It’s a Stock Picker’s Market—Or Is It? - Cabot Wealth Network

It’s a Stock Picker’s Market—Or Is It?

Big, Liquid Growth Stocks: Stock Market Video

What the Heck Is a Stock Picker’s Market?

Fortune Cookie

In Case You Missed It

In this week’s Stock Market Video, Mike Cintolo discusses his bullish outlook, as well as a handful of big, liquid growth stocks that have rounded out nice bases (much as the Nasdaq itself has done). Combined with a few early breakouts, Mike believes these are the key names to watch, as both a clue to the market’s health and as potential new buys should the buyers remain in control. Click below to watch the video!

mike cintolo, stock market video

It’s a Stock Picker’s Market- Or Is It?

Since today is June 21, the first day of summer according to the celestial calendar, I thought I’d say a couple of words about this lovely season. First, the idea that summer starts on June 21 is just a technicality. Yes, it’s the longest day of the year and all that good zodiacal stuff, but I’m much more a fan of the winter solstice than the summer one.

I’ve never understood why someone who loves long days would celebrate the date on which they start to get shorter!

Besides, as any real meteorologist will tell you, summer starts when June starts and ends when August ends. Period. (Unless you’re a New Englander in the tourist industry, then it’s from Memorial Day to Labor Day. At least that’s the tradition.)

I guess I also see a parallel between the “beginning of summer” on June 21 and the full blossoming of a bull market. Like most growth investing veterans, I’m much fonder of the moment when markets begin their slow turn from bear to bull. The real money is made by correctly identifying that moment and identifying and buying the new leaders early.

I know this makes me sound like a grump who doesn’t love summer, but that’s not true. It’s just that the three weeks of summer leading up to June 21 are my favorite part.

My real topic today is the state of the stock market right now, which I would characterize as a stock picker’s market.

What, you might ask, is a stock picker’s market? After all, don’t growth investors always have to pick stocks?

That’s true, but a stock picker’s market is a particular kind of moderately bullish market in which there is no clear investing theme or sector to guide your buying.

During the last decade or so, the markets have enjoyed periods of leadership from housing stocks, energy stocks, income stocks, Cloud computing stocks, social media stocks and solar stocks, to name just a few.

But right now, even though the major indexes are at or near new all-time highs, I don’t think I could point with confidence to any sector or industry that’s the dominant source of strong stocks. There’s plenty of strength, but no leadership group.

In this kind of market, it’s more important than ever to look at stock charts to see what’s actually doing well.

As an example, here are two successful companies in the oil drilling business.

Nabors Industries (NBR) and Transocean (RIG) are both oil & gas drilling companies with both U.S. and international operations. Each is profitable and pays a dividend (RIG’s dividend is much larger).

But since the beginning of the year, NBR has been a real tractor, climbing higher despite market fluctuations, while RIG has just been bumping along. Maybe this is due to the higher proportion of land drilling business that Nabors does; after all, the fracking and natural gas boom in the U.S. is a powerful factor. (Needless to say, NBR is the upper line.)

stock chart

The situation in other sectors and industries is similar. Investors are finding stocks they like, not groups they like. And you can’t play this kind of market with sector ETFs. You have to pick your targets.

One thing I enjoy about a stock picker’s market is that it increases the importance of chart reading. Fundamentals are always important, of course, but if you want to know stocks are actually doing well in this kind of market, it’s best to go to the charts.

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.

paul goodwin

Paul’s Comment: I commenting first today because I love this quote. It’s from A League of Their Own, the 1992 movie with Tom Hanks playing Jimmy Dugan, the baseball veteran who manages a women’s team during WWII. Jimmy is talking to a woman ballplayer who’s announcing that baseball is too hard, and she’s leaving. Every time I read it, I know that it applies to many difficult enterprises, but my mind always turns to stock investing. I know that anyone who says that any kind of investing is easy is full of beans. But I also know that getting it right is a hugely satisfying accomplishment.

Mike’s Comment: Beyond just the satisfaction of accomplishing something difficult, there’s also opportunity. Let’s face it, when something is confusing and/or difficult, many are put off. And when so many are turned off by something, that leaves more than a few stones unturned … resulting in big opportunities for those who love the treasure hunt of the stock market. That’s how I look at the challenging aspects of the market; bear markets, lousy earnings reactions or just a plain bad few months, all of these sow the seeds of better performance in the future.

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 6/16/14 – Uber Changes the World

Cabot Stock of the Month’s Chief Analyst, Tim Lutts, writes about Uber and its revolutionary approach to disrupting the taxi industry. Tim also gives the fifth in his series of “10 Stocks to Buy and Hold Forever.” Stock discussed: 21 Vianet (VNET).

Cabot Wealth Advisory 6/17/14 – One Stock with a Great Story, Numbers and Chart

I write in this issue about the danger of relying too much on story along when picking stocks. Unless that story stock also has sound fundamentals and a supportive chart, it’s a bad bet. I also give an example of a stock that has it all. Stock discussed: BitAuto (BITA).

Cabot Wealth Advisory 6/19/14 – What the Apple (AAPL) Stock Split Means

Growth expert Mike Cintolo runs down the implications of Apple’s recent seven-for-one stock split. While frequent stock splits can be a bearish sign, Mike sees AAPL as a nice, dividend-paying large-cap stock. Stock discussed: Surprise! Apple (AAPL).

Have a great weekend,

Paul Goodwin
Chief Analyst of Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory


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