Daily Posts Archive
We admire people with the courage of their convictions, those who know their own minds and don’t waver. It’s a good thing to be called tenacious, persistent, tough, steady or steadfast. A good thing, that is, if you’re not a growth stock investor. The rules say that growth investors should stick with a winning stock for as long as it rises. The problem comes when a stock starts to lose value but the investor has faith in the stock and demonstrates that conviction by holding it all the way to financial disaster.
After all investors have bought, the sellers eventually take control. After you’re #1, there’s only one way to go. That’s one reason the dollar, which you might view as a proxy for the value of the U.S., is down. It was previously perceived to be the most powerful currency on earth; in recent years its reputation has been in decline. But I’m firmly convinced the long-term trend of the U.S. economy--and thus the U.S. stock market--is still up, and that the market will reflect that by climbing out to new highs eventually. And the time to invest is when public perception is lowest! It seems to me we’re pretty much there.
Something I’m always concerned about it how we’re communicating with our readers. One way that I stay informed is by reading blogs. While I was brainstorming about how we can better communicate with you and vice versa, I began to think that a blog might be the way for us to reach out to our readers, while at the same time hearing what you have to say. So after hammering out the details, I am pleased to announce the creation of The Iconoclast Investor (iconoclast-investor.com), a place for the Cabot editors to share their thoughts and you to share yours.
As for the market, my view is a bit split. I do believe that last week the market likely formed a major low. All the pieces were in place for one, and the big-volume rally, combined with the widespread fear and panic, tell me that some type of low was put in place. However, that doesn’t mean we’re now in a bull market. It’s likely that a few weeks or more of bottom-building will be needed. Giving evidence to that view is the nature of the nascent rally--so far, the only stocks making solid upside were the most beaten-down groups of the past few months.
For today’s stock, my recommendation is a mid-sized ($1 billion in revenues) steelmaker named General Steel Holdings (GSI). I look at the chart and I see a stock that came public in October 2007, peaked at 19 two days later, coinciding with the broad market’s top, and then declined to build a broad bowl formation that bottomed at 6. When Paul Goodwin wrote about the stock a month ago it was selling at 13 and trending up. Today it’s 15. I think it will hit its old high of 19 in time, and eventually break out to new highs.
The moment of maximum hopelessness marks the start of the next bull market.
When making decisions in the stock market, procrastination can be your enemy. One delayed decision will only lead to another delay, and before you know it, a mini-disaster is at hand. I know, because I’ve been there. Most often, my initial thoughts about whether to buy or sell a particular stock turn out best. That is, of course, after the proper amount of research has been completed.
Cabot Benjamin Graham Value Letter, launched in 2003, uses the teachings of Benjamin Graham, the father of value investing, in a system that safely builds long-lasting wealth. Unlike Cabot’s growth publications, the letter doesn’t use market timing, instead relying on a 76-year-old system, followed by investors such as billionaire Warren Buffett, to pick undervalued stocks and hold them as they reach a specified valuation.
Lots of analysts work hard at trying to figure out what equity markets are going to do. These people pour over interest rates, unemployment figures, inflation (both producer and consumer), GDP growth and a trillion other statistics to try to predict how the U.S. and global economies will perform in the short, medium and long terms. It’s a fun exercise. The trouble is that, to quote George Bernard Shaw, “If all the economists in the world were laid end to end, they still wouldn’t reach a conclusion.”
I’m a big believer in heroes. They remind us that something can be built from nothing, that victory can be snatched from the jaws of defeat, that we should aim high, and that we should never give up. One of my heroes, John Marks Templeton, passed away last week. John was a pure value investor, with a very long-term perspective and an appreciation of global markets.