The Iconoclast Investor

Today I’m giving you some terms most frequently used when talking about the emerging markets, although Pauls’ SNaC system can be used for any stock. Please leave us a note here with any other terms you’d like defined.

BRIC — The BRIC countries are Brazil, Russia, India and China, and we often refer to the acronym when writing about the emerging markets.

ADRs – Cabot China & Emerging Markets Report recommends stocks that trade on U.S. exchanges as American Depositary Receipts (ADRs), which are dollar-denominated stock equivalents. This avoids any currency risk and gives investors the protection of knowing that the listed companies have met U.S. accounting and reporting requirements.

SNaC — SnaC is Cabot China & Emerging Reports Editor Paul Goodwin’s unique way of determining whether a stock is a good buy. Story includes the basic market proposition of a company, including its products, its target consumers, its potential for huge sales growth, its barriers to entry, its competition, its intellectual property, its management and all the other stuff that you can put into words.

But a good story isn’t enough. A stock also must have good numbers, which are a factual record of a company’s (and thus, management’s) success. Paul looks for stocks that have been growing revenues and earnings for a number of quarters, ideally with earnings (profits) rising faster than revenues (sales). Paul likes to see the rate of growth for both categories accelerating. It’s also nice to have an increasing number of institutional investors and an after-tax profit margin that’s high and rising. And finally, Paul wants a stock that’s liquid–trading at 400,000 shares a day or more–so Cabot subscribers can trade without being worried that the stock will get deep-sixed by one money manager who wants out.

Charts are where the rubber meets the road in growth stock investing. Some highly technical investors don’t even care what a company’s product is or how much money it’s been making.  They think they can tell everything they need just from a stock’s chart. Paul isn’t that confident, but he knows that a stock with a rising price and good volume support must be doing something right.