Answering Readers’ Survey Questions
Stock Market Analysis Video
In Case You Missed It
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Each issue of Cabot Wealth Advisory contains a link near the bottom to a survey that I regularly check and compile results from. We get a lot of great ideas for issue topics from the survey and it helps us stay in tune with you, our readers. Today, I’m going to answer some of the questions from the survey. Thanks to readers who’ve taken the time to fill it out, we appreciate your feedback!
Question: When should I sell a previously recommended BUY? My weakness: I never saw a stock I didn’t like.
Answer: We get this question A LOT! And it’s something we’ve struggled with ourselves. Over the last 40 years, Cabot has developed a growth stock investing system that allows us to choose the market’s top stocks at precisely the right time. But how do we know when to sell? This is where one of our top investing rules comes in: Cut your losses short.
Cabot Market Letter uses a loss limit of 15%-20%, depending on whether we’re in a bear or bull market. That is, if any stock closes out a day giving us a loss of 20%, we’ll sell on the next trading day. Coming up with a strict sell rule to follow is the key. Yes, sometimes after you sell a stock for a loss, it will move higher. But more often than not, the stock will continue lower and you will have gotten out without doing severe damage to your portfolio.
On the other hand, you will have many winners, and knowing when to sell them is more difficult. In general, though, we believe it is wise to sell when a stock has underperformed the market for eight weeks or more. The stock’s relative performance (RP) line is a good indicator of this.
Question: I would like to see each newsletter explained for what type of person it is best for. You said you like “steadier equity.” What newsletter would one subscribe to for that benefit?
Answer: A full description of each of our newsletters can be found here. But here’s a quick summary:
Traditional growth investors subscribe to our flagship Cabot Market Letter or Cabot Green Investor.
Aggressive investors are comfortable with the high-momentum stocks in Cabot Top Ten Weekly or the fast-growing foreign stocks in Cabot China & Emerging Markets Report.
Conservative investors follow the Cabot Benjamin Graham Value Letter to invest in high-quality undervalued stocks. (This is good for people seeking steadier investments that mature over time.)
Long-term investors find undiscovered emerging companies in Cabot Small-Cap Confidential.
If you’re not sure, Cabot Stock of the Month can give you a sampling of each of these advisories, while you decide which is best for you.
Question: How about some news of Massachusetts stocks? Any local values in our back yards?
Answer: One of my favorite Massachusetts companies is Clean Harbors (CLH). I sometimes see the trucks from the environmental clean up company on my way to work in the morning and there is something deeply satisfying about seeing a company whose stock you like at work. Clean Harbors is a Cabot Green Investor stock and was written up by Editor Brendan Coffey in June. This is what he said:
“Clean Harbors is the market share leader in hazardous waste services and a leader in overall environmental remediation and other services. Clean Harbors is a well-run company that was founded by current CEO Alan Kim in 1980 as a four-man outfit dedicated to cleaning out oil tanks. Last month, the company sent a phalanx of employees to begin cleanup efforts in the Gulf. Among its responsibilities are recruiting and training local residents to assist in the cleanup, providing containment equipment and boats, equipment and services to remove the oil from the water, and removing and disposing of the waste in its own incinerators and landfills. In mid-May, Clean Harbors announced that the effort would boost current quarter revenues by 15% to 20% over previous estimates of $352 million. Those earnings will be announced in August.
“Given the scope of the Deepwater Horizon well disaster and the established reputation of Clean Harbors, we suspect this effort is only beginning and will benefit the company for months if not years to come. Even before the disaster, BP was cited as one of Clean Harbors’ loyal customers and Clean Harbors had worked closely with local governments in recovery efforts after Hurricane Katrina. While the company operates nationwide, it has clusters of operations in New Orleans and east Texas that provide a wide base of nearby expertise to draw on. It also has clusters of facilities in the northern Atlantic coast from Maryland up through its home base in Massachusetts to Maine, the Chicago area and southern California, along with extensive operations throughout Canada.
