Infrequently Asked Questions (IAQs)
The Only Good Defense is a Good Offense
A Reinvention Stock
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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.
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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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Why I’m Giving Away Our No. 1 China Stock FREE
1. It’s up 98% in three months.
2. It registered 198% earnings growth for its first quarter.
3. Analysts expect it to register another 203% next year, clobbering the S&P 500 by more than $20 to $1.
4. It doesn’t have a single U.S. competitor and never will.
5. It’s outperforming its No. 1 competitor nearly 100 to 1.
6. It’s set to double again in 2014.
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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
Technical Analysis
You can find additional additional momentum stocks featured in Cabot Top Ten Trader each week by clicking here.
Sincerely,
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.
