“China’s $50 Billion Shocker” Part 3 … Navellier

For those who thought it would never end … at last, we come to the end of the latest Navellier teaser.

Hot Money Stock No. 3, poised to ride the rails to riches when the Chinese investment funds come rolling in, chasing the hot growth stocks on the US markets.

This one is a consumer electronics play — a “technology stock with a have-to-have product line that could be bigger even than Apple’s iPod for investors.”

“Hard to believe? You bet—except for one thing. Over two years, the company has handed investors 100% more profits than Apple with earnings growth of 73%!”

This is, in case you didn’t yet guess from those clues, a manufacturer of GPS systems.

“So it’s no wonder the company trounced analysts’ earnings or that its biggest increase came in their auto division, rising by—get this—98%. As a result of this success, the company is now rolling out cheaper models that could put their devices in as many hands as iPods.”

Navellier thinks this one is set for another 100% gain over the next 12 months …

but to be honest, I think these numbers — and the text of the email ad — are, like the other two teaser picks we’ve sleuthed from this same ad, all from last Summer. Maybe the mailing worked so well that they just had to resurrect it, or maybe a copywriter messed up somewhere.

But this stock is Garmin (GRMN), and if you had bought it and held it last August, and still owned it now, you’d probably be mad — the shares were around $80 when they had that last big earnings “beat” and had automotive segment growth of 98-99%. And they did go up, though not quite 100% … they topped out around $120, then quite famously fell like a drunk actress on the red carpet, to the current price in the mid-$50s.

It’s possible that Navellier likes Garmin now — I know for sure that he liked it last year and before then, and held shares in his mutual funds and mentioned them on occasion. Certainly, the market is starting to accept the fact that perhaps Garmin has righted itself and will see it’s growth return, earnings are projected to grow quite nicely. And if those projection are right, the shares are cheap. Analysts are projecting (you might also use the term, “guessing”) that Garmin will have earnings growth of 16% a year for the next five years, and the shares are trading at a forward PE of just 11 — a significant discount to the market average.

GPS has been an investor graveyard of late — bringing down some chipmakers as well as Garmin, thanks to strong competition from several players and from competing cell phone services like Google Maps, and a constant unease about exactly how many people are going to be willing to pay for this, and how much. I love the idea of GPS, but frankly I get along fine with my little Google Maps program in my Blackberry that tells me within a mile or so where I am without consulting GPS … I’m not usually more lost than that. Garmin has also rolled out phone devices, and wants to partner with more car manufacturers and cellphone companies to expand their brand and their market share. Will it work? That seems still to be an open question.

And frankly, what bothers me more is the fact that the service is free — All else being equal, I tend to prefer companies that get a recurring revenue stream — like Verizon gets when they sell you a GPS service for your phone (as underhanded and irritating as that is for consumers). If the service is free in perpetuity, thanks to the US government, then you’ve got to fight a tough battle to keep margins up in what has every chance of becoming a commodity business as the number of GPS device providers grows, and you’ve also go to convince people to upgrade to newer and better devices. It can be done, of course, and perhaps most famously by the iPod back when iTunes existed primarily to get people to buy iPods (before they made any money on the content, as they do now to some degree). But the iPod also is proprietary and kept it’s early lead, unlike all the Garmin competitors who all use the same network of satellites, and all tell you more or less the same thing about where you’re standing on the earth at any given moment.

On the surface it looks like Garmin is “growth at a reasonable price,” if not downright cheap. But then you look at the chart over the last six months, and realize that’s the same argument people were making when the shares were well above $100. So what’s an investor to do?

Beats me. If you know, I’m listening.


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13 Comments on "“China’s $50 Billion Shocker” Part 3 … Navellier"

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Brian B.
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Brian B.
June 9, 2008 4:52 pm

Satellites are expensive to maintain as WU Western Union can attest, which went away back in the late 80-s, Only to resurface recently. Garmin will do well in my perspective. Std equip. vs optional equip. in cars may land some big contracts from the auto makers. And Garmin is the best equip. for the money. My opinion of course. The price volatility is heartening/scary to say the least. Good investing

l. fish
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l. fish
June 10, 2008 11:05 am

Soon every cell phone will offer GPS maps. Just as accurate as Gramin.

Many new ones do now. It hardly costs ANYTHING extra. Glad I didn’t buy a Garmin or Tom -Tom and sad I spent $2000 to have it in my new car.

Keep up the good work.

Rob
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Rob
June 10, 2008 2:06 pm

The Garmin Nuvi is relatively helpful in a strange place, but has it’s flaws. An associate brought one along while we we in Montreal. Montreal has a rather screwed-up road system. Even though we followed the Nuvi’s directions, it seemed to get lost and blare the annoying “Recalculating!”. To me, it is easier to use Mapquest ahead of time to determine where I’m going.

Mike Sager
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Mike Sager
June 10, 2008 9:57 pm
Here is one from Navalier that sounds to good to be true…what do you think? Thanks for your wit and wisdom in all this…. “All thanks to its mammoth Colombian, Argentinean, and Peruvian reserves. “Buy this one today and I guarantee you’ll thank me a thousand times by June 20th—or you won’t pay a dime.” Fellow Investor: If this is the first time you’ve received one of my Global Growth buy alerts, you’re in luck. The biggest oil play of the year is at hand, and this is your opportunity to profit. Here’s why: The highest oil prices in history… Read more »
Blurpie
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Blurpie
June 10, 2008 10:31 pm

UTS.TO or CLL.TO? Old favorites by Michael Schaeffer and Tobin Smith…

Denby45
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Denby45
June 11, 2008 1:39 am
Blurpie I think you are wrong about the answer to the oil stock being UTS or CLL. Mike, I reckon its Gran Tierra (GTE)(was GTRE in the old days) also a Mike Schaeffer pump and dump in it’s earlier days just like UTS and CLL. MS and his cronies always move on from stocks after they have bagged the cash before the dump part. Strangely, some of their recommendations actually go on to do well such as the one you mentioned CLL of which I am currently holding a lot of. GTE also comes into that category and I have… Read more »
Denby45
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Denby45
June 11, 2008 1:41 am

OOPS forgot to add I don’t like GARMIN. Too much competition out there for my liking. Just take a look at the new iphone and Nokia also have this GPS function clearly in their sights.

Den

cretus
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cretus
June 11, 2008 7:33 am

GTE has all the characterisits of Ultra Petroleum, and is one of the most explosive oil and gas stocks. The potential is huge, and will make many new millionaires. They finance exploration from revenues, and have a site rich with oil layers! This is indeed a pump, but no dump!

hello
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hello
June 11, 2008 8:23 am

If you like GTE look at SOR in canada. This the GTE’s 50/50 partner but trades $2.50 cheaper and has the same sharecount…..

CollegeStudent
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CollegeStudent
June 11, 2008 10:45 am

The 353 P/E is a little frightening for GTE

Denby45
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Denby45
June 11, 2008 1:09 pm
Hello Hello, Thanks for the heads up I’ll certainly have a look. College be careful with trailing P/Es for young growth companies like this one. You can miss some very good stocks because P/E put you off. Must admit it does seem a bit high though but I tend to agree with cretus and think they have some great properties and a forward P/E of about 14 tells a better story about them. Probably more appropriate for this type of play. Will it make me a millionaire ….No I think not I will not be hawking the family silver for… Read more »
CollegeStudent
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CollegeStudent
June 11, 2008 6:30 pm

Appreciate the info Denby.. Im still trying to learn the basics lol

casca
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casca
June 26, 2008 2:24 am

It’s Gran Tierra Energy (GTE)

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