“Clean Harbors gets 15% of its $1.4 billion annual revenue from field services, primarily emergency cleanups like the Gulf disaster. Another 49% comes from technical services, like the carting and disposal of hazardous waste. Around 32% of sales come from industrial services such as routine cleaning and maintenance of systems such as oil refinery systems and emergency power outage services. The remaining 4% comes from exploration services, such as aerial surveys of land, drill camps and civil water engineering. Overall, Clean Harbors has over 50,000 customers on its roster, including a majority of the Fortune 500. Its biggest segment is the chemical industry (21% of sales), followed by refineries and general manufacturing with 11% of sales each. Segments like healthcare, government, biotechnology and utilities customers also provide notable business.
“Clean Harbors hasn’t been waiting for disasters to expand sales-since 2006, the company has spent around $500 million to acquire six companies and a half interest in a seventh to increase its footprint in western Canada, California and recycling services nationally. It is now the largest hazardous waste incinerator operator in North America, and the second largest owner of landfill volume. The company has been operating a little under capacity of late because of canceled projects and few emergency projects, but that looks like it has changed, not just because of the Gulf disaster but also thanks to the modestly improving U.S. economy.
“Right now, the company looks very likely to generate 2010 sales close to $1.45 billion, the high end of its revenue guidance for the year. Wall Street analysts expect $2.65 earnings per share for the year too, with some projections that sales could go as high as $1.5 billion. Up until the recent economic crisis, Clean Harbors had been exceptional at meeting or beating estimates. It had a few missteps since missing consensus the past five quarters running, but management has been at the helm for many years and it’s a good bet they will get the company back on track with investors now that the economy is stabilizing.”
That’s all the questions for this week! Thanks again to everyone who filled out the survey.
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Profit from the Future … Today!
This year Cabot Green Investor has locked in big profits on Maxwell Technologies (47%), American Superconductor (40%) and Telvent (29%), among others. In fact, since we started Cabot Green Investor in 2008, we’ve outpaced the WilderHill Clean Energy Index by 59 percentage points! Join now to start seeing the profits of the future … today!
Now on to this week’s Stock Market Analysis Video with Cabot China & Emerging Markets Report Editor Paul Goodwin. Paul says because it’s earnings season there’s a lot of movement in stocks, but what he’s looking for isn’t just movement, but useable movement. Stocks discussed include Aruba Networks (ARUN), Power One (PWER), Rubicon (RBCN) and Mercado Libre (MELI).
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Cabot Clobbers the Stock Market!
Numbers don’t lie. And here are an impressive few:
** For the past two difficult years, Cabot socked the S&P 500 by a whopping 82%! (Market was down 26%.)
** For the past five years, Cabot stomped the market by a hefty 60%! (Market was down 8%.)
** For the past 10 years, Cabot dominated the market by a staggering 113%! (Market was down 26%.)
Here’s how you can clobber the market too. Click here to get your FREE REPORT, Cabot’s Next 5 Impressive Wealth-Building Stocks
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, I have links below to each issue.
On Monday, Timothy Lutts wrote a follow-up to the story about his 1948 Ford 8N tractor and whether he should keep it or look for a newer model. Due to your overwhelming response (the most ever!), Tim featured many of your letters in the issue. Tim also discussed a stock on his Watch List that has recently broken out to new highs. Featured stock: OpenTable (OPEN).
On Tuesday, Brendan Coffey wrote about peak oil, the theory that at some point, we will have used more oil than there is recoverable in the ground. Brendan also discussed why solar stocks might be a good place to invest with peak oil seemingly imminent.
On Thursday, Michael Cintolo discussed why differentiating between wide and loose versus tight and right chart patterns can be helpful. Mike also discussed the importance of not doing any investing sometimes and a stock with high potential in the telecom sector. Featured stock: Finisar (FNSR).
Until next time,
Editor of Cabot Wealth Advisory