Stock Market Video
One Good Story and One Hot Stock to Be Thankful For
Fortune Cookie
In Case You Missed It
Good stories can be retold again and again, and the story of the Pilgrims is one of the best.
Recent retellings have departed from the traditional “religious persecution” side of the story and have offered insight on the economics of the Pilgrim colony.
My favorite new wrinkle on the old story comes from a new book called Making Haste from Babylon: The Mayflower Pilgrims and Their World. The author is Nick Bunker, a British financial journalist, which may account for the different perspective offered by the book. (I’m told that he’s a descendant of the Bunker family for whom Bunker Hill is named, so his roots are in the right place.)
Bunker’s story begins in 1628, after the Pilgrims have been in their little colony for eight years, and they have become adept at food production and have their housing and other New England survival skills honed to the point of self-sufficiency.
The big problem for the Pilgrims is that they owe a ton of money to the British investors (The Merchant Adventurers) who financed the colony. If the Pilgrims can’t come up with a way to raise cash and pay off their debt, they will lose their land and their chance to raise that City On a Hill that they came over on the Mayflower to build.
The Pilgrims have tried to trade in salt cod, but England has its own fish stocks, thank you. Ditto shellfish and ditto lumber.
There is one North American commodity that has a ready market in Britain, and that’s beaver pelts. Unfortunately, the Indian tribes in Massachusetts (with whom, contrary to popular history, the Pilgrims were living and trading quite amicably) already had trading contracts with the Dutch for the local beaver population.
Then the Pilgrims got wind of the plight of the Abenaki, a tribe that lived on the Kennebec River in what is now Maine. The Abenaki had just suffered through an epidemic, and lived right at the northern edge of the climate zone where corn could be grown. The Pilgrims, fortunately, had become quite successful corn growers.
Market forces being what they are, the deal was struck. The Abenaki, who were skilled at beaver trapping and lived in an area with a population of up to 50 beaver per square mile, were happy to get a market for their pelts, in return for which they got plenty of corn. And the Pilgrims, who were pretty good traders themselves, got a product in such demand in England that they could pay off their debt to the Adventurers within a few years.
As Nick Bunker tells it, it was this proof of the viability of the economy of New England that kicked off the wave of migration to the Colonies, and ensured that the story of the First Thanksgiving would have a happy ending.
Other historians tell us that the mythology of the Pilgrims as the founding stock of America-hardy, morally upright, self-reliant folk-wouldn’t really take hold until the Civil War, when the divided country was in sore need of a story of faith and perseverance among our ancestors. Thanksgiving was created a national holiday in 1863, while the War was raging.
I think it’s easy to be cynical about Thanksgiving. With millions of Americans already fighting bulging waistlines, a national day of overeating seems odd. The fourth Thursday in November is (in my humble opinion) way too late in the year for a harvest festival and puts it squarely on the beach in front of the tidal wave of Christmas. And it’s hard not to be uncomfortable with the part of the story where the Indians help the Pilgrims out, given how things turned out.
But in many ways, Thanksgiving is a defining American celebration, our one national holiday that isn’t just a local version of a global festival. It’s got strong enough roots to survive all the overeating jokes, the I-hate-my-family jokes, the speed-bump-on-the-way-to-Christmas jokes. It will stand up to a lot of teasing because it’s part of who we are.
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In this week’s Stock Market Video, I take a look at the general health of the market (which is good) and run down the leading industry groups that are producing top stocks. (It’s surprising how small the leadership cohort in each group actually is!) I give a couple of examples of leading stocks in each group. Click below to watch the video.
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I don’t usually give stock tips in Weekend Cabot Wealth Advisories, but I see a stock out there that ties in closely with the focus on food that Thanksgiving brings.
The company is Whole Foods Markets (WFM), the dominant player in the specialty grocery business. Whole Foods is easy to lampoon for its high prices (Whole Paycheck Markets) and for its patrons’ sometimes excessive obsession with organic, fresh, local, sustainable, no-cruelty, no chemicals, no GMEs food and drink.
But the company’s five straight years of double-digit percentage revenue growth, with earnings growth to more than match, are no joke. And the company’s continuing build-out of new stores in Canada is keeping revenue growth on track. The most obvious feature of the chart for WFM is its more than 20% dive last May, when the company’s quarterly earnings report showed the effects of increased competition, price pressure and inclement weather. After that May plunge from 48 to 37, WFM traded sideways, finding support at 36/37 and resistance at 40 (despite a short-lived June rally).
But six months to the day after its free-fall, WFM blasted off on more than six times average volume, hitting 45 in one day and following through on its breakout to 48, which was its price before the May washout.
I think Whole Foods is a great operation, offering high quality produce, beer and wine, cosmetics, baked goods, clothing and restaurant services to consumers who care deeply about what they consume.
WFM looks like a good buy right here, as it has a long way to go to reach the high of 65 that it hit in October 2013. A small dividend (forward annual yield of 1.1%) ties up a nice package.
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Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.
Tim’s Comment: It’s not exactly an excuse to pig out on Thanksgiving, but it is certainly a reminder that we should enjoy the simpler things in life while we can. And how can it be applied to investing? Perhaps by remembering that we should seize opportunity when it arises, rather than deferring until some vague future.
Paul’s Comment: Mostly, this quote makes me wish we had Nora Ephron back, but that’s unlikely. I know what she’s talking about, though. I always pay special attention to the last bite of my Thanksgiving meal, saving just the right combination of turkey, dressing and cranberry sauce for that last mouthful. So my investing take is to enjoy the strong market we have now, because bull phases don’t last forever. (Fortunately, neither do bear phases, but it’s harder to enjoy those.)
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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.
Cabot Wealth Advisory 11/24/14 - America’s Biggest Problems
In this issue, Tim Lutts, Chief Analyst of Cabot Stock of the Month, looks at a Gallup poll of the problems Americans see as most pressing and adds a couple of problems of his own, including unfunded retirements. Stock discussed: CyberArk (CYBR).
Cabot Wealth Advisory 11/25/14 - Alibaba vs. J.C. Penney
Cabot Options Trader’s Chief Analyst Jacob Mintz looks at the contrast between tired, old stocks like J.C. Penney and fresh-faced youngsters like Alibaba, and sees much more opportunity in the latter. Stocks discussed: J.C. Penney (JCP) and Alibaba (BABA).
Cabot Wealth Advisory 11/27/14 - My Favorite Investment Research Resources
Roy Ward of Cabot Benjamin Graham Value Investor writes in this issue about his favorite sites for free equity research. He also tells us the four search criteria he uses to find great value stocks. Stock discussed: Celanese Corp. (CE).
Sincerely,
Paul Goodwin
Chief Analyst, Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory
P.S. Don’t forget to reserve your copy of Cabot’s 10 Favorite Low-Priced Stocks for 2015.
Each year we publish a special report that gives you an opportunity to profit from a select group of low-priced stocks with immense short-term profit potential. We don’t recommend these low-priced stocks in our regular advisories for a variety of reasons; most often it’s a lack of momentum and low liquidity. But we do make their names available to investors who want to take advantage of a special investing technique that traditionally brings big profits to savvy investors every January.
