This webinar was recorded on July 23, 2019
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slides here.
Nancy talked about where to make money, no matter what your investing style is. PLUS she shared the best top Growth, Value, and Income picks so far this year!
Webinar Transcript:
[00:00:00] Hello and welcome to today’s Cabot Wealth webinar. Top Stocks to Make Money Now, for Any Investing Style. I’m your host Chris Preston chief analyst of the Cabot Wealth Daily advisory and managing editor here at Cabot Wealth Network. With me today is Nancy Zambell chief analyst of our Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks newsletters. Today Nancy is here to tell you which investing styles are best for the current market how to diversify how to manage your stocks and which stocks she likes best for growth value and income investors.
[00:00:34] This is an interactive webinar which means we’ll be fielding your questions after Nancy’s presentation. So if you have a question feel free to ask it at any time and we’ll try and get to as many of them as time allows once Nancy wraps things up. Just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio. First let me introduce Nancy. Nancy has spent more than 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications including Undiscovered Stocks Untapped Opportunities and Nancy’s Zambell’s Buried Treasures Under Ten Dollars. Nancy has worked with moneyshow.com for many years as an editor and interviewer for their onsite video studio. As a lecturer and educator, Nancy has led seminars seminars for individual investors at the National Association of Investors Investment Expo and the money show. She has also taught finance economics and banking at the college level and has been quoted extensively in The Wall Street Journal Investor’s Business Daily USA Today and Businessweek. And today she oversees our Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks newsletters here at Cabot. Long story Nancy knows what she’s talking about when it comes to investing regardless of style. So I’ll step aside and let her do just that. Nancy take it away.
[00:01:53] Thank you Chris. Boy that sounds like a lot of accomplishments for somebody just 21 years old. You can laugh now if you’d like. So thank you very much. And welcome to our webinar. This is the first one that I’ve done for Cabot so hopefully we’ll do OK. Today there’s quite a few things that I want to talk about. But first I’ll start with this. Every year in January I ask our 200 plus contributors to my two newsletters for their favorite stocks for the next year. And you know it’s a real hoot sometimes some of the things that they send back. We get a lot of blue chip stocks of course how household names that you all would recognize. And we get some really tiny microcap companies that get out most if you probably won’t invest in. And then we get a lot of companies that just do really really well that you may not have heard of. And this year I have to tell you that the contributors just hit it out of the ballpark. Our stocks have done so well this year and of course the markets have done well too. Sell I’m going to talk a little bit about our best of the top picks. We’re also going to talk about additional growth value and income picks that we have from our top picks. Going to talk about the styles that are best for this current market going forth through the end of the year. And then I want to discuss a little bit about diversification versus just choosing one style. And not to take anything away from anybody’s newsletters because we know we have a plethora of newsletters here at Cabot that are devoted to one style. Many of you I understand are subscribers to all of them which is a good way to diversify your portfolio. And lastly I’m going to talk about know when to hold them and know when to fold them. In other words when do you sell. So let’s get started.
[00:03:35] So so far the biggest winners this year since January is IIPR and that is Innovative Industrial Properties. And it is a marijuana REIT and that was picked by Tim Lutts our chairman of the board now and also writer of several newsletters at the company. And that one gained 141.9% which is a huge amount and I think Tim was a little leery when he first picked it because the marijuana stocks are incredibly volatile. But this one has done very well. It’s pulled back just a little bit. It’s trading at about 113 right now but it’s still looking very very good for the year going forward.
[00:04:16] The next one is Starbucks which was recommended by Chris Preston who is our moderator today. That one gained 33 percent. I guess I don’t need to tell you really much about Starbucks. The stock is still going strong at $89 a share. The last one from the dividend letter is APO which is Apollo Global Management and that is an alternative investment company. And one of the things Crista Huff from Cabot actually recommended that at the Cabot Undervalued Stocks. And I’m trying to find my here we go. So she said one of the thing that’s interesting about this one is on May 2nd Apollo announced the company will convert from a publicly traded partnership to a corporation during the third quarter of this year. So that should really increase the awareness of that stock. So it’s up about 32%. It’s currently trading at around $35 a share. And from our Wall Street’s Best Investments newsletters the top three picks were Catasys (CATS) and that is a company that’s in the health care field and one of the things that they do is it’s a proprietary data analysis platform. So they do predictive modeling techniques to try to identify individuals within healthcare plans that suffer from chronic conditions. So yeah it’s true. I mean we’re all going to have to start paying more for health insurance and the sicker we are the more we’re going to have to pay. Like it or not that stock is a worthwhile stock to be in. It’s gained 88.5% so far and it’s trading around sixteen $16 a share. The second winner in the investments newsletter is ARWR and that is a pharmaceutical company. Arrowhead pharmaceuticals. So they do a lot of gene therapy. That’s what they’re known for. They’re up 81%. They’re trading around $29 a share right now. The next one is BRSS which is Global Brass and Copper up 60.6%. That one was recommended by Jeffrey Hirsch of the Stock Traders Almanac. If you’ve guys have been around for a while you know that Jeffrey’s father actually founded that newsletter and they are one of the best newsletters ever for data on the stock market in individual sectors. They produce a stock traders almanac book every year which they kindly send to me. And