Please ensure Javascript is enabled for purposes of website accessibility

My Best Investing Advice for an Uncertain Market

My best investing advice for this frustratingly uncertain market might not be quite what you expect - but it could help recharge your portfolio.

bdc-investement

Getting frustrated by all the back-and-forth in the market and need some guidance on what to do? Not to worry. I’ve got the best investing advice for times like this. It might not be quite what you’d expect. Let me explain…

See You at the Lake

We’re coming up on Columbus Day weekend, which for a lot of people means a long weekend, maybe some apple picking and maybe one last big meal on the grill. For me, though, it means some real R&R, getting away to one of New England’s great locations—Lake Winnipesaukee in New Hampshire—and spending quality time with a bunch of my high school buddies that I still keep in touch with but rarely get to see.

[text_ad use_post='129627']

We’ve been going up there nearly every year for more than two decades, though back in the day it was more wild than today—after all, many of us lived with or nearby one another and all of us were single. Today, of course, most are married and many live outside New England; getting together nowadays represents a few days of catching up with friends I’ve known since grade school (with a few signature cocktails mixed in, of course).

Anyway, my point here isn’t to share cocktail recipes (curacao coolers remain my most popular offering—email for the recipe) or detail my late-night poker strategy (some of my pals read these missives, after all!), but simply to point out the following: If you spend a lot of time focusing on the stock market, you know it can lead to some burnout, especially when things get choppy (as they have for growth stocks during the past four weeks). And when that’s the case, it’s important to recharge your mental batteries.

My Best Investing Advice: Take a Break

During the past few weeks, in fact, I’m getting all sorts of emails from subscribers who appear to be overanalyzing every wiggle in the market and most stocks, as well as reacting to every headline (NAFTA! China! Interest rates!) the media has run with. Don’t get me wrong—I’m not saying now’s a good time to ignore the market. I’m still bullish! And I have plans in place for no matter which way the market goes. But getting too close to the situation when not that much is happening usually works against your portfolio.

Thus, if you’re feeling a bit burnt out, or have been firing off a ton of trades that haven’t led to any profits, my best investing advice is to take a step back. Hit the golf course, host a party or take the spouse away for the weekend. Oftentimes detaching a bit, even for a trading day or two, can give you a fresh perspective and boost your trading prowess. That’s what I’ll be doing this weekend—along with hopefully winning a few bucks at poker!

An Energy Stock for Sector Rotation

Before I head out, though, let’s talk about the market, shall we? I continue to think the odds are strongly in favor of this bull market going on for a while longer because I’m seeing little evidence of any meaningful topping action, and because numerous studies tell me higher prices are likely.

Here’s one I saw this weekend: with September in the books, the S&P 500 has now rallied six months in a row. Going back to 1950, when the S&P has had such a run it’s usually continued—six months later, it’s up an average of 7.2% and is up 80% of the time, while a year later it’s up an average of 10.3% (85% of occurrences were up after a year).

Then there’s an even simpler study: what happens after the S&P 500 reaches an all-time high in September? Since 1950, that’s happened 19 other times—on average, the fourth quarter saw the index rise 4.6% with all but one producing gains.

Those are just two studies, of course, but combined with many other factors (positive longer-term trend, a dearth of money flowing into equity funds, which is a plus from a contrary point of view) and outlooks (the major indexes continue to look a lot like the 1984-1987 period, portending higher prices for at least another few months), it bodes well for the longer term.

Near-term, though, I am seeing signs of weakness. Yes, the Dow Industrials has recently hit new highs and the S&P 500 is doing alright, but the Nasdaq has, for the first time since May, pulled back and failed to return to new highs within a couple of weeks. Meanwhile, small-cap and mid-cap indexes are even worse (below their 50-day lines) and most growth stocks, after a month of iffy action, are now suffering declines on big volume.

In response I’ve pared back—in Cabot Growth Investor’s Model Portfolio, the funky September action among growth stocks had me holding 16% in cash on the sideline, and that cash figure has nearly doubled through some sales this week.

“But Mike,” you might ask, “if the market is rotating toward other areas, shouldn’t we be seeing some new opportunities?” Yes, I believe so, and one area that I think has big potential is energy, which has mostly sat out the dance during the past two years.

There are many energy stock names to chew on, but WPX Energy (WPX) is one name I’ve been following off and on all year and it appeared in the most recent issue of Cabot Top Ten Trader. The company has transformed itself during the past few years, selling off a variety of assets to focus on the Delaware Basin (more than 6,600 drilling locations on its 131,000 acres!) and the Williston Basin (85,000 acres). The acreage is very lucrative and WPX is drilling like mad—in the second quarter, Delaware output rose 83% from a year ago (oil volumes up 94%), while Williston output was up 45% from a year ago (oil up 39%), causing management to hike forecasts for the rest of the year.

My best investing advice? Buy WPX Energy (WPX)!

Importantly, the company has locked in lucrative sales agreements through next year, so it’s not suffering from lower prices in the Permian, where there’s currently an oil glut. And with no meaningful debt maturities for four years, WPX is free to spend heavily to tap as many wells as it can.

As for the stock, it’s moved straight sideways for the past few months, and just last week, moved out to new price highs. Whether you buy a little here or just keep it on your watch list, I think WPX is a name to consider.
For additional growth stocks which you can add to your portfolio, consider trying Cabot Top Ten Trader, which features market leaders you can latch on for big profits.

For more details, click here.

[author_ad]

A growth stock and market timing expert, Michael Cintolo is Chief Investment Strategist of Cabot Wealth Network and Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top handful of market-timing newsletters numerous times.