Stock Market Video
Good Luck … Really!
The Greatest Glory is to Rise Every Time You Fail
In Case You Missed It
In this week’s Stock Market Video, Mike Cintolo gave some insight on how market’s defensive sectors are beginning to outperform, which is often a yellow light. However, he says it’s too soon to conclude anything, especially as the major indexes, as well as most stocks and sectors, are still in firm uptrends … and he’s starting to see a growing number of lower-risk set-ups as the market has tightened up. Stocks mentioned include: Cree (CREE), LinkedIn (LNKD), Cabot Oil & Gas (COG), Range Resources (RRC), CBRE Group (CBG), ServiceNow (NOW) and many others. Click below to watch the video!
The Luck Factor in Growth Investing
In his Tuesday Cabot Wealth Advisory, Mike Cintolo wrote a nice piece addressing the most common questions that he fields as the editor of Cabot Market Letter. I think his answers are thoughtful and practical, but that’s not really the most important message. What’s even better is that he highlights one of the most important differences between Cabot and just about every other investment advisory service I know. We answer questions.
We answer questions from our subscribers in emails and on the phone. We talk to people who are thinking about subscribing to help them figure out which publication is right for them. We have people who call once and people who call every week.
Answering questions is a good thing because (as Mike points out) it lets us know how people are feeling about the market and how they’re doing with their investments. It’s also helpful because it forces us to take responsibility for our stock selections.
Sometimes giving answers isn’t comfortable, but I think it’s always useful. We’re clear about our recommendations and we try to be as frank about our losers as we are proud of our winners. And we don’t try to sugar-coat it when either the market, or one of our stocks, goes south. Communication and responsibility … what a concept.
But in our efforts to be responsive, I think we sometimes don’t give enough credit to one factor that has an enormous influence on growth stock investing results, especially in the short-term.
You actually hear about luck all the time when you talk with other stock investors. Someone will complain that they sold a stock just before the company reported earnings and it popped up 38% the very next day. And someone else will continue the “poor, poor pitiful me” theme with a story about buying Apple at 700 (now trading at around 440).
Many people will take this kind of thing personally, as evidence that the universe (or the market) really has it in for them personally.
And conversely, you’ve probably heard people bragging about how they bought into the market in March 2009 or grabbed a piece of Nam Tai Electronics below 5 last June and sold it at 10 just three months later. Genius!
But the cold, hard fact is that anyone who plays in the market is going to get rained on eventually. No stock goes up forever. No market can act like a rocket or a lead weight for very long.
When I answer questions from subscribers to Cabot China & Emerging Markets Report, conversations frequently start with the phrase, “What happened to … ?” Sometimes it’s a stock that has taken a dive. Occasionally (my preference), it’s a stock that’s acting like a homesick angel, soaring into the sky.
But in almost every case, both the breakdowns and the blastoffs, there is an element of luck.
I work hard to get the odds in my subscribers’ favor. I pick companies with good stories and sound numbers. I check charts for good buy points and pay attention to whether the market is supportive or threatening.
And in the long run, it works. Right now, it’s working with a company called VIPshop Holdings (VIPS), a Chinese online retailer that does flash sales of luxury fashion goods at discounted prices.
And if I’m lucky, I will be able to advise my subscribers to sell out somewhere near the top of VIPS’s run.
But if I really get out of the stock at the top, there will surely be an element of luck—not only skill—that does the trick. It’s not that I’m not that good; it’s that nobody is.
The only people who consistently get in at the bottom and out at the top are the liars. Just listen to them. They’ll be happy to tell you.
The moral of this tale is that the only way to approach the market as a growth investor is with both enthusiasm and caution. Follow the rules. Put the odds in your favor. Do your homework. And it’s amazing how your luck will change.
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Here’s this week’s Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
The Greatest Glory is to Rise Every Time You Fail
Tim’s Comment: It’s been said by Clay Aiken, Nelson Mandela, Vince Lombardi and Ralph Waldo Emerson, to name a few … and perhaps even by Confucius. The full quote is usually “Our greatest glory is not in never falling, but in rising every time we fall.” In investing, what’s important is that you minimize the pain from your failures, and you learn from them so that your failures grow less frequent and less costly.
Paul’s Comment: One of my favorite sayings from my days of following motorcycle racing is, “If you never fall down, you’re not going fast enough.” You don’t have to fall … unless you really want to succeed. If you’re really bent on success, you should be prepared to hit the pavement occasionally. Then get up and get going again.
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
In this issue, Tim Lutts of Cabot Stock of the Month looks at the historical background of the Cyprus crisis. He also checks into how you might find a place to stay on the island if you visited. And this leads him to the Stock Discussed: HomeAway (AWAY).
Mike Cintolo of Cabot Market Letter describes the Cabot approach to questions we get from subscribers and prospective subscribers: we actually answer them! Mike also talks selling rules and how to deal with extended stocks. Stock Discussed: Aruba Network (ARUN).
Value wizard Roy Ward, editor of Cabot Benjamin Graham Value Letter, writes about how to get your attitude right to buy undervalued stocks and sell them when they reach full valuation. Stocks Discussed: Corning (GLW) and Qualcomm (QCOM).
Have a great weekend,
Editor of Cabot China & Emerging Markets Report
and Cabot Wealth Advisory