it’s just fascinating the research they do. Oh and I should go back up just a step that ARWR are was recommended by William Velmer. He’s with SA Advisory and he actually focuses on a lot of microcap companies and he has a fantastic track record. So if you want to be a little speculative he’s a really good newsletter to own. But back to BRSS, its not a mining stock. It’s basically a converter fabricator and processor of copper and brass products. And Jeffrey recommended it more as a seasonal trade but as you can see it’s up 60.6% and it’s trading around $44 a share right now. So those were our top three picks from both of the newsletters. And in addition we have some other picks that have done very very well too. And the first one is Match Group (MTCH). You guys probably all have heard of that. It’s one of those online dating things. I say things because I look at them and think oh my gosh I can’t imagine anybody doing that but people do do it. And it has Tinder is one of the the websites that offers Match. Plenty of Fish, OK Cupid, Pairs too and if you watch TV much you’ve seen the OurTime commercials. But match right now is up 55 % from the recommendation in January. It’s trading around $75 a share now. And it was recommended by Jim Woods of Bulls Eye Trader. The next one is Advanced Micro Devices (AMD). That was recommended by both Joseph Parnes of short X market letter and Gene Inger of the Inger Letter. And it is up 54% since January and that one is a computer chip maker and it’s trading about $33 a share. The next one is Motorola Solutions (MSI). It is up 48% year to date trading around $169 and continuing to increase. And they focus on communication services primarily to governments and police agencies and large corporations as well as wireless providers. There’s a big catalyst coming their way. The first net broadband which is going to be connecting the public service agencies and that should help this stock considerably. And that one was recommended by Harry Domash of Dividend Detective. The next one we move on to value stocks and of course JP Morgan Chase you all know is a big money center bank that was recommended by Martin Fridson from Forbes income securities. It’s up 12.7% year to date trading around $116 a share. Next is Miller Industries. And that was recommended by John Reese of validea hotlist newsletter and they basically make tow trucks and equipment. They’re up 11.7% and trading around $31 a share. Next is AT&T everybody knows that company. It’s up about 10%. It yields 6.35% currently. And Ben Reynolds of sure dividend was the adviser that recommended it and he still continues to think that the shares at $32 have been they pulled back a little bit. He continues to think that it’s very undervalued company. Next income picks. Kimco Realty (KIM). And that has gained 19.7% Year to date. It was picked by Brad Thomas of Forbes real estate investor currently trading around $18 a share and it’s a shopping center REIT. Primarily those new shopping centers they’re building that are sort of outdoor malls instead of the old the indoor malls that most of us grew up with. Algonquin Power (AQN)a utility recommended by Vivienne Lewis of global investing trading around $12.50 a share and it’s up 19.3% year to date. The last income pick is Starwood Property (STWD) and that is a REIT recommended by Tim Plaehn of dividend Hunter. They primarily own commercial property mortgages and they’re up 16.2% year to date and currently trading at around $23 a share. So those are the we have a lot of top picks. I think we had about 70 between both newsletters but those are the ones that I really feel will continue to do very well this year. And then I sort of after that I kind of looked at what these sectors were for the current market and where I thought might be the best ones to look at. And so we’ll start first we have four REITS, financials, consumer defensive, and healthcare companies. So we’ll start with the REITs. And of course those are real estate investment trust and the best thing about REITs is that the government requires that they return 90 percent of their income back to investors. And you can do very well with them. They almost always pay good dividends. They don’t cut dividends very often. And when the time is right you can also make a lot of money off of appreciation with them. At the first of the year as you can see on the chart around the end of December the REITs really took a dive. And that’s because there was so much talk about continuing interest rate increases from the Federal Reserve. Of course that’s kind of gone by the wayside now and and people are now thinking well you know that rates are have stabilized a lot. Probably not going to do another rate increase for a little while anyway. So the REIT charts look pretty good. And two of the REITs that were recommended as our top picks are Sabra Health Care REIT (SBRA). And that was picked by John Gardner of equity research and portfolio evaluation. It was up about 13 % in midyear. And John still thinks that the REIT industry is going to continue to do very well. That this REIT will outperform all of them. He believes that the companies fundamentals are improving. The dividend is sustainable and it continues to have a lot of investor individual institutional investor support strengthens its balance sheet. It owns right now about 693 properties primarily in the senior housing and skilled nursing facilities with near 90% occupancy and of course just as our population ages that’s just going to continue to get higher and higher and higher. The next one is Starwood Property Trust (STWD) mentioned it a few minutes ago recommended by Tim Plaehn of the dividend hunter and he said in his update that the big first quarter recovery propelled the share price of Starwood too. And it has an over 8% dividend yield and it is a finance REIT. As I said originator of commercial property mortgages one of the largest players in its field and they typically make large loans with specialized terms which Tim feels gives them a competitive advantage over their competitors and they have been doing a lot of acquisition and in most recent years. They paid a 48 cent per share quarterly dividend since the 2014 first quarter. And he believes that the stock will eventually return 20 more than 25% this year.
[00:13:36] The next sector is financials and of course financials have their problems because of what was going on with interest rates. Also just like REITs do. But they have stabilized also since the rates have lessened. The rate increases have lessened and they actually are looking to maybe lower some rates in the near future.
