Wise Sayings Winner Announced
You Can’t Afford to Make All the Mistakes Yourself
Rising Chinese e-Commerce Stock
A few weeks ago, in my capacity as Editor of Cabot Wealth Advisory, I issued a challenge to all subscribers. One of the features of the Weekend Cabot Wealth Advisory is a little section called Fortune Cookies. Each week, I select a quotation from a famous investor, philosopher or writer and Tim Lutts and I each write short commentary about it. It’s fun to do and the advice in the selected quote can be useful if you’re in the market for big wisdom in small bites.
The challenge was for readers to send in their own favorite proverbs, maxims or words to live by. Our Cabot analysts and editors would look at the contributions and pick a favorite. And the winning contributor, in addition to having his or her maxim published in Weekend CWA, would receive a free, one-year subscription to Cabot Stock of the Month!
I received almost 50 suggestions, including some I’d never heard before.
The entries came from all kinds of sources, including the Roman orator and statesman Cicero and the Roman philosopher Seneca. Some were literary (F. Scott Fitzgerald and George Bernard Shaw); one came from an inventor (Edison) and a few were from motivational writers (Earl Nightingale and Zig Ziglar). Some were on the unprintable side (which I always appreciate!) and a couple were accompanied by touching stories.
I was tickled to see that quite a few pieces of advice came from relatives, including fathers, girlfriends’ fathers, grandfathers and grandmothers.
The winner came from John Bleckiner, of Marquette, Michigan, and I’ll present it in exactly the same format as a regular Fortune Cookie section from a Weekend Cabot Wealth Advisory.
Mr. Bleckiner will get a free year’s subscription to Cabot Stock of the Month in thanks for his contribution.
Tim’s Comment: One of the paradoxes of the investment business is this: People who are interested in doing their own investing tend to be self-confident—yet this very attribute makes them less likely to seek (or heed) the wisdom of experienced minds. Cabot readers, of course, are the exception.
Paul’s Comment: I’ve heard an alternate version of this that says, “Any idiot can learn from his own mistakes; it takes a wise man to learn from the mistakes of others.” The use of “can’t afford” makes this a particularly relevant bit of advice for stock investors.
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My stock pick for this issue is a stock that has been in the portfolio of Cabot China & Emerging Markets Report since January 31. The company is Vipshop Holdings (VIPS) and I recommended it when it was trading at 103.
The company is an e-commerce site in China that makes the bulk of its money from flash sales of name-brand fashion and lifestyle merchandise.
With VIPS now trading at 206 after pulling back from a high of 217 in late July, many investors might think the stock was either a) cooked because of its 5% correction or b) too extended after a more than 100% run.
Here’s where the part about learning from the mistakes of others comes in. VIPS has actually gone up a heck of a lot more than 100%. If I had been given a message from the future back in August 2012, I could have recommended the stock when it was trading at 5. The resulting 4,120% gain would have blown away the actual paltry 100% jump as if it were nothing! That’s the kind of gains you can always expect with the benefit of hindsight. This weekly chart shows the stocks gains since early 2012.
The real point, however, is this: believing that an already large gain indicates a lowered probability of future gains is just dumb. You could have avoided buying VIPS a hundred times along the way because it had already doubled so many times. It’s one of those “mistakes of others” that you don’t need to make because other people have already made it for you. And the hard-won wisdom is that stocks (and market trends) can go on much longer than you think they can.
As to the notion that VIPS shouldn’t be bought because of its correction, I would refer you to the second chart that shows the long, slow shakeout the stock went through from March through early May. I let my subscribers hang on to VIPS through that correction because we had a nice profit cushion and I knew that growth stocks love to try investors’ patience and then take off again when the weak hands have been worn out.
I can’t say that VIPS is going to double again or make any prediction at all about what it will do. But Vipshop Holdings is a company that has enjoyed three years of triple-digit revenue growth and has seven quarters of rising EPS growth under its belt.
I still have VIPS rated buy for my subscribers, and I’d make the same recommendation for you.
For further updates on VIPS and to view additional strong emerging markets stocks with high potential, consider taking a risk-free trial subscription to Cabot China & Emerging Markets Report.
Sincerely,
Paul Goodwin
Chief Analyst of Cabot China & Emerging Markets Report
And Cabot Wealth Advisory
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