Stock Market Video
Finding Investing Heroes
Fortune Cookie
In Case You Missed It
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In this week’s Stock Market Video, I look at the major indexes, which are still in uptrends, but have stalled out for a few weeks. It’s a bull market, but not a raging bull; some careful buying should reward your due diligence. I also point out some leaders in five market segments that are enjoying buying support. Click below to watch the video.
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Finding Investing Heroes
If the stories that show up on the Internet are anything to go by, we must have an inexhaustible appetite for news about celebrities, many of whom seem to have absolutely no useful function in the universe.
It may give you some comfort to know that people in the investment world are just as curious about celebrities, even if their standards for celebrity usually have a lot to do with the net worth of the individual in question. If someone has made a bundle, we want to hear how he (or occasionally she) did it, and just about everything else about them, apparently.
This phenomenon isn’t restricted to investors, of course. There are aspiring writers who will ask a successful author everything about their writing process, including what time of day they write, longhand or computer (if longhand, pen or pencil and foolscap or yellow pads), where they get their plots, how they edit, who their favorite authors are, their favorite book, etc. I’ve actually seen authors wince under this kind of grilling, although most of them are so used to it that they hardly notice.
This is all fine with me. After all, we need heroes in every line of work, and a good role model can be helpful when you’re starting out. Tiger Woods made many golfing novices feel that it was not just possible to master the little white ball, but that it was a good thing to aspire to.
In the business world, Jack Welch was a shining light for company executives who aspired to mastery of the art of running (and growing) a huge company. And I know that a ton of aspiring executives bought and read Jack’s books and tried to follow his footsteps.
(I don’t know who might be a hero to accountants, but I assume they’re out there.)
But in the investment world, I’d caution any beginning investor that a story from someone who has made a fortune may not be a reliable roadmap for replicating his success.
You wouldn’t, for instance, go out and buy a lottery ticket because you’ve read a glowing account of some bozo who used his wife’s measurements and the number of letters in his daughters’ names to pick the winning numbers. You know that such a strategy isn’t likely to work twice. (I might point out that your odds of winning a big lottery are statistically about the same whether you buy a ticket or not, but I don’t want to be a wet blanket. Plus, you’re probably not going to lose more than $5.)
Suppose someone tells you that they bought $1,000 of a penny stock that then soared from a half-cent per share to one dollar a share. The thought of a $199,000 windfall is certainly tempting. But you probably wouldn’t make the same bet, because you know that the odds against that kind of monster gain are right off the charts.
But it’s important to remember that there are lots of people who would be dazzled by the possibility of turning a small investment into a small fortune. Think of the people who must be sending money to that nice Nigerian prince who offers them millions if they will just send him their bank account numbers. Someone must be doing it, or the offers wouldn’t continue to show up in your spam folder.
To summarize, if the odds of succeeding with some wild-ass investment are 100-to-1 against, guess who will write a book about the experience?
That’s right, the one person who caught the brass ring will tell you exactly how he did it.
But luck isn’t a great investing strategy.
If you want to follow in the footsteps of an investing hero, you’re better off looking around for someone whose temperament, investing style and risk tolerance matches your own. And a record of success over a period of years (and several market cycles) would also raise the odds that you can follow in your hero’s footsteps.
I’m far too modest to suggest that my record as Chief Analyst of Cabot China & Emerging Markets Report might qualify me as such a figure. But I have no hesitation at all in recommending Mike Cintolo, the growth-investing genius behind Cabot Market Letter (which will soon change its name to Cabot Growth Investor) as a great candidate for emulation.
With over 44 years in the trenches of market warfare, Cabot Market Letter has written the book on growth investing. All that experience wouldn’t mean much if the people behind it were just stock pickers. But CML (as we call it) is essentially a continuing research project aimed at figuring out what really works in the market. Its rules have been honed for years, then re-written and honed some more.
Want to be a growth-investing hero among your friends? Follow in the footsteps that lead to success.
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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: The trick, of course, is determining the extreme point. Today, with the market becoming increasingly overvalued, as the bull market grows increasingly long in the tooth, some risk-conscious investors are already reducing their market exposure. But not me. The trend is strong and participation is broad, so I think we have further upside ahead.
Paul’s Comment: It takes enormous discipline to avoid being influenced by the direction of the market, and as market rise, they sweep more and more skeptics into the bullish camp. But when the last holdout finally breaks down and buys, the top is in. And while nobody can consistently identify the top (or the bottom), Cabot’s market timing indicators can be a growth investor’s best friend at market tops (when they get you out sooner) and market bottoms (when they give you the confidence to get back in). The rest of the time, following the crowd is just fine.
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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 4/13/15 — The Best Surveillance Stocks
Tim Lutts, ace stock picker for Cabot Stock of the Month, writes about the problem of finding trustworthy news sources. Tim also looks at stocks in the surveillance industry. Stocks discussed: Taser (TASR) and Avigilon (AVO.TO).
Cabot Wealth Advisory 4/14/15 — Opportunities in Disruptive Technologies
I write in this issue about the multiple disruptions that rocked the music business as technologies leapfrogged one another. I point out that Cabot Small Cap Confidential often finds potential disruptors way before the crowd does. Stock discussed: OvaScience (OVAS).
Cabot Wealth Advisory 4/16/15 — How to Find the Best Stock Buys
In this issue, Roy Ward, Chief Analyst of Cabot Benjamin Graham Value Report, looks at a simple strategy for beating the performance of the S&P 500 (and most other experts, too). Stock discussed: Francesca’s Holdings (FRAN).
Have a great weekend,
Paul Goodwin
Chief Analyst, Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory
