It’s obviously a tumultuous market environment, so in this week’s video Mike Cintolo takes a few extra minutes to detail his current stance and to offer advice depending on your portfolio’s current cash level. He also offers guidance on shorting (if that’s your cup of tea) and on building your watch list, looking for “early-stage stocks.” Names mentioned include: Salesforce.com (CRM), Oasis Petroleum (OAS), Financials Sector SPDR (XLF), Alaska Airlines (ALK) and Qihoo 360 (QIHU). Click here to watch the video!
The Holiday Season, Black Friday and AAPL’s Chances
The markets are doing a fine job of encouraging investors to contemplate less hazardous pastimes … like bungee jumping without elastic cords, for instance, or removing your own appendix. (The final instruction in the Acme Home Appendix Removal Kit is “Suture self.”) At least in bungee jumping (the kind with the cords), you have a reasonable expectation that your free fall will be arrested before you splat into the ground.
But today, with Thanksgiving just six days away, I want to say a brief word about “The Holiday Season,” in general and “Black Friday” in particular.
The Holiday Season is shorthand for the period from Thanksgiving to New Years Day. This year, that will be 41 days, which is as long as it can ever be, given that Thanksgiving will be celebrated at its earliest possible date this year.
It used to be that grumpy social observers would decry the steady creep of the Christmas shopping season to earlier in the year. But once Christmas advertising galloped past Thanksgiving, the only check on its spread into October was Halloween, and that bastion was overrun years ago. Now, the only check on the proliferation of commercials with sleigh bells and holly into September is the sense of shame of marketing managers, and we all know that marketing people get their anti-shame inoculations every September.
Fortunately, I’m not a grumpy social observer, so you’re spared that annoyance.
For genuine cynics, Thanksgiving, Christmas and New Year’s look like shorthand for (respectively) gluttony, greed and drunkenness. But I won’t go there either.
As a stock investor, the Holiday Season looks like a giant reality check on the mood of consumers. Healthy holiday sales can make a huge difference in the lives of retailers, and the stock market will pay very close attention to shopping numbers, both as they come in week-by-week and as they show up in Q4 and year-end reports.
Black Friday, a term coined in the early 1950s to refer to the wave of absenteeism from American factories on the day after Thanksgiving, has now come to mean the biggest shopping day of the year. That’s a change from the old pattern in which sales would gradually increase as December wore on, with the peak shopping coming on the day before Christmas, when desperate and clueless husbands and fathers would descend on stores in a panic and decide that expensive was better than cheap if you didn’t really know what the woman in your life might want.
I respect the Holiday Season for its economic impact. But I love it for other reasons, which I will lay out in future issues.
Today, I want to end with a prediction. Apple (AAPL) was trading right at 700 in September, but fell out of favor with institutional investors after a so-so (for Apple) earnings report. So on Friday, the stock was in exactly the same position as a bungee jumper, poised above 500 with its price in free fall and not sure if its bungee cords were actually hooked to anything.
My prediction is that AAPL—which has fallen so low that it was just featured in the November issue of Cabot Ben Graham Value Letter, which admired its projected earnings growth (22% per year for the next five years), forward P/E ratio (11.1) and newly instituted dividend—will come roaring back quickly.
This isn’t an investment recommendation; Cabot growth disciplines don’t have any place for hunches. But the market is known for overreacting, and AAPL below 500 makes no more sense to me than AAPL above 700.
So don’t buy AAPL on my account. But put it on a Post-It that Paul Goodwin says that AAPL will rise again. We can check on how well my prognosticator works as the Holiday Season progresses.
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Here’s this week’s Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
Proper Prior Preparation Prevents Poor Performance
Tim’s comment: It has the same number of “Ps” as “Peter Piper picked a peck of pickled peppers,” as well as no words that don’t start with “P.” And it touts the value of preparation. Can’t argue with that.
Paul’s comment: I think Tim nailed this one. All I can add is that my favorite version of this saying is in the form of a smart-alecky addition to “Practice makes perfect.” To that, a Vince Lombardi would have added “… if practice is perfect.”
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 Ben Graham Value Letter editor Roy Ward talks about the importance of dividends for value investors and offers a new list of the ten best dividend-paying companies. Stocks discussed: Accenture Plc. (ACN) and CVS Caremark (CVS).
Tim Lutts, Cabot’s fearless leader and editor of Cabot Stock of the Month, writes about the stocks that let rich people hold onto their money and the stocks that those of us who would like to be rich can use to get their. Tim offers a special report detailing five stocks with huge potential. You can get it by using this link. He also discusses International Business Machines (IBM), a stay-rich stock.
This issue features a repeat engagement with Chloe Lutts’ essay on the parallel between risk and return in Skee-Ball and investing. And I point out that market timing is the biggest risk-control tactic of all. Stock discussed: Deutsche Bank (DB).
Have a great weekend,
Editor of Cabot Wealth Advisory
and Cabot China & Emerging Markets Report
Editor’s Note: Paul Goodwin’s Cabot China & Emerging Markets Report is the place to discover the top stocks in fast-growing international emerging market sector. Learn more here about high-potential stocks like NTE, PSMT, MPEL and CHL, and the proper way to handle them.