How a Professional Growth and Market Timing Investor Beats the Markets.

Mike explains his “SNaC” approach to the markets: Great Story, Great Numbers and a Great Chart.

A growth stock and market timing expert, Michael Cintolo is chief analyst of Cabot Growth Investor and Cabot Top Ten Trader (CabotWealth.com). Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top handful of market-timing newsletters numerous times. Cabot Growth Investor has been helping subscribers beat the market with expert growth stock-picking and market-timing advice since 1970. The advisory features a Model Portfolio of no more than 10 of the advisory's best recommendations for a diversified growth stock portfolio along with Cabot’s proprietary market timing indicators. What follows is a recap of the Q&A. For the full transcript please GO HERE.

Have quant trading styles like trend following, breakout trading, etc broken traditional fundamental investing? — patrickrooney

Broken? No! But it probably does mean that position traders should use looser stops to combat higher short-term volatility

Given the current climate; which stocks are you liking for growth during the rest of ’18 into early 19? — speckman32

I’m focusing on early-to mid-stage names with powerful numbers and charts. $NTNX, $BABA, $SHAK, $OKTA are some I have high hopes for. Think some recent IPOs could set-up down the road too, with some looking interesting. $DBX $SPOT etc.

What is proprietary about your trend following system? Isn’t it just moving averages and the basics found online? — TheRELAXEDTrader

Well, we use not just breaks of MAs, but use a couple indexes/MAs in concert. But it’s simple — which is usually better. But you’re right, nothing black box about it — most trend-following methods are straightforward, albeit with some interpretation.

How do you define a growth stock? — moongraber1

Don’t really define it, but I use SNaC approach: great Story, great Numbers (sales/eps) AND a great Chart — I want all three. If you’re looking for numbers, I focus first on sales growth and earnings estimates — 15% to 20% min, usually much higher For more on sales growth you can read about it here — my favorite stock picking criteria cabotwealth.com/daily/growt…

TEX go up now? — Luis1111

You’re talking about $TEX? Building a base, but below 40-week line. Not set up yet for my methods, nothing I follow too closely.

Thoughts on buying stocks after huge earnings gaps? For example $ETSY or $GOOS in recent weeks. — jacobmintz

What’s up buddy. You know I love those big gappers, but prefer them out of a base area. $FIVE is one I like, preferably on dips. In fact, in the latest Cabot Growth Investor I talked about the crazy number of gap ups seen in specialty retail. Encouraging.

Which variables in particular make you decide what growth stocks are? Maybe some unconventional ones to mention? — KevInvest

Talked about sales growth/eps estimates above. Also focus on liquidity — I want liquid stocks that are ideally emerging blue chips. I’m not as interested in wild, thinly-traded things. Sweet spot seems to be 400–500 mutual funds — on the way to 1k or more.

What is your opinion on $CRON? — koreantiger

Good Question. So, too small for me, but I am intrigued by the weed stocks. $CGC is one I’m watching. Think it can be a trend. $CRON is tiny but obviously growing and nearly profitable. Worth watching probably, though again, too small for me. Not to be sales-y, but my Cabot has a marijuana stock advisory that’s doing excellent cabotwealth.com/premium-ser…

What are your thoughts on the new “Hot IPO Chinese ADRs?” $IQ $HUYA $BILI — bigfry

Like them in general, but after BIG runs feel we need a setup. Biased toward $IQ but we’ll see how they handle their 1st correction

As to your work as a market timer, do you sense a recent shift or cracks in the tundra beneath the bull stampede? — bearcharts

So I still think this bull market has room to run — haven’t seen the classic topping signals yet (AD Line, yield curve, etc.). Intermediate-term, also bullish, as the trend is up. Short-term, I do think things are frothy so half-expect some potholes But, really, I try to stick with (a) trends of indexes as a whole, (b) action of leading growth stocks. Both are positive now.