[00:13:57] And the two companies from there. First U.S. Bancshares (FUSB) was recommended by Benj Gallander and he’s the editor of contra the Hurd newsletter. He focuses on a lot of small cap companies too. And this is a bank that was founded in 1952. It’s done very well it’s up about 16% since the beginning of the year. They had a recent takeover of people’s bank. They are doing really well financial ratio wise but they’re still trading well below the book value of the company. Insiders own about 5.8% Of this bank and they’ve had the same CEO since 2011 which is pretty good for banks because they do a lot of changing of CEOs. Next is Midland Capital Holdings (MCPH) and that was chosen by Doug Hughes of Hughes investment management and Midland is a very undervalued stock. Insiders own more than 50% of this company. You have to be careful when you look at insider ownership of banks because sometimes at the if the founding family has a large amount of shares they will often classify those as institutional and they’re not they’re considered insider ownees. A lot of the time when you see a bank with a lot of insider ownership you think oh wow that’s really great then it can it can be both ways because if the family doesn’t want to sell and they get some takeover possibilities they probably won’t sell. But in this case it sounds like the bank is maybe at some point time interested and that because the top two owners are both in their mid 60s now and it’s one of the few banks that never took TARP money when we had the recession. So it’s always been very well-run. There are some banks in its market that are closing branches like Fifth Third Bank Corp so that really helps MCPH also. And it says the mergers in the banking industry continue to grow like like rabbits. There’ve been over 25 deals so far in 2019. You know banks are basically trading at a pretty low P/E right now. So that bodes well for takeovers for really both of these banks.
[00:16:03] Next is consumer defensive and you can see that those stocks have become more popular when the economy gets a little uncertain or people think it’s got you know burning on all burners too fast. Then people start worrying about getting a little defensive. And honestly these are the kind of stocks that are fairly good most of the time because no matter what you still have to buy your toothpaste and deodorant and all that stuff. So the one stock which of course I know you all know was Altria (MO) what I call the cigarette company. I’m not a big fan of certain stocks but they do make money for you and this one has done very very well for investors. Now this year so far Altria is down a little bit.
[00:16:44] But the the contributor who recommended it Bob Howard at positive patterns is a big big fan of the stock and he thinks that it’s going to do very well within the whole marijuana industry that Altria is going to be selling the Willie Nelson reds right next to the Marlboro’s at your local 7-Eleven. He thinks that vaping cigarettes and pot will be the big business profile of this company by 2025 and it will be very very profitable. Currently there’s almost 300 publicly traded pot companies and of course most of those are real microcap. Some of them will never have any money. It kind of reminds me of the old days when we had the tech boom and bust and we had all of these companies that pretty much disappeared overnight. It’s probably going to happen at some point time with the marijuana stocks too. But as long as people continue to continue to legalize the recreational marijuana in so many states now you know that right now there’s no end in sight to the growth. Next we have health care. Health care has not been the best sector to be in this year. It Has been very volatile as you can see from the chart but it’s really starting to improve because there are a lot of demographic factors that figure into it. The political wrangling in D.C. has really hurt health care companies. All of this socialist you know Medicare for everybody. I mean that’s probably never going to pass in our lifetimes. But you know that’s going to impact some stocks. The biotechs are still doing very well. Most of the pharmaceutical companies and the company that I picked to show today is a medical device company and it’s actually my recommendation from the top picks and it’s up about 16% so far this year. It’s Smith & Nephew (SNN) and they do make medical devices primarily for hips and knees. So the demographics really play well there because as we older our population ages in the US and really around the world. You know I go to a cocktail party where I live out here in Tennessee and all they talk about are you out replacement of their hips and replacement of their shoulders and and knees. And so it is a huge huge business. And once you reach you know that 60ish 70 level that seems like everybody seems to have to get something replaced we’re all going to become bionic I think at some point in time. But it’s done very well compared to the health care sector as a whole which is only got 9.1% For the year. They sell their products in more than 100 countries around the world. And in addition they provide advanced wound care products for the treatment and prevention of acute and chronic wounds which is another issue today. Company is growing organically and also by acquisition for its first quarter sales were $1.2 billion and right now it’s followed by about 13 hedge funds who have increased their purchases of the stock by 18% over the previous quarter. So that one’s doing very very well too. Don’t forget to write your questions in if you have any questions along the way and we’ll get to those at the end of this seminar. OK. Next I want to talk to you about diversification versus choosing one style. So what’s really important. I get a lot of people that come up to me at the money shows and they say oh I love this stock so much. You know it’s 90 percent of my portfolio and it about gives me a heart attack because you never really want to have your portfolio consisting of only one stock or only two or three stocks but it’s up to you to decide how many that you really can manage. And a lot of investors can manage 50. Every time I go to our Cabot summit in August I always ask everybody how many stocks do you have how many stocks do you have. And I get anywhere from 10 up to 100. Hundreds probably too many for most of us unless that’s what you just want to do all day long. But you know manage to put in 15 25 stocks. That’s probably about good for just about everybody. And you can kind of take care of those and monitor them on a regular basis. And then of course within that stock group you want to diversify your portfolio so that it reduces your risk and certainly diversification can lower your returns because you know your