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Welcome Dear Reader,
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Here's a welcome from Publisher Timothy Lutts himself, describing in his own words what you can expect as a reader.
Enjoy!
Your Cabot Wealth Advisory Staff
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Letter From the Publisher
Dear New Cabot Wealth Advisory Reader,
The very fact that you're reading this tells me two things about you: First you want your investments to grow, and second, you're open-minded enough to listen to someone else's ideas about how to make that happen.
And that's a good start, because there is no monopoly on wisdom. And sharing good ideas ultimately benefits all parties involved.
We'll be bringing you a lot of well-researched investment idea from the Cabot analysts. But I want to share more than just investment ideas with you.
I want to show you how everyday experiences connect to the investment world. It's well known, for example, that investment legend Peter Lynch's discovery of L`Eggs--which turned out to be a 10-bagger for him began with his wife's purchase of the stockings in a supermarket.
In my own case, a life-long love affair with books led me to become an early believer in Amazon.com. Critics--and they were legion predicted Jeff Bezos's company would fail to make a profit; they said Borders and Barnes & Noble would steamroll the Internet fledgling. But they were wrong. And Cabot readers who followed our advice on Amazon.com walked away with profits of more than 1,200%.
And then there's Summit Technology. This was a small company located in Boston that pioneered the industry of laser-eye surgery. We sought out the company to investigate it, liked what we saw, and in the space of a few months, my brother, my father and I had each had one eye lasered. And there was no charge, because the company was doing FDA trials, and needed guinea pigs! We also recommended Summit to our subscribers. The profit in that one was 443%.
Life is full of opportunities like these, typically as small companies offer the masses something that makes life better. Hansen Natural, for example, was a huge winner for investors who followed our advice in 2004-2006 as energy drinks took the country by storm. I'm not a user. I haven't even drunk coffee in more than 20 years--but I can appreciate that millions of young people value the burst of energy they get from these elixirs.
Today I'm excited about alternative energy, especially solar companies, which are sporting triple-digit revenue and earnings gains, and are struggling to keep up with booming demand. I'm excited about Emerging Markets, especially fast-growing companies in China, which is growing GDP at an 8% rate and is still under-owned, and under-respected, by Americans. And I'm excited about several companies benefiting from the continuing expansion of functionality in the communications business, particularly as used in mobile phones and other portable devices.
Because there's another factor that made those stocks named above great investments, and it's this: the companies were viewed with great skepticism at the time. In fact, friends and co-workers who heard about our plans to have our eyes lasered worried that the procedure would render us blind!
So I want to show you how to think contrarily, to consider that the common wisdom is not so wise at all. This is not a new idea. The dean of this line of thinking--at least as it relates to investments--was Humphrey Neill, who in 1954 published "The Art of Contrary Thinking." In it, he expounded at length on the idea that When everyone thinks alike, everyone is likely to be wrong.
A recent case in point: the mortgage industry. For all of my life, I've heard people say, 'You can't go wrong with real estate.' And for decades, that was true.
But when I saw the cheapest house here in Salem selling at $300,000, and when I read about the no-money-down and no-interest mortgages that were being made available to borrowers who years ago would have been laughed out of the bank, I knew the end of that housing/mortgage uptrend was near.
The investing rule says, When the last buyer has bought, the trend will end. And so it has.
In addition to the logic such as that about contrary investing, I also want to share with you some logic that comes from optimistic thinking. And this is important.
Every day of your life, you can watch the TV news, read the newspaper, check Google News, and learn what's wrong with America, and with the world. From war to global warming, from immigration to social security, it's all too easy to succumb to the belief that life just isn't fair, or even worse, to fear that sometime in the future, there will come a time when it all falls apart, to quote my dear sister-in-law, who is steeped in the values of academia.
Well, I can promise you that the world won't all fall apart, literally or figuratively. Every seer who has ever predicted that has been wrong, and I'm confident they will continue to be wrong. And this is no Pollyanna-ish blind faith. It' confidence in the ability of man to continue to make the world a better place! And for beliefs here, I give credit to both my father, Carlton Lutts, the founder of Cabot Heritage Corporation, and the most optimistic man I ever met, the philanthropist Sir John Templeton.
He didn't start out as a Sir, of course. He started as a poor, but very intelligent, boy in Tennessee. He got to be a philanthropist by ranking tops in his class in high school, tops in his class at Yale, earning an M.A. in law at Oxford as a Rhodes Scholar, entering the investment business, and by buying stocks when they were down, and selling when they were up.
When war began in Europe in 1939, he borrowed money to buy 100 shares in each of 104 companies selling at $1 a share or less, including 34 companies that were in bankruptcy. Only four turned out to be worthless, and he turned large profits on the others after holding each for an average of four years.
