Daily Posts Archive

In 2002, the Investment Company Institute, the industry group for mutual fund companies, found that just about half (52.7 million or 49.5%) of all U.S. households owned stock in some way. But just 21 million households (fewer than 20%) owned individual stocks outside their 401(k) plans and other mutual funds. I know that much has changed since 2002, but I’m betting that those figures are still in the ballpark. And that’s because owning mutual funds is easy. Personally, I have the bulk of my retirement savings--what’s left of it anyway--in exactly the same kind of mutual funds as most people. They are mostly a legacy from my days with earlier employers, and I mostly just let them be. But I also own individual stocks. And I think there are some really good reasons for taking on that role. Here they are.

Last chance to enter our essay contest: How I Lost Money in the Bear Market and What I Would do if I had Another Chance. Here are the rules: maximum 1,000 words; one entry per email address; send entries via email to essaycontest@cabot.net; the winner will receive a one-year free subscription to your choice of these Cabot newsletters: Cabot Market Letter, Cabot Top Ten Report, Cabot China & Emerging Markets Report, Cabot Green Investor, Cabot Benjamin Graham Value Letter or Cabot Stock of the Month Report. The contest deadline is June 30, 2009 and winners will be announced on July 12, 2009. The top three essays will be selected by a panel of Cabot editors, and readers will vote on the winner. We may choose to reprint any entries in Cabot Wealth Advisory.

As an investor and editor of Cabot Green Investor, I separate my personal feelings from investment analysis, relying instead on sound fundamental analysis I developed at Forbes and Dow Jones and the unique and time-tested technical analysis performed here at Cabot, publisher of the Cabot Green Investor. If you follow the stock market, you already know the stock of Whole Foods Market (WFMI) has been a big winner for much of this decade. In fact, in recent years, sales of organic products overall were rising 25% a month (!) until the economic turmoil of last autumn. Naturally, because organics are generally pricier, that rate of growth dropped. Yet while pundits expected the recession to be the death knell of the widespread move to organics, it hasn’t been.

I look around to see what history is happening in the world now and I see above all the rapid development of China. While here in the U.S. we struggle to regain positive economic growth, this year China’s economy will grow 8% ... maybe more. Which means China is a great place to find growth companies! One of my long-term favorites in the country is Ctrip.com (CTRP), which has the country’s biggest travel-related Web site. The company’s revenues were $99 million in 2006, $160 million in 2007 and $215 million in 2008. Earnings were equally impressive.

There is something sadly ironic about a newspaper reporting on its own demise. Certainly it’s important for readers to know what’s going on behind the scenes and for many employees, the decisions being made at their newspapers are the biggest news of the day. But it still shocks me a bit to see headlines in The Boston Globe proclaiming that its largest union rejected $10 million in wage and benefit cuts. In what seems like a “punishment,” union members will now endure 23% pay cuts. It’s almost guaranteed that the very people who wrote, edited and laid out the story will be part of that salary slash.

Back on Monday, I tackled the big challenge of our healthcare system once again, beginning with a few personal stories--including the $840 bill for my wife’s sliced thumb--and finishing with a prediction that the big pharmaceutical companies were in for tough sledding once Washington begins a serious effort to reduce costs. The responses to the column were numerous and excellent, and I share the best with you here.

While my heart is with growth stocks, there’s no question that many commodity stocks are doing well. My bias against them at this time is that most lack any sort of sales or earnings growth. And my own experience investing in shrinking or money-losing operations, frankly, is not good. I usually lose money when I toil in such fundamentally unsound stocks. However, I’m also a tape-reader, and some of the best price-volume patterns today are found in a few commodity names, so I’m going to give you a few stock ideas, and let you decide what to do with them.

The most popular column I’ve written (judging by the volume of your responses) was published nearly three months ago (March 13). The topic was health care, a subject of increasing attention by President Barack Obama these days. So today I’m going to tackle it again--focusing on the cost of healthcare and what can be done about it in the future. I’m also including a couple more letters from readers that came in too late to be included in the original reader-response issue.

Today I’m bringing you a special Q&A with Cabot Small-Cap Confidential Editor Thomas Garrity. Earlier this week, Timothy Lutts told you that small-cap stocks are leading the current market advance: while the Dow Industrials are up 26% over the past 13 weeks, the S&P 600 Small-Cap 600 Index is up a whopping 39%. Even better, stocks currently recommended by Cabot Small-Cap Confidential are up 49% in the past 13 weeks. The Q&A should help you better understand why small-cap stocks are leading the market, what you should be looking for now in individual stocks and where Tom sees the market and small-cap stocks going in the second half of 2009. Enjoy!

I make my living writing advice about aggressive growth stocks in emerging markets, which is a fairly risky business. I don’t just mean that emerging market stocks are risky, although that’s true, too. No, even the writing part is risky. It’s not as risky as writing about penny stocks, bulletin board stocks and pink sheet stocks, but there’s enough risk to make things exciting. It’s entirely understandable that people who read my recommendations can get a little peeved when the stocks I write about go down. But one unexpected result of airing my opinions about growth stocks is that I sometimes get complaints from people even when stocks go up!