Can you chat a bit about the evolution of your trading? One thing you wish you knew if you started from day 1 again? — michaelbozzello

Great question. I’ll give you 3. First, follow the plan — emotional trading is a killer, and it used to dampen my results. Second, stick with “real” leading stocks — ones that the big boys are buying. Leave the speculative stuff to others. And third, step back from the screen — even if you’re short-term, watching every wiggle can lead to bad decisions.

What is your estimate of the probability of a correction of at least 5% before September? — alexsimonelis

I’m a trend follower, so I leave the guessing to others. I guess I’d say pretty high, but might be from much higher levels.

As a growth investor what are the three things you look for in a stock? — scheplick

I mentioned above our SNaC (Story, Numbers and Chart) approach. I can give some detail as to what that means when I go hunting. Story: Ideally a revolutionary product/service. Something new. Mass markets. Protection from competition or 1st mover advantage. Numbers: Sales (up > 15%, best >30%), EPS estimates and other key metrics for that biz (def revenue, margins, etc) Chart: Early stage, bullish volume clues, longer-term uptrend. Looking for tightness, controlled pullback or big breakout when buying.

Why is NFLX up if it’s in such damning revolving debt? — Thankfulness

My system’s focused on factors that tend to correlate with growth stock performance. Debt ain’t one of them in most cases.

What are key things you look for when scouting stocks? When are profits relevant, vs. only revenue growth? — zeromein

Depends on market environment. I would prefer both of course but have found very rapid sales growth to be more meaningful

What is your 6–12 month outlook on $FANG stocks? — YouGotTrumped

Well I’m an overall bull so I guess I’d say bullish. But $AMZN and $NFLX are the two with the best charts/growth for now

How do we know when we are in a bear market? How much exposure do you take at any one time? — RobTrader88

The foundation of my market timing system are two trend-following models — one intermediate-term, one longer-term. When longer-term one goes negative, dramatically raises odds of a bear market. By that time we’d usually be 60%-plus cash. In 2008 Cabot Growth Investor held 90% in cash for months as we crashed; avg’d 50%-plus that year. Obvious an extreme example.Early warning signs help too — A-D Line divergences, yield curve, big leaders getting destroyed, etc. It’s a combo of things.

What are you watching for in terms of the $QQQ finally topping? Any books you recommend for a young growth investor to read? And how do you manage the non-stop negative headlines? — IronDre

Really just the trend and the action of key leaders (I guess $AMZN and $NFLX right now for $QQQ). Break of 50-day line etc. Near-term, am curious if/when we pull back, how $QQQ and other indexes bounce. That could provide an early clue, we’ll have to see. Right now, though, we’re mostly bullish b/c the trends are up, though few great buy points out there right now IMO Reminiscences, HedgeHogging, How I Made $2 Million and How to Make Money in Stocks are my four favorite books. Beach reading! And just ignore the news. Debate it at the dinner table or what have you, but trade what you see, not what you (or others) believe.

How often do you check/trade your portfolio, when do you admit a trade was bad and sell out(% or time wise)? — dsod

Checking your portfolio is like checking out the cute girl at the bar — keep an eye on it but don’t stare. (Old line I heard once.) In all seriousness, this is my job, so I watch a lot, but don’t obsess over ticks or that sort of thing. Follow the plan/rules. As for loss cutting & stops, I use a “tight-to-loose” method. Loss limits avg 8% to 12%, then loosen from there as develop a profit.

When do you know to buy more position in a stock after already buying in at an earlier time? — Jerseyboy

Initially, usually best to have a plan BEFORE your first trade — breakout at 50 (buy), up x% from there (buy more, raise stop) After the initial pyramid, tends to be more about proper entry points (tightness, 50-day, whatever)

What is the best way to learn more about options trading?-elijarvis

I’ve bought options 3 times and lost money 5 times. @jacobmintz is the smartest guy I know in the options field so start there!

Entry and exit strategy? — speckman32

Entries: Big early-stage breakouts, tightness and/or first pullbacks after big-volume moves. That’s probably 90% of it for me. Exit — tight-to-loose trailing stop, though I take partial profits on the way up frequently, and market timing plays a role too

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