Daily Posts Archive
Mike Cintolo shares tips based on how the market actually works...as opposed to how many investors think it works.
My stock idea today takes its cue from water. Good old H2O. Water is a daily requirement of all living things, and the earth has a limited supply. So as the world’s population increases, proper management of water resources becomes increasingly critical. And where are both the population and the use of water increasing especially fast? China. So my idea today is a very young stock, which came public on June 24 and just earned a spot in Cabot Top Ten Report.
Carlton Lutts, Cabot’s founder, once said of reading books on investing: “All I’m looking for is one good idea.” Today, I’m going to share with you our editors’ favorite investing books so you can find one good idea of your own. Cabot is housed in an old library, so we’re reminded of great books every day. And while the shelves are mostly gone, the walls of our office are still lined with many hundreds of investing books. Enjoy!
My featured stock today is a health care company that has created its own unique niche. I have studied the company’s sales and earnings trends. I have read about management’s strategies, goals, and plans for the future. I am confident that I could put all my money into this stock, because the outcome is obvious: the stock will be a winner! In fact, I like it so much that it was featured in the May edition of Cabot Benjamin Graham Value Letter, of which I am the editor.
You should focus on the leaders--the stocks that held up well during the market’s five-week correction and have just bolted to new peaks on big volume. But this is also earnings season, so even if you haven’t jumped on board some recent breakout stocks, there should be plenty of opportunity to get on board after some earnings gaps. To review, powerful gaps higher (10%, 15% or more) right after earnings reports usually lead to higher prices. Most investors are afraid to buy a stock that’s just risen 20%, but if that gap comes after earnings, buying at that time is usually your best move.
One of my favorite stocks is in the technology industry, where we often find great growth stories in bull markets. Its name is Rackspace Hosting (RAX), and its business is simple; it delivers enterprise-level hosting services to businesses of all sizes all around the world. The company first came to my attention when our IT director selected it as the site for our Cabot server about two years ago, a choice that has proven wise. Rackspace differentiates itself from the competition--in an industry that risks commoditization--by promising “Fanatical Support” to its customers ... and delivering.
This week marked the first anniversary of our blog, The Iconoclast Investor, and I want to thank all of our loyal readers for making it such a great first year! I love having an interactive outlet for Cabot’s investing advice and really enjoy reading your responses to our posts. We’ve grown a lot in the last year and plan to keep growing in the future. Since Cabot launched the blog last July, we’ve guided you through the bear market and into a new bull market with our detailed stock chart analyses (the blog has visual aids) and ongoing commentary on the state of the market. You’ve responded by writing some very insightful comments and starting a lot of great discussions.
Oil and gasoline prices, as you likely have noticed, have been easing lately, even as we’re in the midst of what energy industry hands call “the summer driving season.” I bring up gas prices because as editor of the Cabot Green Investor, I have noticed that there is a fairly popular--and false--idea about the correlation between gas prices and Green stocks. The idea is that as the prices of oil products drop, there must be a decrease in interest in hybrid cars, solar panels and the like. I contend it’s false for one simple reason: the daily fluctuations of a commodity aren’t going to affect whether someone chooses to go ahead with a capital intensive purchase of a geothermal heating system or an electric car. Yet some people trade Green stocks each day against the price of oil, surrendering longer-term gains.
China is a country that, as we all know, is changing fast ... but is still misunderstood. While writing the title of this column, I was tempted to use the word xenophobia, meaning fear or contempt of strangers or foreign peoples. But the word I want (which appears not to exist) means, “underestimating the power of the people of a foreign country.” Because when it comes to China, I fear that’s exactly the mistake most Americans are making today. To the vast majority of Americans, China is, first and foremost, a Communist country. Americans “know” Communism is the wrong way to go. However, for the past quarter-century, the Chinese economy has grown at an average annual rate of 10%.
Recently, we held our very first Cabot essay contest and the response was incredible! We received lots of insightful, well-written essays from you, our readers, and after selecting four finalists, we asked you to choose your top pick. The final results were too close to call, resulting in a tie between Essay #1 and Essay #4. Congratulations to the two winners! I’ve re-printed the two winners’ essays below with some comments written by those of you who voted. I hope you enjoy reading them as much as we did. Thanks to everyone who submitted essays and voted for their favorites--you helped make this contest a great success!