January 7, 2009 Interview with newsletteradvisors.com
What advice are you giving subscribers/clients to weather the storm?
Gauging both sentiment and trading patterns, it does look like the worst is behind us in the overall market. A full-fledged bull market still isn’t a given any time soon, but with markets calmer, there are now opportunities for good buys on solid companies that offer excellent growth potential.
One positive we’re focusing on is that the new U.S. administration promises to bring both stimulus spending and targeted tax cuts which we believe is the correct approach. We also continue to be encouraged by burgeoning interest in alternative energy and environmentally friendly products, which will drive a wave of growth companies whether or not the broader market takes off.
Is your focus on safety or profits or both, and why?
Both, although profits is the primary objective. We advise readers to treat our portfolio as only a portion of their overall portfolio, and for that reason we look to take on more risk than if we were presenting a total portfolio to readers. However, we are quick to move to cash when our indicators tell us to, which is why we avoided much of the damage of late 2008.
The market dictates the type of stock we focus on. In this environment, we’re focusing on companies with positive earnings, low net debt and unique product offerings and positioning that give them a competitive advantage in their markets.
What do you think it will take to inject confidence into the markets?
A feeling that the regulators and government understand the situation and have it in hand and that steps are being taken to keep derivative instruments from being such an integral part of hedge funds and investment banking as they were for the past five years.
Would you have voted for or against the last “rescue” bill, and why?
If you mean the auto bailout, yes, for two reasons. The auto industry is still one that, if run well, can be profitable and a growth sector in the U.S. economy. The other is simply that with so many jobs dependent on the sector, punishing workers for managerial incompetence does no one good at this stage since having wholesale business failures has the potential to cost taxpayers more anyway.
What would be your fix for the financial sector, and is a fix in this sector necessary to boost the markets?
Greater oversight and regulation of derivatives trading and greater oversight of hedge funds, something managers such as George Soros, John Paulson and James Simons endorsed before Congress late last year. Greater oversight can restore confidence in major banks in each other which in turn makes them more willing to provide credit, ultimately making it easier for capital intensive industries, such as solar, wind and biofuels, to make the long-term investments needed.
What three stocks would you buy today?
My current top stocks are AeroVironment, Tetra Tech and Itron.
AeroVironment, is a cutting edge company that translates its unique alternative energy experiments into high-profit commercial ventures.
Itron, operates in the stodgy world of utilities, where it is finding a huge growth market in the next generation of metering.
Tetra Tech is an environmental consulting company that does everything from figuring out how to clean up the Port of Los Angeles to where best to site wind turbines in upstate New York. Essentially, Tetra Tech is the environmental expert people turn to the figure out the nitty gritty of getting eco-projects done.
How does your advisory service help its subscribers/clients get through times like these?
All the editors at Cabot give readers the ability to ask questions via email, which we both welcome and respond to in a timely fashion. We also provide free weekly updates on the stocks we discuss on our monthly issues and special alerts when needed.
If you had an average investor standing in front of you, what would you say to him/her to ease concerns and raise confidence in the economy and markets?
With the market, remember that it is forward looking, so while the present economy is difficult, the markets are looking ahead to where growth will be coming from. As it becomes more apparent October’s crash was the bottom, sentiment will continue to improve.
Regarding the economy, the U.S. has proven time and again it is the most resilient and dynamic economy and therefore the best suited to emerge from the storm the fastest.
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