high flyers are going to do really well and your steady ones are going to do okay. The high flyers may also not do very well if they’re more speculative but yet really in the long term it’s really better diversified and that means you need to diversify with non correlating assets which theoretically would react differently to different market cycles. So if you’re in a different market catalyst if you’re in a real growth growth growth mode you know maybe your dividend stocks aren’t going to do as well. Only that certainly hasn’t proven the case so far this year. The dividend stocks have done very well. But you know just try to balance some out. Some growth some value some dividend so that when you when the market action does change and all of a sudden value stocks are out of favor like they were a couple years ago or even last year now they’re coming back into favor again. You know they might drag your portfolio returns down a little bit but then your growth stocks will take over and increase your portfolio returns. The main point here is just not to overdo one particular sector in your portfolio. And so I would recommend that you diversify between small mid and large cap stocks. Companies in different sectors and value and growth stocks. You should have kind of have a little bit of this and a little bit of that in your portfolio and it just helps it helps you sleep a little bit better at night. Back in the heyday of the boom and bust of the tech stocks back in 2000 1998 2000 I would always ask people in my money show seminars you know what their portfolio looked like. I mean they were all overloaded with tech stocks. Most of them didn’t have any idea what the companies did. And you know to their defense you couldn’t understand what the companies did. When I would go and visit companies for my newsletter I would say I have no idea what you do. Can you tell me in 25 words or less so I can explain it to my 75 year old subscribers what exactly you’re doing. So it’s never a good idea to buy companies that you don’t have some sort of understanding of what they do because otherwise how are you going to determine when you’re monitoring them whether the latest news will affect your stock or sector or not. But anyway it’s a good idea to diversify all the way around.
[00:23:10] All right. And the last segment I’m going to spend a little bit more time on. And this is no one to hold them and know when to fold them. So my motto is always it’s OK to fall in love with the company but not the stock. Do you have problems selling your companies. Almost everybody I know has a problem selling the companies. And when I was writing my undervalued newsletters people would come up to me and say well you know I have loved this company and made so much money out of it. I just really don’t want to get rid of it. Do I have to sell it because I may have said go ahead and sell your stocks. Well no you don’t have to sell it. But there were some rules to follow and this is not on the slide. But here is really when you know you should sell your company. If the fundamentals of the company have deteriorated. So now they’re not growing at the growth rate they were growing before. Whether its sales on an earnings basis or maybe they have good sales but they’re not making as much money off of them. Well what’s the question there. Why aren’t they. You know if you’re if you have increase in sales you can understand what the new company that they’re not going to make any money. But if a company’s been around for a while you know their earnings growth rate should be pretty close to the revenue growth rate. If the price earnings ratio goes too far beyond the normal range of the company on the upside or on the downside. And if you go to Reuters.com and put your company’s symbol in you can see what what P/E rate ratio is for your industry for your company for that particular sector. And when you buy a company you should kind of keep an eye on what is the P/E at the time and you kind of look at that over a period of time and of course if the P/E is going up your stock price is probably going up too. And we’ll talk about target prices in a minute. Again I always get a question what is a good P/E. Well in the old old old days when I started doing this back in the I’m not going to say when that was a long time ago. P/Es under 10 were considered to be undervalued companies and over 30 were considered considered to be overvalued and in between was kind of the hot spot to look for companies. That’s totally changed. Its nothing to see P/Es of 65 for a technology company. And that doesn’t mean that’s bad. A low P/E doesn’t mean it’s good. You have to look beyond those numbers. It might be a low P/E because of the dog You know and it could be a really high P/E because they’re just growing so rapidly. So you have to compare the P/E to your company for the last three to five years and also to its industry.
[00:25:40] If you’re toward the end of the cycle with the cyclical stock and you know what those are aluminum companies steel companies heavy industrial companies. You know in the growth mode of an economy they do very very well. When the economy starts to peter out those companies don’t do as well. So you have to kind of look at that. I remember sitting next to one of the guys whose father founded Motorola on an airplane a few years ago. Well more than a few years ago its probably been twenty years ago. We were talking about Motorola stock and he laughed he said. Here’s what I do. He says when it gets below 55 I buy it when it gets above 80 I sell it. And you know back then Motorola was a totally different kind of company than what it is today and of course it’s been split into a couple of companies. So but on a cyclical company I mean you could look at Alcoa shares and you I guarantee you every time the economy starts blasting out you’ll hear the heads on CNBC going Alcoa’s up Alcoa’s up. As soon as you see Alcoa’s earnings go up then you know that cycle is going to be very very good. And you can if you have a cyclical stocks you can chart them out and just really look at them and say OK here’s the cycle here’s when I know I have to start selling it. Unless you’re just somebody that wants to be in a stock for 30 years most of us don’t do that today. After a turnaround has been completed. George Putnam the third writes The Turnaround Letter and we quote him quite often in both of our newsletters and he’s really good at finding a company that’s down on its luck. There are a lot of companies down on their luck but he also finds that one that look like they’re going to turn around. And of course if you could buy them at that low level then you can do very very well. And of course if the turnaround has been completed, you know what take your money and go. Go to the next one.
