Daily Posts Archive
Chevron Chairman and CEO David O’Reilly spoke about the need for energy security and alternative energy at the recent Chief Executives’ Club of Boston meeting. So clearly, with even Big Oil conceding the pressing need for alternative energies to be in the mix, the future market for Green technologies is huge. How much does Chevron believe this? It’s now the largest non-public utility producer of geothermal energy in the world and is one of the largest installers of solar panels in the United States. Even Big Oil is going Green.
A lot has been written in previous Cabot Wealth Advisories about how to pick a growth stock. The advice from my fellow Cabot colleagues is sound and, when followed, will lead to exceptional returns. The editors of the growth-oriented Cabot letters know their stuff, and can produce performance numbers that prove it. But I like value stocks, and I believe that value stocks should be included in your portfolio. In my opinion, your portfolio should contain half value stocks and half growth stocks and should not contain 100% value or 100% growth stocks. Value investing, perhaps more than any other type of investing, is more concerned with the fundamentals of a company’s business rather than its stock price or market factors affecting its price.
When it comes to market timing, I prefer to keep it simple, and that’s exactly what my Letters do. For the most part, my timing is based on two things--the trend of the overall market, and the action of leading stocks. However, there is one category of indicators that I do track ... though they generally give signals only every few years! Thus, you can’t use these indicators to tell you when to get in or out of the market, and they’re unlikely to be much benefit in your daily investing routine. So why follow them? Because when they do flash green lights, it tells you something unusual is happening--something unusually bullish!
Yesterday was my birthday, one I share with a U.S. president, several musicians, novelists and other notable historical figures. And one that I might share with you. Statistically speaking, all you need is a group of 23 people to have a 50% chance that two people have the same birthday. With about 160,000 Cabot Wealth Advisory subscribers, that means that several thousand were probably born yesterday. If so, I wish you a very happy birthday! Today, you’ll meet others who share your birthday. If your birthday wasn’t yesterday, I hope you’ll still enjoy the following wealth advisory and even learn some fun facts to share with your friends and family.
In general, you should work to hold your best-performing stocks as long as they continue to perform well, while getting rid of your worst performers, continually upgrading your portfolio so that it is always composed of healthy stocks with good prospects for advancement. In practice, this means you should watch their charts, and that, of course, is where it can get complicated.
Stocks don’t know you own them. That’s the standard reply to anyone who’s feeling paranoid because a stock they bought immediately fell on its nose. Similarly, the sports team you’re watching on television doesn’t know when you leave the room, turn your hat around in “rally cap” position, or give the evil eye to the shooter, kicker or passer. At least that’s what they tell me. The truth is, though, that while the stock may not know you’ve bought it, the stock market does. Or, rather, the market knows when a bunch of people have bought a stock because the chart reflects the rising tide of buyers.
The #1 request Cabot has had over the years has been to find great stocks sooner and with our publication Cabot Small-Cap Confidential, we’re able to do that. Cabot Small-Cap Confidential, a limited subscription newsletter, focuses on finding undervalued and little-known small-cap companies that are poised to break out in a big way. Or, I should say, the publication’s analyst and editor, Thomas E. Garrity, is able to find winning stocks sooner. His long career and varied experiences taught Tom to make investments only when the potential rewards outweigh the risks. He applies this philosophy to every stock he recommends in Cabot Small-Cap Confidential.
I don’t drink coffee; my last cup was roughly 23 years ago. But that doesn’t mean I don’t appreciate the power coffee has in our society, both in the U.S. and the whole world. Coffee is the world’s most popular beverage, and ranks second only to petroleum in terms of dollars traded worldwide. And investors who spot new trends in the coffee industry early and take advantage of these opportunities can make big money.
The weather has finally turned nice here in New England, with a consistent string of 60-degree days and a couple of scorchers thrown in (we set records on Tuesday, with temperatures north of 90 degrees!). That means it’s nearly vacation time! And with vacation comes reading; I’m always on the lookout for good books, investment or otherwise, to help me unwind while I watch waves lap against the sand. Since this is a wealth advisory, of course, I’ll offer up some of my favorite investment-related book recommendations. Heck, I might even re-read one or two of these this summer. Here are some favorites …
Over the past 79 years, small-cap stocks have outperformed large-cap stocks by 165%, and I think their prospects are especially terrific now; historically, they perform best following a bear market. My sense is that the old blue chips will continue to be hobbled (like Ford and General Motors) by their expensive old overhead, while their stocks will continue to be weighed down by institutional investors slowly easing out on rallies to invest in faster-growing small companies with greater potential.