward becoming more heavily invested in great growth stocks. So, let's see. Here's Seaspan Corporation, they're a shipping company that does great business and has their fleets of boats are always constantly under long term leases. So after a really tiresome down trend during which people were worried about what would happen to China if Europe imploded because Greece exploded. Now they have come back strongly and look at the daily chart here and you can see after this, you get a couple of very interesting big volume ... big volume clues. So we think this is one that will be interesting to look at. 

A more familiar name, Apple. People keep saying how long can this go on? Well, we were worried right about here when the rate of advance started to become larger, but right now, after a one day down -- a one big down day -- and a small consolidation here, Apple looks good. 

And then in China, one thing I'm looking at is China Mobile, which for years has just been kind of sitting there, I mean look at the monthly chart for it had this huge up which we enjoyed a lot. And then this whole -- since 2008, it's just been trading sideways, but go back to the daily chart and you see that while it's a little thinly traded that it's starting to get a little bit of movement. And part of that is an Apple story which is that China Mobile has made arrangements to distribute the iPhone in China and that's working out pretty well for them. 

So, on the big cap side, we think, we think Caterpillar. Heavy equipment doing just beautifully after coming out of this base, nice rush, consolidates a little bit more and then in the past couple days has been showing a move off of these new intermediate term highs. It also pays a nice dividend. 

And in India, this is HDFC Bank, which is heavily into Indian development and with the weekly chart here and you can see that it has been a lot of sideways for this, for this stock. But recently, just look at the number of weeks of advances here and we think HDFC Bank is going to do good business in India.

That's it for this week. You should be moving toward being more fully invested in great growth stocks and if you need anymore information about Cabot, you can always find us at Thanks, and we'll see you next week. 

[ Music ] 


Paul Goodwin Paul Goodwin 
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report

A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the #1-rated newsletter of 2006 with a 78.6% gain for the year, and the #1-rated newsletter of 2007 with a  74.1% return. Cabot China & Emerging Markets Report was also named 2007 Investment Letter of the Year by Peter Brimelow of MarketWatch

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