[00:28:10] Next at the end of the second phase of rapid growth startup companies have just most of them have just fantastic growth rates in the very beginning cycle but the cycle for a company’ stock is sort of like the same as cycles for economic cycles it’s a bell curve you know once they get past that hump on the top of the bell curve and start going the other way they’re really no longer a growth company. And so you may decided at that point in time should I unload them or should it continue to stay stay with them. Lasty if you’re holding the stock you bought as an asset play waiting for the raider to come in and pay you a premium then go ahead and sell it. And we’re seeing some of that today. We have a very active Imani environment. And so you’re seeing companies that are being bid up you know when they’re bid up just most of the time when that announcement is made it’s usually time to sell the stock. I mean yes sometimes the advisors will say well hold on for a little while we’ll see what happens when it goes in the new company. But they’re often bought up by much larger companies then what they are.
[00:28:26] So then you’ve got to think about analyzing that larger company that’s doing the purchase to kind of find out if those companies are going to is that a good investment is that big company. And it makes it tougher because many of these big companies are not pure plays. They’re companies like you know Pratt Whitney which is owned by UTX United Technologies I mean they make airplane engines and they make space shuttle components and they make elevators and they make air conditioners. You’re analyzing a company that has that many sectors you’re analyzing that many sectors and that’s harder to do. Some you know some people like to keep a contingent of those companies and that’s fine. So. So anyway that’s sort of how you look at when you sell. And then lastly if the stock doesn’t follow into any of those categories I just talked about here’s my remaining three test. Are all the reasons that you originally bought the stock still in place. If they’re not get rid of it. Is your price target still valid. And we’ll talk about that in a moment. And thirdly can I make more money by retaining this stock or it could I do better by substituting it with another investment. You know you may have a stock that you set a target of 30 percent return and maybe it blows through that target really fast. Well then you’ve got to think about well why did it blow through the target really fast. Is that a good thing or is that a bad thing. When that happens to me I usually sell at least half. If I still like the stock I’ll sell at least half and let the rest of the money ride on it. So let’s talk about actually setting price targets. We’re going to talk about that stop loss orders and monitoring your portfolio. Now all the newsletters that I cover. Two hundred and some. I mean I’m looking at about a thousand newsletters a month. I find that there’s only a handful of people that really set price targets. Maybe less than 20 percent. And I’m not saying that you have to do that but that’s my way of disciplining my investment strategy. So let’s talk about that.
[00:30:25] So I set my price target the day that I actually buy the stock and I base it on the current price earnings ratio of the stock and what it’s projected earnings are over a specific period. You know for most investors three to five years is gonna be pretty good. For newletters you know there are some newsletter editors that keep the same stocks in their portfolios for 20 years. And hey if you’d like to do that if it’s making money for you that’s fine. But normally in the newsletter business subscribers actually want some action in the newsletter so they require that you turn the portfolio a little bit faster than that. Usually 18 months to two years.
[00:31:01] So this is just a little example and I’ve given you the sources there where you can find this information. So lets just take an XYZ company with a share price of $45.52. The current price earnings ratio is 12.9. U.P.S. for the last four quarters is 353.
[00:31:19] Now you can base this on this kind of EPS which is called a trailing EPS. Right. When you’re comparing ratios of different companies. So you have three companies that you’re looking at to buy. You want to make sure you’re comparing apples with apples and not with oranges. So look at the websites and see how they calculate the P/E. Is it trailing. Is it future for what they call forward P/E. Is it just a calendar year P/E. So you want to make sure as I said you’re comparing apples with apples. Five year earnings annuals five year annual earnings growth rate. And that’s another one that you can get off Reuters.com. They have about 20 or so ratios I think that they can do comparisons with. So we’ve got those three things that’s really all that you need to know. OK so scenario one we’re going to project what the future earnings growth is at that rate that its currently growing at. So we go year one year two year three so now we know what the EPS is. Then we’re going to do a scenario two. An earnings growth rate higher in this case 25 % instead of 21.3%. So you see those three EPSs.
[00:32:25] And the last I think that was supposed to be three wasn’t it but anyway the last one is a lower rate 16%. So those I don’t know if you can see from the I guess you can see that whole slide. So that has those three things. When you put them into the equation. The current P/E times the three year EPS projection you get what the projected price would be under each scenario. And so you determined for yourself and we’ll go back a minute.
