My Stock Investing Education
A Beverage Stock with Emerging Markets Exposure
Problems are Opportunities in Work Clothes
Stock Market Video
My education in stocks started very early. In fact, my grandmother bought me my first stock before I even came home from the hospital!
Of course, I was completely unaware of this at the time, but it didn’t take long for me to develop a keen interest in the world of business and investing. It was a huge passion for my grandma that she passed along to my dad and that they passed to my brother and me. I’ll never forget her determined searches for an Investor’s Business Daily when we were traveling. She just had to get her hands on it to check her stocks … no matter what!
The next phase of my stock education came when my grandma and dad started teaching my brother and me about various companies using real-world examples that were easy to understand at a tender age.
Take our lesson in PepsiCO (PEP) for instance. Once when we passed a Pizza Hut when I was a child, my dad explained to me how Pepsi owned the fast food eatery and many other similar brands. It was eye opening to see that companies could participate in different industries to find growth and success.
My favorite lesson came when my dad bought my brother and me some shares of Disney (DIS) prior to a family vacation there. We had a great time on the trip and knowing that we “owned” a piece of the park made it even more fun!
In middle school, I participated in a class where we picked stocks in a paper portfolio and had to explain our picks. The analysis was mostly focused on the stock’s story and many of my stocks fit into the “buy what you know” category. I remember picking Microsoft (MSFT) because I was familiar with its Windows operating system and shying away from Ford (F) because my family once purchased a lemon from the company. (This method of choosing stocks lingers with me even today. Before it went private, I wrote about my favorite clothing retailer J. Crew a few times in this very space.)
As I got older, my focus shifted to writing about business (among other things) at various newspaper internships and jobs. As a journalist, I find the story behind a stock very compelling, but it was during this time that I began to realize how crucial strong numbers were to a stock’s success.
Prior to working at Cabot, I’d been focused mostly on long-term value investing. That’s what I’d been taught and it seemed to be working pretty well for the investors I knew. Like many, I was told that it’s time not timing that will bring you success in the stock market. Part of me is still attracted to that type of investing; it can be less risky … but it can also be less rewarding (financially speaking, anyway).
But now that I work at Cabot, I’m passionate about growth investing as well. As you probably know, many of our Cabot newsletters are focused on growth stocks (those with new or revolutionary products, strong growth numbers and uptrending charts).
I don’t believe there’s a right or wrong way to invest in the stock market. But that doesn’t mean you can just pick any stock and dive right in. The most important thing, especially when you’re just starting out, is to educate yourself on what systems work and figure out which system is for you. I’m lucky that my family started my stock investing education an early age, but no matter how old you are, you too can learn to invest successfully!
You’re already on the right path if you’re reading this newsletter and I hope that as you progress, you’ll find that one of our other advisories can help guide your stock selection and investing strategy. To learn more about our newsletters and see which one is right for you, click here.
Reminiscing about my dad’s lesson involving PepsiCo (PEP) made me want to do some additional research on it. Here’s what I found …
PepsiCo, incorporated in 1919, is a global leader in the soft drink and snack food industries. PepsiCo’s popular brands include Pepsi, Frito-Lay and Quaker Foods (acquired in 2001).
PepsiCo gets 65% of total sales from North America, while the rest come from international sales spread throughout the world. The company is beating its competition by expanding in international markets and focusing on health and wellness beverages and foods.
PepsiCo management has created faster growth by reacting more quickly to new growth trends in the industry. Bottled water (Aquafina), fruit juices (Tropicana and Naked Juice) and nutritious snacks (Quaker oatmeal and granola bars) are growing noticeably faster than traditional carbonated soft drinks and conventional snack foods.
On the international front, PepsiCo acquired Russia’s leading food and beverage company Wimm-Bill-Dann this year. The deal made PepsiCo the largest food and beverage business in Russia and gives the company access to the fast-growing emerging markets of Eastern Europe and Central Asia.
In its most recent quarter, PepsiCo reported a 10% jump in earnings per share to $1.21, matching analyst expectations. Second quarter revenue grew 14% to $16.8 billion, trumping Wall Street’s $16.4 billion predictions. The company’s net income climbed to $1.9 billion, or $1.17 per share,
I also found that Cabot Benjamin Graham Value Letter Editor Roy Ward currently rates PEP a Buy under his Maximum Buy Price of 64.89. He recommends holding on tight until the stock reaches his Minimum Sell Price of 90.38. With the company’s focus on the healthy snack and beverage market and its international expansion, that shouldn’t take long.
To stay current on Roy’s PEP recommendation (and dozens of other higher-quality value stocks), check out his Cabot Benjamin Graham Value Letter today. Click here to learn more.
Now for this week’s Contrary Opinion Button. Remember, you can always view all of the buttons by
Problems are Opportunities in Work Clothes
Henry J. Kaiser, American industrialist and namesake of Kaiser Permanente, the first health maintenance organization, actually said, “Problems are only opportunities in work clothes.” I like to call them challenges. In any case, the message is that you should not let problems defeat you; instead you should approach them with a positive attitude aimed at finding a resolution and ultimately turning the situation to your advantage.
In this week’s Stock Market Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says that for growth investors, it’s a good time to do something besides investing. Cash is king. Paul looks at the Halter USX China Index, which tracks the performance of Chinese stocks that trade on U.S. exchanges as American Depositary Receipts (ADRs), and the Nasdaq to show the market’s recent action. Stocks discussed: Kraft Foods (KFT) and Hershey (HSY). Click here to watch!
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 8/15/11 – Three High-Potential Stocks
On Monday, Cabot Publisher and Cabot Stock of the Month Editor Tim Lutts discussed the importance of not getting distracted by the market’s ups and downs. He wrote about three recent IPOs that are changing the world for the better through fairly revolutionary technology. He also discussed why price-to-earnings ratios are helpful for evaluating older, slower-growing companies, but that using them to evaluate growth stocks means you’ll miss out on some impressive gains. Featured stocks: LinkedIn (LNKD), Tesla Motors (TSLA) and ZipCar (ZIP).
On Tuesday, Dick Davis Digests Editor Chloe Lutts wrote about the passenger and freight railroad systems in the U.S. and why one (freight) is one of the best in the world, while the other (passenger) is one of the worst. She featured two stocks that were recommended in the latest Dick Davis Dividend Digest issue. Featured stocks: Norfolk Southern Corp. (NSC) and GATX Corp. (GMT).
On Thursday, Cabot Market Letter Editor Mike Cintolo discussed how unusually big moves in the stock market happen more often than you might expect. He also wrote about what he thinks may occur in the coming weeks and months in the market based on past events. And he recommended looking into two stocks that have positive volume clues despite the volatile market. Featured stocks: were MAKO Surgical (MAKO) and Rosetta Resources (ROSE).
Until next time,
Editor of Cabot Wealth Advisory