Carlton and Tim Lutts's investment newsletters are their own bull market.

In 1970, in love with the stock market and unhindered by any special knowledge of newsletter publishing, Carlton Lutts launched the Cabot Market Letter (CML), published 26x/year and now selling for $335.

He kept his day job in engineering but, in a few years, the newsletter became a full-time operation based in Salem, Mass., where, Carlton will tell you, no witches were ever burned at the stake (although quite a few were hanged and one pressed to death with rocks).

In 1986, armed with a degree in English and experience with several high tech firms in the Boston area, Carlton's son Tim joined the firm as they expanded into the mutual fund area.

"Like my father," Tim said, "I learned on the job and made my share of mistakes, but we got some traction in that market for a few years."

Their company, Cabot Heritage Corporation, had several rough years during the down market of 2000-2002. "Worst bear market I've seen in my lifetime, worst since '29-'32," Tim said.

"Subscribers are like other investors, the newest ones you get are the people who wait till the top of the market when they see everyone they know is in ... and they are the first ones to get out when the downturn comes."

But currently the father-son team is embarked on an ambitious expansion program and has launched three new titles in addition to the CML flagship.

Carlton Lutts has said that CML has always been positioned for the serious long term investor, "but what our readers really want are hot tips."

So they launched Cabot's Top Ten, a $297/year weekly giving their analysis of the most interesting stock opportunities of the week and the reasons to buy or sell. It's been published for 18 months now.

The Benjamin Graham Value Investor

"Our first venture with an outside editor is The Benjamin Graham Value Investor," Tim Lutts said, "Benjamin Graham was the founder of value investing, the man who taught Warren Buffet everything he knows. The name was available and we found the editor, or we found each other. We launched in September of last year and so far projections are right on track. It positions nicely with CML which targets the growth investor."

The Graham newsletter is an e-mail-only monthly with the regular price of $249 and an introductory offer of $99/year. It's written by J. Royden Ward.

"Our newest launch, Cabot's China Investor, has only published a few issues, so it's certainly too soon to tell, but we see the area as a tremendous growth opportunity for the future."

Here's some smooth copy from www.cabotchina.com:

Welcome to Cabot's China Investor

"Your guide to profitable investing in stocks benefiting from the tremendous growth of China.

"From basic industries like electric utilities and petroleum refining, to high-tech sectors like telecommunications and Internet content, the opportunities for early investors in China are enormous.

"Yes, there are uncertainties, ranging from the prospect of government intervention to the currency fluctuation. But it's an ancient Chinese maxim that in uncertainty lies opportunity."

Print-electronic interplay 

Cabot continues to market CML with print, but most of the marketing for the three newer titles is electronic.

"In-house lists work the best of course," Tim said, "and finding e-mail addresses has been a major effort here for several years."

Their website, www.cabot.net, (which has a nice photo of Carlton and Tim at the top of the home page) offers deals like a free two-issue subcription to the e-mail edition of CML.

Today the subscription base of CML is 60 percent e-mail, and they expect it to continue to rise, reaching 70 percent in a couple of years.

"The speed of delivery is important," Tim said, "We save a few bucks on printing and postage, but that isn't really important on a $200 product."

Tim described their efforts at converting online trials and inquiries to paid as a "mild success."

"But once we get the address, we can try to sell them every product we have. Each e-mail effort we make carries an opt-out option so we don't feel bad about 'hammering' them a little with offers and this costs almost nothing," Tim said.

Subscriber surveys

Cabot has long been a believer in subscriber surveys. They do them today via e-mail and usually see response rates from 20 to 30 percent.

Carlton Lutts once told me that when he first surveyed his readers, his mental picture of a typical subscriber was someone in his or her later 30s or 40ish who was beginning retirement planning. But results showed the average reader to be 57 or 58. "And that hasn't changed, "Tim said, "although the range is from 25 to 105.

"Surveys are a golden source for testimonials and they tell us what the readers like and don't like. It's a vehicle for us to test ideas for new features. You get positive responses. Over the phone most of what comes in is complaints. The survey results also provide ammo for our annual publication audit program," Tim said.

Competition

Asked about the future for investment publications in today's extremely competitive marketplace, Tim said that the firms that aren't making the transition from print to electronic tend to be in trouble.

Tim said he was disturbed by a marketing development he calls "triangulation" where an investment newsletter publisher accepts "sponsorship" from a firm which pays the printing, mailing and postage costs for a marketing package (which, coincidentally, gives a glowing recommendation to the stock in question).

The sponsorship is "disclosed' in mouseprint somewhere in a magalogue. "I hope the SEC cracks down on it," Tim Lutts said. "The most important thing we have to offer is our independence and our integrity."

Somewhat similarly, Lutts doesn't view cable TV's 24-hour financial programs as really being competition. "They're part of 'information overload.' We offer our subscribers exclusivity, our analysis and conviction and a steady stream of new ideas."

One last point: Cabot created one of my favorite late-renewal techniques. Their final effort, well past expire, was a double postcard from the marketing director which said, "My boss says that if you haven't renewed, I'm not doing my job right. Could you take just a minute and use the return portion of this card to tell me why you haven't decided to renew."

"I picture the subscriber shaking his head and smiling," Carlton Lutts said, "saying 'If the poor schlemiel is this desperate. ...' But I get checks."

Cabot, P.O. Box 2049, Salem, MA 01970, 978-745-5532, fax [phone], www.cabot.net

RELATED ARTICLE: "We must be doing something right"

Visit the Cabot Heritage Corporation's website, www.cabot.net, click About Cabot, and you are treated to a photo of a handsome building surrounded by trees, shrubs and lawn--accompanied by this text:

"The Cabot Market Letter has been published 26 times a year, without fail, since 1970, when the first issue was turned out on the proverbial kitchen table by founder and editor Carlton G. Lutts.

"Today, operating out of this converted public library building constructed of steel, brick and slate in 1934, the Cabot Heritage Corporation consists of 16 talented employees whose goal is to deliver the best investment advice to the greatest number of subscribers. Like our building, which has stood the test of time while adapting to modern demands, we are proud of our roots, but we are dedicated to progress and growth.

"We have been independent from the start. We write exactly what we want at all times, keeping in mind that our mission is to help our subscribers make successful investment decisions by following our advice. Our own success comes when those grateful subscribers renew their subscriptions year after year. And we must be doing something right, because as this is written there are over 25,000 subscribers.

"Carlton G. Lutts and his son Timothy W. Lutts now share the editorial duties of the newsletter. They welcome your comments, suggestions and criticisms.

"Members of: Newsletter Publishers Association, Better Business Bureau and the Salem Chamber of Commerce."