[00:32:54] So $45.52 was our original share price. So then you go back to your projection. So if you expect that the company is going to continue to grow with the rate it’s growing now that $45 could turn into $83. If you think it’s going to grow at a little bit higher rate. Remember 25% versus 21.3%. We have an $88 almost an $89 share price. And if you do scenario three which was a lower rate of 16% you would get $71. So that kind of gives you an idea of what to shoot for. When I buy a stock I want the stock to at least grow by 30% by the time I sell it because honestly it’s just way too much work to try to figure out for 10%. I mean you look at analyst projections they’re always extremely conservative. If you go into Yahoo and you see a target price for a company it’s usually I don’t know two or three percent higher than what your price is right now. Well really why would you even want to buy a company like that. That’s not going to make you a lot of money. So you have to decide in your mind OK I want 30% return in 18 months or I want a 50% return in five years or you know whatever your time period is. You know best of what you’re holding your best holding period is for your stocks. So you look at that and you say OK let’s say we bought XYZ company and you know we’re going to be conservative. We’re just going to say it’s going to grow at what its growing now so that means in three years it should be $83 so it’s almost doubled which is pretty darn good. But so what happens if that $45 stock in two months suddenly goes to $90. Oh my gosh. Let’s go find out what’s happened to it. So you’ve got to go look between the lines. Maybe it got a takeover offer. Hey if it did and it went to $90 I’d sell that thing right there. It could just be they bought another company and this company really melds in well what they’re doing it increases their product offering and their brand exposure. But if if if it went up that much in two or three months I’m gonna sell at least half of it. I might sell the whole thing. It just depends on the size of the company what part it plays in my portfolio. But I just kind of looked at to see it gives me setting a price target gives me somewhere to go and say you’re three years down the road and you’re $45 stock is only at 60 and you’ve kept it for any number of reasons. You know what. Just bail out because it’s not going to make you the money that you want and you probably want to bail out before that three year period. So you do want to keep an eye on the stocks just to find out. But it is just the measure of discipline. You can set price targets on whatever brokerage scenario or brokerage system that you’re looking on and it can be a hard target where it gives you a little ring and a little balance is hey your stock is approaching its target or it could just be a mental target where you think oh boy look at that it’s getting out there maybe I should take some of my money off the table. You have to be very disciplined in your approach to the stocks. You really cannot fall in love with the companies and it’s just as hard for me as that is for you because I’ll find a company I love so much that I really never want to not own the stock. And that’s OK. But just keep taking money off the table as you go along. Nobody says you can’t keep it for 20 years. OK. Next is setting stop losses. And again most of the contributors most newsletter writers most financial analysts do not set stop losses. I like to set them because again it’s a it’s a discipline for me to figure out. It makes me pay attention to what’s happening to my stocks and of course you can do this as a hard stop or as a mental stop also and depending on how risk averse you are you can set the stop and also how good the market is. I mean if you’re in a really growth market and you set your price target too low you know you’re not going to be happy and if you set your stop loss too high you’re not going to be happy either. Just say you’re buying a technology stock and you know when tech stocks go up they just go up and say it or if it goes down it can be very very volatile when we’ve seen that happen. So what if your hundred dollar stock goes down to $70 or you know you’re if you set a hard stop you’re going to be out of that stock. But tomorrow it could be back up to 90. So you have to kind of watch which your companies are. If you’re really conservative investors sometimes put a 10 percent stop loss I would not do that in this kind of market at all because it’s just too volatile. Most of the advisors or many of the advisors we have we’ll tell you about stops and I know Cabot does some of that too. And buy up to and those kind of things. So it’s really important for you to consider that. And you know you can start with mental stops and just lay out your portfolio your 15 or 20 stocks and say OK. This is what I bottom at. This is the loss I can live with. If you can’t live with a 10% loss you should not be in the stock market, however, we all know that. So anyway just do yourself a favor and play around with them. And lastly monitoring your portfolio on a regular basis. So this is really important. Don’t be one of those people that buy stocks that never looks at them again and all of a sudden you get your annual statement from Fidelity and you’re like Oh my God what am I going to do now. You know my stock has really gone down. So you have to really look at least on a quarterly basis and that’s you know that’s usually good enough for most people. Honestly if you’re a short term trader you’re going to be looking at them every day. If you’re an options person your’re gonna be looking at that every day. If you can hear my dog barking forget it we’ve got a repairman coming. Anyway when you’re monitoring your portfolio make sure that your stocks have progressed. Make sure that you know if your stocks have progressed rapidly or lost a lot of money if they’ve hit their targets. If they’ve had no movement whatsoever you need to be very interested in finding out why they’re not moving. And lastly do you have a better replacement for your stock. As I said if you’ve got a stock that is growing you know 30% and all of a sudden it’s only growing 10% then you have to look and see what the alternatives are. And fortunately with thousands of stocks trading you can probably find something else to replace it with. So that’s all I have to talk to you about. Hopefully we have some questions and I think Chris has a few words to say to you.
[00:39:17] Yeah yeah thanks for that Nancy. I’m going to give Nancy a few minutes or a couple of minutes to catch your breath before she starts answering some of your questions. We’ll get to those in just a minute. First I just wanted to tell you how you can sign up for either of Nancy’s newsletters Wall Street’s Best Investments or Wall Street’s Best Dividend Stocks depending on your investment style. Here’s how it works. You’ll receive first of all you’ll receive an e-mail in your inbox if you’re listening to today’s webinar with a special discount offer reduced to subscribe. And that’s reserved exclusively for today’s listeners and the new subscribers can try either of Nancy’s advisories for just one dollar for the first month. And again that’s just for those of you listening today and Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks draw on insights research and experience of more than 200 of the top professionals on Wall Street to provide investing recommendations and stock picks and what you get is monthly issues featuring 30 plus top recommendations and advice plus the market sentiment consensus of more than 200 industry expert contributors. You get daily alerts in your inbox featuring new top pick or trade recommendation every day. You get 24/7 online access to the subscriber only website for access to current and past issues consensus picks in-depth reports and more. Also Nancy’s exclusive economic overview exclusive interviews with contributors with her contributors in every issue. So look for that special offer to Wall Street’s best in your email inbox shortly. Now let’s get onto your questions. There’s been a few that have been rolling in. James has been waiting patiently. James had a question about diversification. Nancy what are your thoughts on emerging markets right now.
