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Don’t be tempted to hang onto a stock for old times’ sake. Find new stocks to buy.

You should focus on the leaders--the stocks that held up well during the market’s five-week correction and have just bolted to new peaks on big volume. But this is also earnings season, so even if you haven’t jumped on board some recent breakout stocks, there should be plenty of opportunity to get on board after some earnings gaps. To review, powerful gaps higher (10%, 15% or more) right after earnings reports usually lead to higher prices. Most investors are afraid to buy a stock that’s just risen 20%, but if that gap comes after earnings, buying at that time is usually your best move.

Mike Cintolo shares tips based on how the market actually works...as opposed to how many investors think it works.

On a recent trip to the local shopping district near my house, I noticed that a staple of the neighborhood--the local movie rental store--had closed. I suspect the closing has a lot to do with the lack of people renting at locally owned video stores. Now I’m seeing a Netflix subscription in my future. It’s not that I’m against the online movie rental giant, but I liked the character of my local video store. Whatever my feelings about the company, it doesn’t change the fact that Netflix (NFLX) has transformed the movie rental business with its online platform. In fact, it was featured in Cabot Market Letter just a few weeks ago.

Carlton Lutts, Cabot’s founder, once said of reading books on investing: “All I’m looking for is one good idea.” Today, I’m going to share with you our editors’ favorite investing books so you can find one good idea of your own. Cabot is housed in an old library, so we’re reminded of great books every day. And while the shelves are mostly gone, the walls of our office are still lined with many hundreds of investing books. Enjoy!

With annual sales exceeding $44 billion, SUPERVALU, Inc. (SVU 14.89 NYSE – yield 4.70%) is one of the nation’s largest food wholesalers and retailers, servicing over 5,000 stores in 48 states. It owns and operates 2,400 retail supermarkets, including Acme Markets, Albertson’s, Bristol Farms, bigg’s, Cub Foods, Farm Fresh, Hombacher’s,...

Right now, the auto industry is presenting a lot of opportunities for appreciating assets in the stocks of companies developing the cutting edge technologies for electrics, hybrid, natural gas vehicles and many others. Most of the truly exceptional opportunities are in companies most people have never heard of, not Ford (F) and Toyota (TM). Two such companies are featured in the August issue of the newsletter I edit, Cabot Green Investor. They are major growth stories that have a lot to do with a bill 77 senators are co-sponsoring in Congress, Indian oversight of taxicabs, and China’s admiration for European air quality.

I was browsing through our Web site archives this week and ran across a Cabot Wealth Advisory written by Brendan Coffey in August of last year. In it, he discussed the concept of buying stocks based on what you know ... and what you like. I took this advice to heart after reading the June 1 issue of Cabot Top Ten Report, which featured on of my favorite stores: J. Crew (JCG). But there is the potential for investors to take this notion too far.

If you take time now and then to think about the long-term changes going on around you, you can put yourself in position to benefit from them financially, by making the right investments. The most successful investors are not only far-sighted; they are also courageous enough to buy and hold these stocks when they were flying high and more cautious investors warned, “That P/E ratio of 100 means the risk is way too high.” So today I’m going to mention 10 big trends I see developing, and suggest 10 investments that might benefit from these trends ... starting with global trends and narrowing focus from there.

Note from Cabot Wealth Advisory Editor Elyse Andrews: Occasionally, we bring you articles from outside sources that we feel you will be interested in and benefit from. Today, we have an article from Nathan Slaughter, Chief Investment Strategist of the Half-Priced Stocks newsletter at StreetAuthority, about why you should invest in the “Best-Managed Bank in America.” I hope you enjoy it!

What do you do with a McMansion that nobody wants? I’m serious. There are a bunch of 4,000 sq. ft. (and larger) houses out there that were quite appropriate for a time of growing families, big paychecks and two SUVs in the driveway. For all I know, there are lots of families who still love their super-sized abodes and wouldn’t trade them for anything. But I’ve seen a couple of stories about how much these castles cost to heat in the winter and cool in the summer, and to clean all year long. If people don’t want to pay to heat a place, and cool it, and make the payments on it, they move out and find a bungalow of manageable size. Then what happens to the big one?

