Cabot Wealth Network Turns 50 This Year! Here’s How It All Started - and How We’re Still Making our Readers Rich Five Decades Later.
Relative Performance is investing slang for how a stock is performing relative to a specific market or index.
Drawing Relative Performance lines—or RP lines, for short—is the best way to gauge that performance. RP is calculated by dividing the Friday closing price of a stock by the Friday close of an index. The weekly changes are then plotted on a line graph, using a log scale.
When an RP line is moving upward, the stock is outperforming the market. When it’s moving downward, the stock is underperforming the market. A flat RP line indicates the stock’s performance is equal to the market’s.
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As a young investing enthusiast growing up in Salem, Mass., Tim Lutts spent weekends drawing RP lines with a piece of paper and a pencil, measuring the long-term performance of stocks he was following against the Dow Jones Industrial Average. The results were encouraging.
“Every week,” says Lutts, “the lines would grow a little bit longer.”
Though his college degree was in English, investing was in Lutts’ blood. His grandmother, Grace, was a lifelong investor who bought her first house at age 19 with money she’d saved. His father, Carlton, loved the stock market too, and in 1970 Carlton (an engineer by trade) started his own investment newsletter to share his thoughts on stock selection and market timing.
Carlton named the newsletter Cabot Market Letter, after the 28-acre Cabot Farm on which his family lived in Salem. Over the years, Carlton’s newsletter grew, attracting enough subscribers that he quit his engineering job to focus on Cabot Market Letter full-time. In 1986, Carlton asked Tim—who had been working for his newsletter part-time since its inception—to take on a more regular role to help expand the business.
Tim’s new role was to write about mutual funds.
“In the ‘80s, mutual funds were going gangbusters, and my father was having a hard time selling the newsletter,” Tim Lutts recalls. “I didn’t know anything about mutual funds.”
Eventually, he learned, and the business expanded to become more than just a newsletter for growth investors. By then incorporated as “Cabot Heritage,” the Lutts’ publishing business bought out a number of small competitors in the investment newsletter industry, folding those companies’ subscribers into their mailing list. To accommodate investors of all kinds, Tim filled the Cabot stable with experts on value investing, international investing, options trading, dividend investing, small-cap investing and more. He also helped shepherd the company into the digital age, making all of their newsletters available on the web.
Carlton retired in 2004, handing his now-booming newsletter business over to Tim. Sixteen years later, and exactly half a century since Carlton started writing the newsletter during his spare time, Cabot (since re-dubbed Cabot Wealth Network) not only still stands—in an increasingly competitive industry, it thrives.
‘Staying Calm’ Key to Cabot’s Survival
Located on North Street in Salem in a former town library, today Cabot has more than 20,000 subscribers to its 14 investment newsletters (we call them “investment advisories” these days)—all available on the web. Through market crashes, global recessions, dot-com bubbles bursting, 9/11, and nine U.S. Presidents, Cabot has survived. Very few investment advice publishers have lasted that long. How has Cabot managed it?
“It helps to stay calm,” says Lutts. “1987 was rough because it was unexpected. 2000 was an eye-opener. 2008-09 was a real difficulty for everybody. But the long-term trend is up.”
Lutts has a special talent for seeing the big picture. Almost preternaturally calm, Lutts says he “hardly notices” the daily fluctuations in the market. Regardless of how choppy the investment waters get, he maintains an even-keel approach.
Staying calm is an underrated attribute when it comes to successful investing. When it comes to running a successful investment advisory, another key is earning the customer’s trust. According to some of the company’s most loyal subscribers, that’s an area where Cabot excels.
“They’re straightforward, very direct and honest, which you don’t find very often in this business,” says Michael Reade, a Houston optometrist who subscribes to most of Cabot’s advisories. “You can tell they’re not just trying to make money. They truly have your best interests at heart.”
Toward that end, every one of Cabot’s investment advisories includes a heavy dose of education in addition to all the stock picks. Lutts says he puts a premium on helping subscribers become better investors, and giving them the tools to invest on their own.
That’s precisely how Rod Kieft, a Cabot devotee who lives in Alaska, subscribes to Cabot’s advisories.
“I use Cabot as a pre-screener, and then I further research which stocks I want in my portfolio,” says Kieft. “Probably the best thing I have learned from Cabot is, ‘Cut your losses short.’”
Limiting losses is another longstanding Cabot pillar. Part of the company’s unrelenting honesty is admitting up front that not all of our stock recommendations are going to be winners (whose are?). In investing, losing stocks are inevitable. Picking more winners than losers is one way to make money. But so is letting your winners ride—and setting hard and fast limits on your losers.