[00:41:10] Well I love emerging markets almost all the time. Sometimes it’s not you know the most attractive time to invest in. I mean Carl Delfed who writes our newly named what’s it called now Chris Cabot Global Stocks Explorer. Thank you and that used to be Cabot Emerging Markets Investor. He spread his wings out. Carl I’ve known for many many many years and he really knows stocks around the world. And you know today we live in a global economy. So pretty much information is known no matter what it is. The only problem with emerging market stocks is that you have to make sure that the accounting principles are that are being used are the same as what we’re using. That’s why in America that’s why a lot of people choose to invest an ETFs or mutual funds in the emerging markets arena just because those people at those research firms have vetted those financial statements. And it’s hard also just to buy directly from an exchange in a country countries are opening up more and more. But it’s still pretty risky to do that. So if you’re not a pretty savvy investor in foreign stocks I think ETFs mutual funds are really subscribing to somebody like Carl or many of the other emerging markets people you can find some really good recommendations. Yeah they’re more speculative but boy you can rake in some dough on those things.
[00:42:29] Yeah. Good question.
[00:42:31] And here’s a question about what what websites and resources do you like Nancy besides Reuters and Yahoo.
[00:42:40] OK. Well I use a lot of different websites as you can imagine. There’s websites for insider’s. Insider monitor is is a good company. Also dividends there’s Dividend Channel which is a really good website. And sometimes with the Canadian recommendations I go there because Yahoo doesn’t really tell me a whole lot about the dividends on the Canadian recommendation. So I’d look at those and Yahoo is certainly not what it used to be. It’s lacking a lot of categories that it used to have so I’ve had to go out and find other ones. Market Watch is a really good website. Investor’s daily also but I think you have to be a member for some of that. And of course Bloomberg is also a really good one and I look at all of those for news about the stocks too because sometimes other websites will cover news that Yahoo or Reuters doesn’t necessarily cover. And then you can also go to trade group websites. So if you’re interested you know in an aluminum company you can google aluminum trade group and you will find out some of the latest information about that particular sector. So don’t limit yourself. Brokerage companies research analysis is very good. I don’t think you know too highly of their price targets as I said a little while ago. But the brokerage industry ports are excellent excellent sources for information on that particular sector or particular industry.
[00:44:10] Question from Barbara. Barbara says you mentioned Alcoa. It’s been dropping most days. Should it be held or sold. Do you have a feel for that right now Nancy.
[00:44:21] Well I don’t it’s not a stock that I typically cover but I mean if it was it’s a cyclical stock of course and you know even though the economy continues to do well if I owned it I’d probably watch it for a little while and if it continued dropping in the next week or two I’d probably bail out of it.
[00:44:38] OK. And actually Barbara asked also the question about whether Starbucks should be held. I guess I can chime in on that. Why don’t you get to that question Chris.
[00:44:49] That was my pick. I’ve been wondering that myself lately. You know it’s it’s it’s hanging in there for now. I don’t think it’s going to go up another 33% before the end of the year. But it seems to still be on a good trajectory and it might be sort of catching its breath at the moment. It’s pulled back a little but not much and what it’s pulled back from is essentially all time highs. I think it’s gone from 91 to 89 in the last week or so. So I’d hang in there if you already own it and if you don’t it could be a good time to buy because it could just be catching its breath for another leg up. But again I don’t I don’t know if it’s going to go up 33% again before the end of the year. That’s just my take.
[00:45:32] You know they’re still branching out and expanding. In fact in my market area they’ve had deals with Kroger stores to have the Starbucks within the grocery store and they’re changing that contract now they’re going to Food City which is a different food store in our area and Food City seems to have more locations than Kroger and I don’t know exactly how many but I thought well that’s kind of interesting.
[00:45:56] Yeah yeah yeah. It’s just a good solid company and people aren’t going to stop drinking coffee that’s for sure.
[00:46:02] Now and Isn’t it incredible what they’ve done with four dollar coffee.
[00:46:06] Yes it is. Let’s see. See here’s here’s a question. Let’s see. Do you do you pay much attention to interest rate hikes or cuts or do you sort of respond if the market responds.
[00:46:27] I am guessing that the question means to a portfolio in general. Yeah yeah yeah I think it’s one of those overtimings. It’s not something that I panic at every time that an interest rate increases but I’d look especially because I love REITs. I’ve always loved REITs and I like MLPs and I’d like all kinds of partnerships because they pay such great dividends. So if I see interest rates increasing a lot I’m going to kind of look at those particular companies in my portfolio and try to decide whether you know how safe they are and what their cash flow looks like how an interest rate increase might impact them. Certainly if it’s a mortgage REIT like they start what we were talking about today even though that’s commercial mortgages interest rates going up or not the greatest thing in the world to happen for those kind of REITs because their whole portfolio was made out of interest sensitive properties, interest sensitive mortgages I should say. Going down that going down doesn’t really spike attractiveness of those kind of companies either or banks but going up can make a big big difference whether you’re in those particular kinds of companies. Now you didn’t ask this but if a company’s increasing its dividend or decreasing or cutting its dividend that’s another thing to look at. Rising dividends are always good for the investors. Steady dividends are great. People like to keep their dividends steady. They have the dividend aristocrats that have actually increased their dividends for a twenty five year period or more and they’re more and more those companies all the time. When a company cuts its dividend that’s a real warning flag. It could be just a temporary thing. There’s a good reason for it. You just have to research that. But if it’s pretty drastic or they totally eliminate their dividend then I’m thinking about bailing.
