One of my favorite books on investing is Catching Lightning in a Bottle, Winthrop Smith’s fascinating account of the rise and fall of Merrill Lynch.
At the heart of the book is the story of Charlie Merrill, a visionary who helped improve the public’s perception of Wall Street. His efforts to make small investors feel that Merrill Lynch put their interests first helped pave the way from Main Street to Wall Street.
Whenever I revisit the book, I’m reminded of the mission we have here at Cabot – helping individual investors take control of their financial future and grow their wealth.
That mission started in 1970 when Tim Lutts’ father began sharing his market insights with Cabot subscribers. Over 50 years later, that legacy continues under the leadership of Ed Coburn.
Midway through Catching Lightning in a Bottle, Smith discusses Merrill’s advertising campaigns from the late 1960s through the early 1980s. Charlie Merrill felt that good advertising and public relations were essential to help Merrill Lynch grow.
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One particularly interesting story involves Don Regan, Merrill’s Chairman and CEO from 1971 to 1980 – who later served as U.S. Secretary of the Treasury Chief of Staff under President Ronald Reagan – and his work to revamp the firm’s advertising focus around “trends.”
Under Regan’s guidance, the firm launched a series of print ads, each focused on a key investment trend designed to let the public know what Merrill Lynch thought they should invest in, and why.
One memorable ad promoted certain retail stocks as the place to be by featuring a young woman after a successful shopping spree. Her arms full of packages and shopping bags, the ad’s caption reads: “Your Wife’s Making Merrill Lynch Bullish on Certain Retail Stocks.”
And at the bottom: “Merrill Lynch: We Look for the Trends.”
While I don’t think the ad would fly today, I like it because it shows that big-picture thinking is a timeless approach to investing. Trends come and go, but investors’ desire to be in the right ones, and avoid the wrong ones, is constant.
So what does this have to do with the type of work we do here at Cabot, and specifically, how I research small-cap stocks?
A lot, actually.
There’s no doubt in my mind that focusing on big-picture trends remains one of the key ingredients in successful growth investing.
Not so much when it comes to analyzing a specific stock’s fundamentals. But absolutely when it comes to formulating an opinion on whether a small company has the potential to grow into a mid-cap, and maybe even the next Salesforce (CRM), Spotify (SPOT) or Robinhood (HOOD).
That’s why every stock write-up in Cabot Small-Cap Confidential includes a section dedicated to big-picture thinking.
It’s called “The Big Idea.”
The Big Idea is a way of stepping back to explain the larger trend in play, a top-down perspective that paints a clear picture of the potential opportunity.
Of course, I also include bottom-up analysis, looking at the company’s financials, growth catalysts and other company-specific metrics.
But The Big Idea gives you the story behind the stock and the broader forces that could propel shares higher.
As Merrill Lynch’s 1970s campaigns showed, trend-based investing is nothing new. And as we’re showing here at Cabot today, it remains an excellent tool for communicating the potential of specific opportunities to our subscribers.
Click here now to grab a subscription to Cabot Small-Cap Confidential and gain access to all of my stock reports, including the Big Idea behind every recommendation.
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*This post has been updated from a previously published version.