For Sir John, optimism paid off very well. And this is partly because he has a long-term perspective. He points out simply how much progress humans have made in science and medicine and technology and human rights in the past hundred years and suggests we imagine where a similar century of progress will take us.
This sets me, for example, to thinking about genetic medicine, about nanotechnology, about the ongoing revolution in computing and communications enabled by Moore's Law, and about the incredible resources being unleashed in the form of human capital in China and India.
So in Cabot Wealth Advisory you'll find a strain of optimism that may seem, at times, to be out of touch with the reality you see on TV. But to me TV--in fact, much of today's digital media torrent--is terribly shortsighted. So I want to share with you the vision that wealth is ahead for all of us who have the vision to see beyond the common wisdom.
Not all my topics will bear directly on the market. Sometimes I'll mention my family or my dog. Did you know that dogs bring more happiness into people's lives than steady relationships and job satisfaction? But even when I stray, I'll try to tie it into an investing theme.
I also promise you a frank look at the trends of the stock market, illuminated by a lifetime of study of market psychology. It's well known, for example, that the man-on-the-street feels bullish when the market has been up for six months, but can easily come up with a dozen reasons not to invest when the market has been down for six months. My goal is to help you look beyond your own feelings to discover the real risk/reward ratio in the market.
There's more of course, including a deep trust of free markets, an attraction to excellent, innovative management, and a soft spot for companies with fat profit margins. But this letter's gone on long enough, so I'll save these ideas for future letters,
Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher
P.S. If you could go back in time a hundred years, and make some long-term investments; would you put your money in U.S. stocks or stocks of the British Empire?
The smart choice, of course, would be the U.S.
In fact, 1908 was the year that the GDP of the U.S. surpassed that of the British Empire ... and our growth since then has been spectacular.
If you had bought U.S. stocks in 1913, you might have bought Amalgamated Copper (which eventually became part of British Petroleum), American Sugar (now Domino), General Electric, National Lead (now NL Industries), Peoples Gas, U.S. Rubber (acquired by Michelin) and U.S. Steel. All these stocks were part of the Dow in 1913.
And I dare say if you had held them until now you'd be pretty happy... you'd be pretty old, too.
But you can't go back in time; all you can do is look ahead, and ask if there's a parallel story unfolding today. I say there is, and--no surprise if you've been reading my columns a while--I say the fast-growing major power of the 21st century is China.
Back in 2000, China's GDP was just 12% of the U.S.'s. Last year it was 28% of U.S. GDP. Eventually--no one knows exactly when--China's GDP will surpass the U.S.'s.
Now, you can ignore this and go merrily on your way, disregarding the lessons of a century ago and sticking with familiar U.S. investments.
Or you can invest in Chinese stocks and start reaping the rewards that come from investing where the growth is strongest.
I've been publishing a newsletter called Cabot China & Emerging Markets Report since 2004 (when I first caught on to this big trend) and I'm happy to report that over that period, there is no newsletter--none--with a better performance record.
Under the guidance of editor Paul Goodwin, who follows the time-tested Cabot growth investing system, Cabot China & Emerging Markets Report has brought its subscribers a compound annual return of 22.8% (through June30, 2009). In the same five-year period, the Dow has brought investors a compound annual loss of 1.5%, while the broader Wilshire 5000 has brought investors a compound annual loss of 1.6%.
Moreover, the out performance continues--in fact, while many stocks are doing well in this bull move, Chinese stocks are the undisputed leaders of the advance! Many more exciting young Chinese firms are being listed here in the U.S. each month, and institutional investors are piling in, eager to invest money in the biggest growth area in the world.
In the latest issue of Cabot China & Emerging Markets Report, you'll find recommendations for Internet companies (the Chinese Google and the Chinese Yahoo!), real estate companies, a travel company, a bank and much more.
These companies aren't reinventing the wheel; they're just applying healthy business practices in an environment where the climate of growth is extremely favorable. The wind is at their backs and investors in these companies are reaping the benefits.
So, if you're ready to apply the lessons of a century ago ...
If you're ready to invest in the leading stocks of China ...
And if you're ready to take advice from the leading expert in the field, I invite you to join Paul's happy subscribers by taking a trial subscription to Cabot China & Emerging Markets Report.
Give it a try today. With my money-back guarantee, you've got nothing to lose and everything to gain! http://www.cabot.net/info/cem/cemjd03.aspx?source=WW22
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Cabot Wealth Advisory, a free five-times weekly e-mail service brought to you by the Cabot family of investment newsletters. To learn more or subscribe, go to: http://www.cabot.net
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