[00:48:19] OK. This is a question about investor sentiment which you track. Is there a point where you think investor sentiment can be too bullish or too high to where it might concern you.
[00:48:33] Yeah and especially if it’s over a period of time again. I don’t ever literally look at anything on a one day period or a one quarter period. But you know we right now we’re extremely bullish with investor sentiment and that’s institutional investors as well as individual investors. But last month it wasn’t that bullish so it’s just really spiked recently. And the market has gone up quite a bit. If that continues like that for the next four or five six months then I’m gonna be really concerned. Usually when investor especially individual investor sentiment becomes very high for a sustained period of time it’s usually telling us it’s probably time to go through our portfolio and weed out the weaker stocks just because investors just typically over time don’t do as well as the institutional investors do. They don’t have access to all the known information.
[00:49:27] Great. So I think we have time for one or two more questions. See here’s a question just about investing styles. Do you have a particular style that you gravitate to or do you are you truly just a mix of various styles like you mentioned earlier.
[00:49:47] Yeah well I make myself be a mix of styles but my heart belongs to value companies and it always has from the very beginning my first newsletter was some undiscovered socks and I used to go and visit every company that I put in the newsletter and that was quite an education. You know if you buy low and sell high all day long you can do really really well. But those companies that are smaller. That’s my favorite niche. It’s not really the micro caps but a small to mid cap company primarily midcaps are my favorites because they’re usually pure plays. You can read their financial statements and say oh I can see exactly what they do. They make bicycles or they own amusement parks. I try to stay away personally from UTX kind of companies. I don’t really like utilities I’ve never cared for utilities that much. I understand that dividends can be very very good with them. Their so highly regulated and it’s really difficult to figure out what the regulators in each state are going are going to do. So that those mid-cap companies that I can see exactly at a glance what they do and see how they can grow and what catalysts would increase. And they generally will grow more than 30% which is my minimum price target as I said. So yeah that’s where my heart lies but they have to have growth as well as just being undervalued.
[00:51:10] One last question another one from James. Just before the buzzer here. What are your thoughts on preferreds.
[00:51:17] Well you know Marty Fridson of Forbes Income Securities is our main contributor for preferreds. And he loves preferred stocks and you know why not have a few in your portfolio. I would not entertain having a portfolio completely made up of preferred stocks but you know they can have some pretty decent returns most of them return over 5% and some of them have different options on them for what happens when the preferred runs out and that kind of thing. But I just think for the most part you know why not especially as we get older it’s probably not something that people in their 20s or 30s are really gonna be that entertained with. You know used to be in the old days when you looked at your financial adviser and said well what percentage of my portfolio is should be in stocks and what in bonds. It was always you know heavily loaded with growth stocks when you’re young and you become more conservative as you get older and it used to be that when you’re over 65 and you’re ready to retire people would say oh you only want to buy bonds or you want to buy dividend stocks and that’s just not true anymore because you’re really limiting your portfolio returns when you do that. But for the most part you know throw in some high yield stuff and just got to be a little careful with a high yield make sure that there’s substance there and there’s just not just the high yield because those yields can collapse really quickly.
[00:52:31] I hope that answered that question.
[00:52:32] Yeah with some sounds good to me. Well thanks Nancy and thanks for all the good questions today. Nancy if you could just advance to the next slide. I’m going to fill people on on our schedule coming up. We will be back in September on September 12th.
[00:52:51] To be specific at 2 o’clock Eastern with our next webinar this time featuring Tom Hutchinson chief analyst of our Cabot Dividend Investor advisory. So mark that on your calendar. They’ll be talking about a high yield dividend stocks to boost your income now.
[00:53:07] But prior to that reason we won’t have a regular webinar next month as we’re holding our annual seventh annual Cabot Wealth Summit in Salem Massachusetts our home city next month from August 14th through 16th. It’s a chance for you to mingle with individual investors like yourself meet all of our Cabot analysts hear their latest investment advice and stock recommendations and enjoy summer in historic Salem Mass. And actually Nancy will be kicking things off with this is the first time we’ve done this she’s done this with the getting started with investing add on seminar at 3 o’clock Eastern on the 14th and that’s aimed at beginner or newer investors.
[00:53:52] But it’s really open to anyone who just wants to learn a little bit more about investing and you’ll hear some of the good insight that Nancy’s talked about today and more and she’ll be doing that seminar hosting a seminar along with Roy Ward who is our former now retired longtime value expert.
[00:54:15] It’s a great the wealth summit is a great event. If you’re interested you can register at the website right there cabotwealthsummit.com. Now there’s not many spots left. Not much time left. So if you’re interested in joining us please sign up now. And thanks again. That does it for us. Thanks again for joining us from Nancy Zambell and the entire Cabot Wealth Network team I’m Chris Preston. We’ll see you next time.
[00:54:44] Thanks everybody.