1. Cabot Investors Conference 2014www.cabot.net The Treasure Hunt The SNaC Approach to Finding Big Winners Mike Cintolo, VP of Investments Chief Analyst, Cabot Market Letter and Cabot Top Ten Trader Mike@cabot.net Twitter: @MikeCintolo

2. Cabot Investors Conference 2014www.cabot.net Initial Requirements … Always stay Interested and Optimistic –Big Winners are Always Setting Up (Especially in Down Markets) –“All it Takes is One” Separate Research from Trading Obsess Before the Trade –As Many Pieces in Place as Possible –Buying the Right Stock Cures Many Sins

3. Cabot Investors Conference 2014www.cabot.net Step 1: Overall Market Provides a Background Market Timing Indicators –Long- and Intermediate-Term –Buy Now vs. Watch List Are Growth Stocks in Favor? –XLP vs. IBD 85-85; Small-Caps vs. Dow –Results of Last Few Buys

4. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Story Ideal: Company Starting or Dominating Entirely New Industry –iPods, Electric Cars, Satellite Radio, Single-Serve Coffee, Non-Silicon Solar Cells, Robotic Surgery Something New and Different –Changing the Way We Work or Live? Bottom-Up is Better –Revolutionary Firms Don’t Fit into Round Holes

5. Cabot Investors Conference 2014www.cabot.net SNaC Approach : Story Majority of Big Winners Serve Mass Markets –Consumer Oriented –Rapid Adoption –Less Regulation/Government Dependency Institutions Want Dependability and Growth –Recurring Income? Subscriptions? –Clear Barriers to Entry or Fly-by-Nighter?

6. Cabot Investors Conference 2014www.cabot.net SNaC Approach : Story What I Don’t Care About: –Insider Buying and Selling (All Winners Have Lots of Selling on Way Up) –Analyst Price Targets –Pundits’ Opinions –Potential Happenings 1 to 2 Years from Now –Minutiae of a Stock’s Product or Workings

7. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Numbers Less Complicated than Many Believe –90% is Sales and Earnings Growth Recent Sales Growth = Most Important –Direct View of How Firm is Doing Triple-Digit is Best (excl. Buyouts) –40%-plus is Very Good –Check Estimates

8. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Numbers Next Up: Earnings Estimates –Growth Investors are Buying the Future! –This and Next Year’s Estimates –Preferably 30%-plus for Both (10%? 15%?—I Usually Pass) –Acceleration a Cherry on Top –Remember These are Estimates

9. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Numbers Anything Else That Stands Out? –Super-Low Liquidity (Screen for This) –Profit Margins –Debt Load –Cash Flow Much > EPS? –History? Is it Boom-Bust? –Usually Beat Earnings?

10. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Numbers What I Don’t Care About –Valuation Measures (with a Few Exceptions) –Balance Sheet (Asset Ratios, etc.) –Short Interest (Unless Extreme) –Secondary Measures –Almost Anything that Happened a Year or Two Ago

11. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Chart Looking for Familiar Faces –Not Patterns but Repeated Supply/Demand Characteristics Want to Confirm the Bullish Story and Numbers –Positive Trend, Constructive Action Want to Find Low-Risk Entry –Or, at Least, Avoid High-Risk Entry

12. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Chart On the Weekly Chart: –Stock/RP Line are in Long-Term Uptrends or Lifting out of Big Consolidations Recent IPOs Need Big Open –Relatively Early-Stage Situation (Base Counting) Tighter vs. Wide-and-Loose –“Blue Skyscrapers” –Must be Liquid Enough (Screen for this)

13. Cabot Investors Conference 2014www.cabot.net SNaC Approach: Chart On the Daily Chart: Breakouts –Want to See Power and Follow Through, Huge Volume out of a Multi-Week Range Pullbacks –To Moving Averages, Shakeouts and First Dips after Initial Up-Thrust Tightness –Playing Possum

14. Cabot Investors Conference 2014www.cabot.net My Screening Criteria Keep it Broad … then Dig In –Trading Volume > $35M per Day –Price > 12 –RS > 75, within 20% of high, above 200-Day Line –Latest Quarterly Sales > 15% or Accelerating –Current and Next Year’s EPS Estimates > 15% That’s it! –Don’t Want to Be Too Strict

15. Cabot Investors Conference 2014www.cabot.net First Solar (FSLR): Feb 2007 Revenue Growth last 4 Qtrs: 146%, 197%, 60%, 302% Earnings last 2 Qtrs: +200%, +300% Big EPS Estimate for 2008 Unique new Solar Panels (no high-priced silicon) Not a Full Chart Pattern but new RP peak, EPS Gap A bit Thinly Traded => Can be OK with recent IPOs FYI: Stock was trading at 30x SALES at this point

16. Cabot Investors Conference 2014www.cabot.net First Solar (FSLR): Feb 2007 Up Nearly 600% by May 2008 Our Final Sale When Broke 40- week line in September 2008

17. Cabot Investors Conference 2014www.cabot.net Equinix (EQIX): Jan 2012 Revenue Growth last 4 Qtrs: 26%, 33%, 46%, 42% EPS Estimates: +40% for 2012 Stock Lifting out of ~ 2- Year Base on Heavy Volume Traded at 68x Trailing EPS

18. Cabot Investors Conference 2014www.cabot.net Equinix (EQIX): Jan 2012 Up a Bit More than 100% Less than a Year Later Note: Up 10 Weeks in a Row Right out of the Gate = Sit Tight

19. Cabot Investors Conference 2014www.cabot.net Netflix (NFLX): March 2010 Revenue Growth last 4 Qtrs: 28%, 26%, 24%, 24% EPS Growth last 4 Qtrs: 52%, 63%, 44%, 53% EPS Estimates: +32% 2010, +34% 2011 NEW Streaming Video Leader Gigantic Volume Thrust, New RP Peak

20. Cabot Investors Conference 2014www.cabot.net Netflix (NFLX): March 2010 Up 300% within 15 Months Before Collapsing Note: Huge rally, 8 weeks up = Hold through first consolidation

21. Cabot Investors Conference 2014www.cabot.net Crocs (CROX): Sept 2006 Revenue Growth last 4 Qtrs: 232%, 309%, 524%, 648% EPS last 2 Qtrs: 330%, 122% EPS Estimates: 155% 2006, 26% 2007 (out year is often conservative) New RP Peak, Huge Volume Leap to New Highs Like FSLR, a bit Thin, but OK if Stock is “Growing Up” “Ugly” Shoes, Traded at 6.5x Sales, were a Fad …

22. Cabot Investors Conference 2014www.cabot.net Crocs (CROX): Sept 2006 Stock Up More than 500% within 13 Months before Falling Apart Note: Another EPS Gap Out of a Base = Another Buying Opportunity