Stock Market Video
Trophy Growth Stocks
This Week’s Fortune Cookie
In Case You Missed It
In this week’s Stock Market Video, Mike Cintolo discusses the market’s recent failed breakout attempt and the abnormal selling he’s seen in growth stocks. This has him currently cautious but far from negative-there remain many growth stocks in tight consolidations, and if the bulls can produce a real uptrend, lots of new leadership should emerge. Right now, though, he’s buying very selectively, focusing on the best, low-risk set-ups among high-potential stocks. Click below to watch the video.
As far as I know, pretty much every stock investor enjoys seeing a stock go up in price. For most of us, that’s the point. (I’m leaving out short-sellers, of course, but I think of them as a bunch of weird ducks, sorry.)
Value investors, income investors, penny stock specialists, swing traders … we all like to see the line on the graph go up.
When I explain to friends or potential subscribers what it means to be a growth investor, I sometimes give an example or two of a stock that has done really well.
You’ve seen these examples in Cabot’s marketing material for advisories like Cabot Growth Investor or Cabot China Emerging Markets Report. You know « ABC Corp. up 250%!, XYZ Inc. up 300%!. »
But my friends (and potential subscribers) are no dummies, and I can pretty much anticipate what their next question will be. « Yeah, but they don’t all go up do they?! » And this is followed by, « So how many losers did you have to go along with those winners? » I have the feeling that they enjoy asking those questions, like Perry Mason catching a slippery witness in a lie.
But I’ve been at this game for a while now, and what I try to explain is that growth investing isn’t about picking all winners. Anyone who could do that would soon own the world. Growth investing is more like deep-sea fishing for tuna. You spend a lot of time and effort preparing, getting the right equipment, selecting your path, using the right bait and starting your trawling run. And if you come back from your fishing trip with one big tuna, the trip has been a huge success.
Sure, you could have gone to a little lake with a can full of worms and a cane pole and gone home with a whole mess of crappie or perch or bream, but if you’re a growth investor, you’re not cut out for that kind of fishing. You’re willing to wait through long stretches of nothing happening to land one big fish.
I try to explain that the bulk of a growth investor’s profit for the year is made in a handful of stocks that go big. In a good year, there may be three or four; in a bad year, one or two.
And the losers? Well, the only way to make big money in an enterprise where you may have as many losers as winners is to make sure that the losers get cut off quickly. If a stock you have bought rolls over into a correction, you sell it. Your loss limit may be 5%, 10% or 15% below your buy price or it may be a percentage below the stocks’ current price, and you may vary it according to the main trend of the market, your profit cushion or your personal risk tolerance.
But the only successful growth investors I know all have some kind of sell discipline. And they follow it. If you can’t cut your losers short, your career as a growth investor is likely to be short.
I call this little essay « Trophy Growth Stocks » because when I get together with other growth investors (like at the Cabot Investors Conference, which will be held in Salem on August 12 through 14), part of the fun is telling tales of our favorite winners. It’s like showing pictures of your kids or grandkids.
So when you read those lists of big winners in our ads for Cabot growth advisories, you can fill in what’s written between the lines. « The market is a tough place to fish, but Cabot’s growth team knows how to find the big winners. »
Tim’s Comment: Asimov paints a beautiful picture, revealing in the process that he’s a scientist with the heart of an artist.
Paul’s Comment: This sounds a lot like my favorite bumper sticker of all time, which is: « Don’t Believe Everything You Think. » The market (and indeed the world) is trying to teach you something every day. But if you’re not willing to consider letting go of your assumptions, your only success will be that you avoided learning.
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.
Chloe Lutts Jensen, Chief Analyst of Cabot Dividend Investor, challenges your knowledge of the trading symbols of some familiar stocks (and a few funny ones). She also discusses the varieties of dividend stocks available. Stock discussed: Novo Nordisk ( NVO ) .
Cabot Stock of the Month’s Chief Analyst Tim Lutts writes about Cabot’s history and character and also about how our marketing can push the envelope at times … and what he’s doing about it, including our new website. Stock discussed: General Motors ( GM ) .
Mike Cintolo, Chief Analyst of Cabot Growth Investor, goes into detail about important rules for stock holding and stock selling. He also looks for a stock that’s calm enough to buy in these choppy market conditions. Stock discussed: Valeant Pharmaceuticals ( VRX ) .
Have a good weekend,
Chief Analyst, Cabot China Emerging Markets Report
And Editor of Cabot Wealth Advisory