Daily Posts Archive

The investment principles taught by Graham at Columbia University became legend in the field of professional stock analysis.

Many value investors adhere to the old buy-and-hold forever theory. The past year, though, has been a brutal time to be a buy-and-hold investor. According to Morningstar, 95% of all mutual fund managers lost more than 27% last year. Holy cow! The S&P 500 Index (before dividends) dropped 21.85% for the 10 years ended December 31, 2008. The buy and hold strategy that many value investing gurus recommend has clearly not worked well during the past 10 years. Jeff Macke on CNBC’s Fast Money went so far as to proclaim “2008 will go down as the year buy-and-hold came to die.” Oh no, what do we value investors do now?

Note from Cabot Wealth Advisory Editor Elyse Andrews: It was greeted as “an oddball security from Canada” when it debuted in December 2003. But investors have been warming up to this special type of security in difficult times. Today, we’re featuring this income-investing article from our friends at StreetAuthority. StreetAuthority editor Carla Pasternak explains how to capture a 16% yield from a special Canadian security. After all, Carla reports that it pays five times the average yield delivered by the S&P 500 Index--while offering the safety of a bond with the upside of an equity.

There’s another company that’s benefiting from the trend of increasing government spending, and its stock was first mentioned (briefly) in last Saturday’s Cabot Wealth Advisory. In that issue, editor Elyse Andrews reprised the Martin Zweig-influenced screen I sometimes use that finds attractive undervalued growth companies. Last week, it found only two. The one that caught my attention was Comtech Telecommunications (CMTL).

First of all, I want to thank everyone who took the time to fill out the survey last weekend. We’ll try to write about many of the investment topics that you requested, so in that vein, today I’m pulling an article out of the archives that answers a question that was asked several times on the survey: How do you invest during a recession? Timothy Lutts wrote an excellent piece about this last January, yes a whole 13 months ago (long before anyone officially declared that we are in a recession), and I dug it out to share with you again here.

Doomsaying is a tricky business. In the late 1970s, when commodities were king, technical analyst Bob Prechter correctly predicted the implosion of the commodity bull market and a “‘super cycle’” bull market in equities. His eerily on-target prediction made him an investing superstar. Unfortunately, he then predicted the 1990s would be a severe bear market for stocks. I’ll admit, there is something tempting about subscribing to bleak predictions when times are tough. But there are four reasons I believe most of this dommsaying is wrong.

Late last year we published a Special Report titled, “Cabot’s 10 Favorite Low-Priced Stocks for 2009.” Well, it’s been more than eight weeks since most readers received their reports, and because I recently received an inquiry for follow-up from a subscriber, I thought I’d provide it to everybody. Overall, an average investor who bought all 10 stocks and followed the instructions we gave, might have earned an average profit of 13%, not bad at all for two months at the bottom of a bear market.

By now you may have heard of the “25 Random Things” phenomenon that has swept Facebook and been written about in The News York Times, CNN and the Wall Street Journal. The idea is not new; your friends write 25 things about themselves that they then send to you in hopes of learning 25 things about you. Some have used this as a forum to spill their guts, while others have sternly refused to participate. I’m not into confessionals, so I’ll use the concept to write 25 top investing rules, tips and books that I’ve compiled from the advice our editors have given over the years.

Why doesn’t economic news affect my market outlook? The reason for that can be explained in my favorite quote, which is carved on the mantel above the fireplace at Cabot: “Markets are never wrong; opinions are.” The infamous trader Jesse Livermore is responsible for this gem. Far too many investors fail to leave their egos and opinions at the door and this is the #1 reason most investors lose money, or at best produce lackluster returns.

I just finished a book, “The Fourth Tuning,” which was recommended to me by long-time subscriber. The book’s editors have written several books that all deal with the authors’ conception that progress in America is not linear but comes in predictable cycles, all because succeeding generations grow up influenced by--and reacting to--the behaviors and values of their parents’ and grandparents’ generations.