Stock Market Video 6/15/2012

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In this week's Stock Market Video, Cabot China & Emerging Markets Report Editor Paul Goodwin looks at the major market indexes and sees a potential shift to a positive direction. Much will depend on how the vote in Greece goes this weekend. If the indexes turn up, we could get a new buy signal soon. But, as we point out again and again, there’s huge risk in trying to anticipate a market shift. Patience (and working on your watch list) is the only prudent course right now. Paul discussed some stocks with good stories, including Amazon (AMZN), Mellanox (MLNX), Monster Energy (MNST) and Expedia (EXPE).

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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 Ctrip.com (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.
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Our instant messaging stock is up 25% in three months.
Our Amazon-like online retail stock is up 36% in three months.
Our flash sale online retail stock is up 35% in two months.
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Sincerely,

Paul Goodwin Signature

Paul Goodwin

Editor, Cabot China & Emerging Markets Report


--- Video Transcript ---

 [ Music ]

Hi. I'm Paul Goodwin, the Editor of the Cabot China and Emerging Markets Reports and this is your Cabot weekly video review.

It's been a solid week in the market, not much happening. The market's trading sideways, not necessarily a bad thing. They've been holding on to, to last week's gains, which came about because we got some provisional good news from Europe.

This week, I think, the buyers and sellers are kind of fighting it out, showing the S&P 500 heading, heading sideways, as you can see here. And holding onto these gains but people are still worried about Europe and there's a major election, another election in Greece on, on Saturday. And people, people see the outcome of that as crucial to whether the European bailouts, primarily by Germany, go ahead or not.

So this is, this is still a nervous market but the interesting thing to me is that the S&P 500 here has now pushed slightly above its 25 day moving average. So when, when we get an index, major index above its 25 day moving average or the lower of its 25 and 50 day moving averages, all we need is to get that average to start turning up and we get ourselves a new buy signal.

Now you can see that the 25 day moving average is starting to scrub off these, some of these really nasty down days in May so it's quite likely that the market will turn up.

The situation with the emerging markets is pretty much the same, had a awful May, a little jump earlier in June and now things are trading sideways. So I think people just need to know which way to jump and they are ready to jump, both either the upside or the downside.

We don't want to get ahead of ourselves, we'll just, we'll just take the signal when it comes but you should be working on your watch list and I have some interesting stocks, I think, for you for that little project.

This is Mellanox Technologies, (MLNX), a company that makes, makes chips or, or design chips. They're a fabulous manufacturer so they don't have their own, they don't do their own manufacturing. But Mellanox makes chips that allow servers and telecom equipment to talk to one another more quickly and speed is the name of the game. And you can see, this is a weekly chart.

It's been in a long term uptrend, then take a look at the daily here, see this great gap up and after the gap up, you get this little perfect formation here, a little correction and then things head back. Big volume clues here and the most recent volume clues are all on the upside. So this is, this is a good story of, of a company that just has good technology.

Here's another Monster Beverage, (MNST), take a look at this weekly chart. You don't find them a whole lot stronger than that. And this includes a two to one split, which often marks a, at least a temporary high for a stock but certainly doesn't here. So Monster has just been popping along, I think this is just bad data. But that's a perfect uptrend.

The big story here, aside from the fact that that Monster Beverages are number two in the energy drinks department, behind Red Bull, is that there are persistent rumors, which are constantly being denied that the company is a takeover target. Investors love this sort of thing because there's usually a significant premium involved and they also expect that everyone's going to not deny everything. So that's part of the story here.

Then we have Athena Health, (ATHN), take a look at the weekly here. You can see from, you know, a lot of sideways, but the company, all of it's volatile, has been in an uptrend and has just pushed out to new highs, which we think is always pushed above 80, always a good sign.

The story here of course is they do electronic billing collections and, and a lot of other kind of medical office digitization, good story, and, and, and we like the chart.

Expedia, (EXPE), this is, this is a beautiful chart because you have this, you know, down here and then pops higher and hasn't spent much time after this gap up, digesting those gains, you know, three weeks and then it's off to the races again. The story here is, just the, the company's really doing well. European bookings and inquiries are much stronger than they had been and business is good. And as the global economy picks up, business is expected to get better.

And finally, our old friend, Amazon, (AMZN), take a look at this chart and you can just see, you know, of course it's been mostly sideways here but go back to the daily and you see this great gap up, huge volume telling you that all of a sudden, people kind of changed their minds about it.

This decline is an indication that people aren't quite sure but Amazon has been spending lots and lots of money, huge capital expenditures and they have it. And the feeling is that if, if that capital expenditure program, which has been going on for a couple of years, ends that a lot of the extra money's going to go right to the bottom line. So there's a lot of anticipation here. Nobody expands the way Amazon does. They've, you know, taken over starting with books and now they're selling everything.

So some great stories out there. We say with the technical indicators still negative but the possibility of an upturn, we would say still time to be keeping your powder dry, keep your checkbook in your book but be working on your watch list. So that's it for this week. We'll see you again next week. Thanks. And if you need more information about Cabot's Newsletters, you can always find us at www.cabot.net.

[ 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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