01/14/00: "Market Monitor"-Louis Navellier, President, Navellier & Associates
PAUL KANGAS: My market monitor guest this week is Louis Navellier, President of Navellier & Associates and one of the nation's top rated investment advisory services. And welcome back. It's good to see you again, Louis.
LOUIS NAVELLIER, PRESIDENT, NAVELLIER & ASSOCIATES: It's good to be here.
KANGAS: Your January newsletter beings by saying that January will likely begin the last great surge in the current market advance. Does that mean that you think the bull market is on its last legs?
NAVELLIER: Not at all. I think 40 percent of the money we'll make this year will be in January. January is the record month for money pouring in the stock market. But we're going to have to rest. We made too much money too fast. And I think later in the month, the market is going to settle down and will start to rest and digest some of these gains.
KANGAS: What's settle down? Down how far?
NAVELLIER: Well, first of all, I think we're in the midst of a rotational correction right now. What that means, they're selling some stocks and others are being rewarded. Small cap stocks are very firm this month. They're letting some air out of this Internet bubble. What's happening is Wall Street is demanding earnings growth and those Internet stocks don't have the growth so the money is leaving that industry and chasing fundamentals. I like the market now. It's reverting to fundamentals. It wasn't doing that late last year. It was getting a little silly.
KANGAS: You have a number of model stock portfolios designed for investors all the way from $50,000 to $6 million. What criteria do you use in stock selection, in this case, let's say, for the moderately aggressive investor?
NAVELLIER: Well, we have a three step process. We run our stocks through a reward risk screen. Different sectors of the market have different fundamental filters, but right now things like earnings surprises, strong profit margin expansion, positive analysts comments are very important fundamental criteria. And then we buy up the best 30 stocks for our clients. A smaller portfolio won't have 30 because it's not cost effective.
KANGAS: Well, understood. Give us some of your current favorites.
NAVELLIER: I love Harmonic (HLIT). Its symbol is HLIT. I love some great semiconductors like Q Logic (QLGC). The symbol is QLGC. There's still a shortage of computer chips out there. I had another great semiconductor is Applied Microcircuits (AMCC). You know, the, my average stock has over 40 percent revenue growth. In the past year earnings are still growing in excess of 140 percent. So earnings will grow faster than revenues due to my profit margin expansion.
KANGAS: What do you do about some fallen angels like Tyco International (TYC) and just recently Lucent (LU)?
NAVELLIER: Well, you have to sell them to buy something better. You know, this is a very narrow market. It's a beauty contest out there and if a stock has a blemish, you have to move on and buy something better. Now, the big stocks can recover very quickly. Lucent can especially recover quickly. Now Tyco, what happened is they were, had a lot of their earnings were acquisition related and they weren't operating earnings and it has to probably rest a little longer.
KANGAS: OK. We have a question from one of our viewers, Richard Valderwel of Sheldon, Iowa. He asks, "Since telecom companies have the benefit of receiving revenues from Internet users, which telecom firms do you like for investment purposes?"
NAVELLIER: You know, you'd think the big phone companies would make agents a lot of money now, but they're not. MCI WorldCom doesn't hit our criteria. AT&T, there's a lot of hope for it. When I'm in telecom, I'm on the hardware side and playing the companies that are increasing the speed and bandwidth of the Internet like the Broadcoms or Broadvisions. But the only really telecom companies I like are the cell phone companies, Rural Cellular (RCCC), U.S. Cellular. These are the ones when you get out of town you get dinged with the roaming charges. They make a lot of money.
KANGAS: Aha, so, we've seen some interest coming back into the some of the old stalwarts like General Motors and some of the steel companies. Are you a follower of that?
NAVELLIER: No, those are good value stocks and value is still a little bit out of favor because as interest rates go higher and higher, it kind of destabilizes value strategies. But that's a healthy sign. But I think it's a dead cap balance until earnings peak out, investors get insecure or interest rates settle down.
KANGAS: OK. Any financial stocks with interestingly enough yields to make a buy on your side? No?
NAVELLIER: No. The reason that the banks, the savings and loans, utilities, insurance companies and the real estate investment trusts have done so poorly is that as long as interest rates are rising they will not do well. When bond yields settle down and peak out and the Fed stops raising rates, it will be a wonderful time to buy. Unfortunately, I don't know when that is.
KANGAS: All right, but very selective and you're still in the market?
NAVELLIER: Absolutely.
KANGAS: Louis, it's great to see you again and thanks for being with us.
NAVELLIER: Thank you.
KANGAS: My guest, Louis Navellier, President of Navellier and Associates. |
