A Reinvention Stock

Infrequently Asked Questions (IAQs)

The Only Good Defense is a Good Offense

A Reinvention Stock

Any idiot can put together a list of frequently asked questions (FAQs), and such lists are often very useful for visitors to websites. After all, if a lot of people are asking something, you may be too.

But my interests always run to the less predictable end of things, so I try to shun the usual and the expected.

Accordingly, I’m going to give answers to a couple of questions that I have not been asked very often. In fact, I’d be astonished if these questions had popped up even once in my experience.

Question: Since markets are volatile and stocks can move quickly, how do growth investors ever go on vacation?

Answer: This is a lot easier than it used to be. Writers used to love to tell stories about the days before the Internet and smart phones made life easier for investors trapped at the summering spots of Maine, Vermont and even Europe. Their novels often featured an investment addict who was searching frantically for news from the markets.

For these harried men in their linen suits and straw boaters—their wives insisting that they “just relax,” and leave the markets behind—nothing was more important than sneaking away to town for a call to their broker or bribing a servant to courier a recent copy of The New York Times or The Wall Street Journal. (Younger readers will probably have to be reminded that these publications used to print price charts for every stock on the New York Stock Exchange on a daily basis.)

Nowadays, when you can watch cable TV shows on your bathroom mirror and your mobile phone offers videos and direct data feeds from the entire universe, staying in touch isn’t a problem.

But if you’re planning on bobbing around the world in a rowboat or spending time in a cavern or climbing a mountain, you might want to consider setting some stops under your holdings. These days you can do that on your phone, if not your watch.

Question: What kind of investing should I do if I can’t stand the thought of losing money … ever.

Answer: The safest investment in the world is U.S. Treasury bonds, bills and notes. But right now the yield on these instruments is so low that you will be losing money to inflation just about every year. So, basically, you’re screwed.

Gold investors have historically seen it as a safe haven, and were probably feeling pretty good about owning some bullion in the second half of 2011 when prices soared to $1,800 per ounce. Since the metal was priced at $270 an ounce in 2001, gold bugs had momentum on their side.

But markets seem to actively dislike letting investors enjoy perfect good luck for too long, and the last couple of years have been less kind to precious metal enthusiasts. Gold slipped to near $1,200 late last year and have only rebounded to around $1,320 in the past couple of weeks.

So, if you’re loss averse and looking longingly at gold, you should spend some time analyzing its historical price patterns. Even if you see gold as a great long-term hedge against inflation or the total collapse of civilization, you will still need to absorb some losses at some point.

As for index investors, buy-and-hold diversifiers and other fans of lower-risk stock investment styles, the picture is also grim. With the Tech Bubble and the Housing Bubble both taking huge tolls on investment portfolios, the decade from 2000 to 2010 just wasn’t a reassuring time for “set it and forget it” strategies. And even the very durable rally that began lifting the S&P 500 and other major indexes in late 2009 has included some stomach-churning corrections.

And at this point, the interest banks are paying on savings accounts is an insult to the idea of capital preservation.

No, when you get right down to it, in investing, the only good defense has to be a good offense.

You protect money the same way you make money, by investing your time, energy and intelligence in the job. There’s nothing passive about managing your money. Either you put in the time yourself, or you pay someone else to.

This is frustrating to lots of people. It seems that there ought to be a simple way to protect your capital from both the volatility of the markets and the erosive effects of inflation.

If you find one, be sure to let me know.

(Note: I’m leaving out the obvious step of “hiring” Cabot to help you manage your assets. That would be too blatantly commercial, and I try to avoid the appearance of being just an arm of the marketing department. But I have to admit that Cabot’s advisories can put decades of stock investing advice on your side. So maybe you should check them out here.

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My stock pick today is a company that has done a great job of re-inventing itself, writing a new chapter in its story after a very successful first run. The company now calls itself Monster Beverage, but when it first started showing up in screens for Cabot Top Ten Trader, it called itself Hansen Natural. Hansen was a squeaky clean bottler of organic juices with a unicorn-in-the-orchard vibe about it.

What most consumers didn’t know was that Hansen’s huge revenue growth was due mostly to its lineup of energy drinks that were marketed with high-energy graphics to thrill-seeking punks and shredders who didn’t give a rip about sunshine and lollipop juice drinks.

It’s a good story about reinvention, and here’s what Mike Cintolo, chief analyst at Cabot Top Ten Trader wrote about it in the February 17 issue. This writeup follows the traditional Top Ten pattern of a paragraph about why the stock is strong and another about how the stock looks from a technical point of view.

Why the Strength

“Back when Hansen Natural was scoring its 21 appearances in Cabot Top Ten Trader from 2004 through 2011, the company had a guilty little secret. While its public face was based on organic fruit drinks, the company also owned the hugely profitable Monster energy drink brand, which was the source of its most vigorous growth. The charade ended in 2012 when the company changed its name to Monster Beverage, acknowledging where the growth really lay. Now, with various energy brands thriving, the company is enjoying healthy growth. And it still has the Hansen Natural and other organic brands under its umbrella. The company has been enjoying steady, but uninspiring revenue growth, but investors have other reasons to be enthusiastic. The rumor mill has been cranking out speculation that Coca-Cola might want to take over Monster and its wildly popular energy drink lineup. There is also speculation that the company might strike a deal with Green Mountain Coffee Roasters to offer its products in Green Mountain’s new Keurig Cold beverage system (as Coca-Cola has already done). Plus, the company’s announcement of a new product called Punch Monster, which is intended to keep partygoers awake all night, shows continuing product innovation. No date for Monster’s Q4 and 2013 earnings report has been announced, but its Q3 report was on November 7, so it’s likely to come in February.

Technical Analysis

“MNST was featured three times in Top Ten in 2012, but after its June 11 appearance, the stock went into a tailspin that pulled it from 75 to 40 in October. The stock worked its way back to 66 last June, but corrected to 51 in early October 2013. But since then, buoyed by solid fundamentals and the persistent takeover rumors, MNST has been on a roll, with a nice pop on February 10 and 11 pushing it to new multi-year highs. MNST has pulled back a couple of points from last week’s highs, and looks like a reasonable buy anywhere under 71. Use a stop near 64 until earnings are safely in place.” 

You can find additional additional momentum stocks featured in Cabot Top Ten Trader each week by clicking here.


Paul Goodwin
Chief Analyst of Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory

P.S. We’re excited to announce that the second Cabot Investors Conference will be held in Salem, Massachusetts in August. Last year we had the pleasure to get to know many individual investors and share our knowledge of investing strategies with them. We hope that you can join us this year so that you too can benefit from meeting all of the Cabot analysts and get their opinions on how to make the best investments in years to come. 

To learn more about the Cabot Investor Conference and take advantage of the extra early bird registration discount, click here.


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