It’s easy to understand what a leading economic indicator is and why it leads. If purchasing managers are increasing their buying, it’s because their businesses need new equipment to do business with. Increasing consumer confidence will lead to more consumer spending. Simple. Trailing indicators are a little more complicated, and the amount of attention being paid at the end of last week to layoffs, initial unemployment claims and the unemployment rate are a great illustration. As with corporate earnings, how the figure compares to estimates is more important than the absolute number.

An attractive beverage investment for investors who want fast growth is Green Mountain Coffee Roasters (GMCR), which we’ve mentioned here before. Michael Cintolo of Cabot Market Letter is a big fan of the stock; he added it to his Model Portfolio on May 5 at 50, and is now sitting on a 36% profit. Long-term, the key attraction to Green Mountain is its razor blade business model. The recurring income from the disposable K-cups, which make you a cup of coffee for less than 50 cents, represents a very predictable stream of income for the company. If you don’t own it, it’s not too late to buy.

One of my favorite stocks is in the technology industry, where we often find great growth stories in bull markets. Its name is Rackspace Hosting (RAX), and its business is simple; it delivers enterprise-level hosting services to businesses of all sizes all around the world. The company first came to my attention when our IT director selected it as the site for our Cabot server about two years ago, a choice that has proven wise. Rackspace differentiates itself from the competition--in an industry that risks commoditization--by promising “Fanatical Support” to its customers ... and delivering.

My featured stock today is a health care company that has created its own unique niche. I have studied the company’s sales and earnings trends. I have read about management’s strategies, goals, and plans for the future. I am confident that I could put all my money into this stock, because the outcome is obvious: the stock will be a winner! In fact, I like it so much that it was featured in the May edition of Cabot Benjamin Graham Value Letter, of which I am the editor.

Forget the Dora the Explorer, Hannah Montana and the Jonas Brothers, kids will soon have a new idol to emulate in the form of a new cartoon series starring ... Warren Buffett. No, your eyes aren’t playing tricks on you. The famed billionaire investor is the star of a new online cartoon series aimed at teaching children about financial responsibility. (After the credit crisis, housing market debacle and stock market meltdown last year, it seems like more than just kids would benefit from this series.)

China is a country that, as we all know, is changing fast ... but is still misunderstood. While writing the title of this column, I was tempted to use the word xenophobia, meaning fear or contempt of strangers or foreign peoples. But the word I want (which appears not to exist) means, “underestimating the power of the people of a foreign country.” Because when it comes to China, I fear that’s exactly the mistake most Americans are making today. To the vast majority of Americans, China is, first and foremost, a Communist country. Americans “know” Communism is the wrong way to go. However, for the past quarter-century, the Chinese economy has grown at an average annual rate of 10%.

I noticed the following headline last week: “Virgin Atlantic boss warns no airlines will make money this year.” Reading deeper, the writer informs us, “Steve Ridgway said reduced passenger numbers, ‘massive’ pressure to cut prices and high fuel costs will prevent any of the world’s major airlines, including Virgin Atlantic and British Airways, making a profit in the current financial year.” Hmm, now it’s only “major airlines” that won’t make money. Reading further still, we get to Mr. Ridgway’s actual words: “These are some of the toughest times any of us [airline executives] can remember. I would be very surprised if anybody made any money.” That’s different still. So where’s the truth? I took a look at the consensus of Wall Street analysts’ estimates of ALL publicly traded airline companies, and here’s what I found.

Imagine a place where no one owns a car and everyone walks, rides their bikes or takes public transportation to work, to the store, to school or anywhere else they need to go. No, this isn’t some Star Trek-like fantasy world, it’s Vauban, Germany, a planned community where cars are largely banned in favor of other modes of transportation. A New York Times article this week detailed the particulars of this forward-thinking community; where a tram runs through the center of town, shops and houses are mixed together so no one has to travel far to do the shopping and people embrace biking and walking as primary means of travel.

Oil and gasoline prices, as you likely have noticed, have been easing lately, even as we’re in the midst of what energy industry hands call “the summer driving season.” I bring up gas prices because as editor of the Cabot Green Investor, I have noticed that there is a fairly popular--and false--idea about the correlation between gas prices and Green stocks. The idea is that as the prices of oil products drop, there must be a decrease in interest in hybrid cars, solar panels and the like. I contend it’s false for one simple reason: the daily fluctuations of a commodity aren’t going to affect whether someone chooses to go ahead with a capital intensive purchase of a geothermal heating system or an electric car. Yet some people trade Green stocks each day against the price of oil, surrendering longer-term gains.