A Great Vacation Stock

It’s Not My Fault

Four Reasons I’m Bullish

A Great Vacation Stock

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What Happens When I Go On Vacation

There’s a misconception here in the Cabot offices (held by some people) that whenever I go on vacation, the market falls apart.

I’ve tried explaining that while there may sometimes be correlation (thanks to normal probability), there is certainly no causality. But the misconception lingers, at least in jest.

So let me say clearly that it’s not my fault that the market fell apart last Monday.

Admittedly, I was rather close to the “action.” While Greeks were draining their bank accounts, I was draining wine bottles—and enjoying the churches, beaches, pastas and people of Puglia, the province of Italy that’s located just across the Adriatic in the “heel” of Italy.

At the same time, I was getting a refresher course in a culture (like Greece’s) where tax evasion is a way of life, and laws—most obviously, traffic laws—are treated as mere suggestions.

So it doesn’t surprise me a bit that the long-anticipated default by Greece has actually come to pass, and that the Greek people are willing—in many cases proudly—to turn their back on the Eurozone and go it alone.

So what comes next?

One camp says that this is the first domino of many to fall, and that just as U.S. sub-prime mortgages were the pebble that started the avalanche that took down the world economy in 2008-2009, Greece is only the first step toward the dissolution of the entire Eurozone.

Another camp says that Greece is so small—with an economy the size of Dallas or Los Angeles—that it hardly matters. The rest of the world will do fine with Greece on the “outside” again.

And a third camp says that even if you know exactly what’s going to happen in Greece, the Eurozone, and the world as a whole, you still won’t know what the market is going to do, simply because the equation that governs the market is so very complex.

If you’re going to put me in any camp, put me in the third.

Reasons to Be Bullish

But overall, you can color me bullish, for these four reasons:

Over the past 130 years, there have been 13 years ending in the numeral 5, and the Dow gained in 12 of those years, for an average return of more than 28%. (2005 saw a loss of 0.61%, but the S&P 500 was up 3%.) If the pattern holds, the market will be higher at year-end.

Many investors “know” that rising interest rates are bad for the market, but very few know about the “Three Jumps and a Tumble” rule, which states that in general, it’s the third step toward tighter monetary policy (whether by Discount Rate, Margin Requirement or Reserve Requirement) that most commonly precedes a market tumble—and we haven’t had even one yet.

It’s well known that bull markets climb a wall of worry, and I think worries about Greece and rising rates (not to mention China’s stock market plunge and Puerto Rico’s debt issues) are high enough to keep pushing this market higher.

Lastly, the long-term trend of the market is always up.

Bottom line, there are still plenty of opportunities to make money, provided you’re in the right stocks.

A Vacation Stock for the Summer

So what stocks do I like today?

Well, having just returned from vacation, I’m thinking of the millions of baby-boomers who are spending more and more money on leisure travel, particularly on cruises, an industry that is dominated by a few big players.

Here’s what Mike Cintolo wrote about one of them in last week’s issue of Cabot Top Ten Trader.

Carnival Corporation (CCL)

“Carnival is one of the big dogs of the cruise industry, with more than 100 cruise ships operating under various brands like Carnival, Princess, Costa, Holland America and more. Frankly, the company hasn’t been as good a performer as some of its peers, as revenues and earnings have been relatively flat for the past five years, but better operational performance, lower fuel prices (down a whopping 37% in the latest quarter), some new ships hitting the water and a big expansion in China should help earnings surge in the quarters ahead. Analysts see the bottom line rising about 30% both this year and next. Carnival is the largest cruise operator in China, which isn’t just boosting revenues there but also creating relative scarcity in other markets as it sucks up cruise liners (hence boosting ticket prices). The company’s recent quarterly report was a good one, with earnings miles ahead of expectations, and the top brass said that rest-of-year bookings were well ahead of the pace from a year ago.”

Mike neglected to mention—mainly because Cabot Top Ten Trader is geared to traders—that CCL pays a 2.0% annual dividend. But I think it’s important, particularly if this trade turns into a long-term investment. With only a few big players in the industry, Carnival’s long-term prospects are pretty solid.

What Mike did do (as he does for all his recommendations) is provide a thorough technical analysis of the stock.

Here’s what the daily chart looks like:

And, most important of all, he provided his readers with precise guidance about exactly where to buy the stock, as well as where to sell if the trade doesn’t work out.

If you’d like to know exactly what that guidance was you can order an issue of Cabot Top Ten Trader here!

Yours in pursuit of wisdom and wealth,

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