We’ve seen a lot of ups and downs during the past few weeks, but the big picture has not changed much—the major indexes are still trending up, but the advance is very narrow, and rotation among sectors and stocks has been vicious (about 58% of all stocks on the NYSE and Nasdaq are still below their long-term 200-day moving averages!).
In other words, some stuff is working, but you have to be selective and pick your buy points carefully.
If you’ve read my thoughts at all in Cabot Growth Investor or Cabot Top Ten Trader or on Twitter (handle @MikeCintolo), you know I’m a big fan of the liquid leaders. Having most of your portfolio in names like Amazon, Facebook, Google, LinkedIn and similar big, liquid stocks can not only give you lots of upside, but also (because of their great sponsorship and dominant positions in their industries) limit your downside (as long as the market remains in good shape).
And some smaller, faster-moving stocks are also doing well in this selective environment. One of my favorite stories in the mid-cap space is Fleetmatics (FLTX)—it’s on my watch list in Cabot Growth Investor, and it also appeared in Cabot Top Ten Trader a month ago:
“Now here’s an easy-to-understand story with lots of potential. Fleetmatics is a leader in cloud-based software that aids with corporate fleet management, helping companies better manage fuel costs, vehicle wear and tear, and even wasteful idling, while also keeping an eye on unproductive worker behavior, unsafe driving, unauthorized vehicle use and excessive overtime. Simply put, Fleetmatics saves companies lots of money by cutting down on waste and increasing productivity; one example showed that a customer’s $640 investment ($40 per month, per vehicle) saved $4,200 per month! Plus, the company also offers field service management, improving communications, scheduling, and invoices. The fleet management and field service businesses are in their infancy; both have penetrated just 12% to 17% of the North American market (where 90% of its business comes from), so there’s years worth of growth potential left. Another big thing to like is the company’s subscription-only business model—like most cloud companies, clients sign up for initial terms (usually three years), pay monthly and renew at extremely high rates. Fleetmatics has about 90% of its revenues booked each quarter before the quarter even begins! There is some competition, but Fleetmatics is a leader, with 655,000 subscriptions at the end of Q3 producing consistent and fast growth in recent quarters. It’s a great story.”
FLTX consolidated nicely over the past three weeks, and remains in a firm uptrend. If you want my latest advice on FLTX and, more importantly, if you want to discover the stocks where the big money is flowing, I urge you to try out Cabot Top Ten Trader—our system never misses out on the market’s leaders because we specifically look for strength (and then identify lower-risk entry points and loss limits for subscribers).