Take Cabot Top Ten Trader, for instance. A momentum-investing advisory run by Cabot’s Vice President of Investments and growth investing expert Mike Cintolo, Top Ten Trader recommends 10 of the market’s strongest, up-trending stocks every week, all of which come with a suggested buy range and, perhaps more importantly, a suggested loss limit. By rule, Cintolo tries to limit subscribers’ losses to no more than 15% on a given stock.
Technical analysis is another Cabot staple. Perhaps stemming from Lutts’ days of drawing RP lines, the charts matter to Cabot’s advisors just as much as a company’s underlying fundamentals. Most of Cabot’s advisories don’t just recommend stocks they think could produce a nice return based on their long-term growth forecast or business model. They also like to invest in stocks that are already performing well.
“I always thought technical analysis was kind of hocus-pocus,” Reade admits. “But they kind of explain it in a way that makes sense, giving examples. And over the course of a couple years (of subscribing), it starts getting you. It’s: No matter what you think of a stock, the chart matters.”
A Time-Tested System
Add them all up—the technical analysis, the devotion to limiting losses, the educational aspect, the even-keel and straightforward approach—and Cintolo says it’s easy to see why Cabot has appealed to individual investors for so many years. Cintolo should know—before joining the company straight out of college in 1999, he was a Cabot subscriber himself, starting when his father was a subscriber in the mid-‘90s.
“I think the reasons we succeed are the same reasons that attracted me to Cabot back when my dad subscribed,” says Cintolo. “It’s good advice based on a proven, time-tested and, honestly, not-that-complicated system that centers around avoiding big mistakes while landing a few big winners; clear and concise writing and advice; and being available to subscribers who have questions, either about a stock or our system.
“Plus, I think there’s something to be said for stand-up people—we own our mistakes, improve upon them, and go about our job without trying to be the loudest or most attention-grabbing out there.
“In other words, we’re humble—in good times and bad.”
Of course, investing is a bottom-line business. What really keeps subscribers coming back is consistently strong returns. And over the years, Cabot has made a lot of people a lot of money.
Knut Langballe moved to British Columbia from his native Norway in the 1970s. He worked in Canada as a civil engineer until he retired in the mid-1990s. In retirement, he got heavily into investing, and one of his biggest investment successes was Tesla (TSLA), a stock he bought early on the recommendation of Tim Lutts. On Tim’s December 2011 recommendation, Langballe turned a modest investment into a $1 million return. Langballe used his TSLA stock profits to buy his dream house in Norway.
Reade also cites Tesla and Facebook (FB) as his Cabot-recommended biggest winners.
For Kieft, Baidu (BIDU), LinkedIn, Regeneron Pharmaceuticals (REGN), Amazon (AMZN), Celgene (CELG) and Palo Alto Networks (PANW)—to name a few—have been among his best-performing Cabot stocks.
Reade and Kieft were among the 80-plus subscribers from around the country—and beyond—who attended the seventh-annual Cabot Wealth Summit at the Hawthorne Hotel in Salem last August. The conference is a chance for Cabot subscribers to get to know the people with whom they’re entrusting their money and portfolios—and their fellow Cabot subscribers.
The fact that so many people attend the three-day event (this year’s Wealth Summit is already filling up—click here to sign up!) is a testament to Cabot’s personal touch, reliability and longevity.
Another 50 Years for Cabot?
Meanwhile, Cabot continues to grow. In just the past six months, we’ve added two new advisories: Jacob Mintz’s Cabot Profit Booster, which recommends a weekly options trade on the best stock from that week’s Cabot Top Ten Trader; and Tyler Laundon’s Cabot Early Opportunitiesadvisory, which uncovers some of the market’s best early-stage stocks—before the big institutions start pouring money into them.
Well into his fifth decade with Cabot, Lutts still runs the show as Cabot’s CEO and Chief Investment Strategist. And in 2018, Ed Coburn joined Cabot as President. Previously Coburn had run several publishing and media businesses, including Harvard Health Publications, the publishing division of Harvard Medical School.
Coburn came from a long line of bankers and investors – his father was Director of Research for the oldest investment advisory publication in the country, Babson United Investment Report (now closed), and his grandfather managed the investment of pension funds for major corporations, including General Motors.
Working side by side, Coburn and Lutts share a passion for helping Cabot’s subscribers become better investors.
“All people should know about investing,” Lutts says. “People are afraid of investing because they’re afraid of the unknown. But long-term investing does work.
“We’re happy to help people overcome those fears.”
Hopefully we’ll be helping them for another half-century!
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