Navellier and Mechel — Cautionary Tale

By Travis Johnson, Stock Gumshoe, July 29, 2008

Greetings from the road, everyone — my time is limited today so I’m sharing a very interesting comment that a reader sent in … we’ll call him Carlo.

Carlo looked into Louis Navellier’s recent history with the formerly highflying Russian steel (and coal) stock, Mechel (MTL). This was also a Robert Hsu pick for a while, I’m told (Hsu and Navellier have the same publisher), but the same little birdie also told me that Hsu sold his Mechel at a very lucky time. Navellier apparently didn’t (I have no way of knowing for sure), though I imagine he has probably sold it by now.

I’m sharing this note just to offer yet another little cautionary tale — Navellier’s system is built on earnings momentum and growth, among other similar quantitative measures, and like any other system it can fall prey to big downside surprises. MTL’s was essentially political in nature, which means it probably shouldn’t have been that much of a surprise in Russia, but one can never quite predict where bad news will come from … and stocks like this that build a following among growth and momentum investors can fall much harder than most when those surprises do occur.

I’ve never lookd at Mechel in any detail and don’t know whether the severely beaten down price now is an opportunity, but if you have an opinion feel free to share.

Here, without further ado, is Carlo’s compilation of Navellier’s notes about Mechel over the last couple months — if you’ve got a chance, go back and read over them … would you have been convinced that this was a great stock to buy?

MTL today (07/29) is still going down … $18 and counting.

Again, I don’t really mean to single out Louis Navellier, though he’s one of the more aggressive advertisers and I write about him quite a bit — just wanted to share Carlo’s walk down memory lane, and offer a little sober reminder that very few systems are really effective at predicting the bad news shocks that occasionally hit the companies we know and love.


Share your thoughts...

52 Comments on "Navellier and Mechel — Cautionary Tale"

Notify of
avatar

steve
Guest
0
steve

Louie, E mailed me special instructions yesterday
to put in a ‘GTC’ order to sell (MTL) at $22.00
he predicts a dead cat bounce. I bet he sold already. we’ll see if it bounces back up to 22

spreadtrader
Member
0
spreadtrader
From his blog: “Yesterday, shares of Mechel (MTL) plunged 38%….The good news is that the stock is bouncing back today by over 13%, and the company has released an official statement saying that it will cooperate with the government. I’ll keep new posted on any further developments in Mechel. Posted by Louis Navellier on July 25, 2008 1:32 PM” What he doesn’t say is that the day before “yesterday” (the 23rd) the stock closed at 36.61…already 38% off its high. At 18, the stock was 69% off its high. After plummeting 40 bucks without so much as a “look out… Read more »
Bigdummyjoe
Guest
0
Bigdummyjoe

He stays in business because he’s actually very good and what he does and most people are very bad at investing. Actually most people who buy stocks aren’t investing. They are gambling. But they either don’t know it or they are deluded into thinking that they are investing. That’s how he does it.

spreadtrader
Guest
0
spreadtrader
Just so that I understand….this guy was closely following this recommended stock on at least a weekly basis, during which time (less than 60 days)it lost 69% of its value. At no time did this very good investor counsel his very bad gambling subscribers (who don’t really understand investing) to sell it; and that makes him very good at what he does? ANYBODY can pick stocks. What separates the “good investors” from the wannabes is the ability to cut losses and lock in profits. It appears that this gentleman can do neither. He’s a wannabe. Even an ordinary chart reader… Read more »
DonBull
Guest
0
DonBull

Back in 1995, I went to a presentation by Louie (in Sarasota), have followed what he throws out for free (never subscribed), he’s not a good picker! Believe he is in the same unspectacular stable (Philips) with Tobin Smith, etc.
which grinds out yards long email enticements (they apparently pay copywriters by the yard).

Jim
Guest
0

Hey Folks does anybody know what the stock simble
is for the stock that Warren Buffet bought $500 million worth?? I would love to know just to see if its true. Thanks
Jim

fireball
Guest
0

from what i can tell by following l.n. some, his advice may be pretty good on some quick trades. i believe he has sacrificed some integrity during these rougher tighter times. as investments from my limited perspective he has not done well. hey if anyone wants to send a few thousand i will tell you my next guess but i would advise you to just follow the gumshoe as he helps me make my guesses quite a bit.

Elissa Stein
Guest
0
Elissa Stein

Yes, Louie has his share of rocks that plummet. So does Steven Leeb. You should see what he did after he recommended AYR and it started to plummet. He endorsed it again! Then, a day or two later, he issued an urgent message to sell. It’s lost over 50% from where he recommended it. You just can’t rely on these guys to warn. They don’t seem to have the expertise they tout.

Indya
Guest
0
Indya

Anyone who invests in Russia has done absolutely no research or ahs lost all perspective. Sorry for the losers but it’s inevitable that the govt, i.e., Putin & Co, will own everything that isn’t alrewady theirs. What does the Gumshoe always say about one-owner stocks? It applies in spades in Russia.

Gerry
Guest
0
Gerry

On another front and Paraphasing DonBull “…they apparently pay copywriters by the yard.”
Has anybody read Crooks Jr’s pub yesterday about “for Big Game Hunters, in Forex”? – Very enticing. I would like to ear comments.

Keith
Guest
0
Keith

If you stick with Louie’s conservative picks he actually has done pretty well through the years. I’m not sure why anybody in their right mind would invest a dime in “Putin’s” Russia.

Dan
Guest
0
Dan

I used to gamble on football. I used my own reasoning for the first couple of years and did terrible. Then I responded to emails from supposed experts in the gambling field, paid a few of them for their services, with similar results. Finally, my wife made me quit. Now I fill this need to gamble by buying and selling stocks, following the same pattern–trying to pick on my own, then following touts like Crammer and Navelier.

Stocks, football…same thing. Neither is an investment. They’re both just gambling.

SageNot
Guest
0
SageNot
http://finance.yahoo.com/q/ta?s=MTL Bigdummyjoe ISN’T!!! You bet that you’re gambling when you say that buying stocks is just investing. Warren Buffett invests (in the businesses), most of us are gambling to some extent. Good gamblers set loss limits so that they have skin left to play with, hence a trailing stop loss s/b used with stocks to lessen the hit when the stuff hits the fan. Forgive me for re-posting one of Mark Skousen’s rules; “never, never let a big gain become a loss” or words to that effect. It’s just dumb to say that you’re investing (gambling) for a bigger gain,… Read more »
TC
Guest
0
TC
To add my 2 cents, and to be perfectly open and honest, I did jump on the Navellier’s hype train a little over a month ago and bought into GTE – he was touting that this one would ‘double by next Friday or your money back!’ Well, when he moved the ‘next Friday’ bit up a week (I think it was at least twice) it still didn’t help. It’s all been downhill. Sure everyone says wonderful things about GTE and how the company is going strong, but for a ‘two-bagger’ that Navellier said it would be, WRONG! I’m currently 33%… Read more »
Nick
Guest
0
Nick

Louie’s latest “$13 solar doubler” seems to be Solarfun (SOLF) — last round of earnings produced a damn good bounce, but with the way the market is right now I’m not sure if it will repeat. Anyone fancy some SOLF?

Tom
Guest
0
Tom

I bought FSYS, GTE & GSI as per Navellier recommendation(not subrscribed to it yet; thought I’ll go by his free recos to see how he is before subscribing). All stocks are down till now. Still awaiting to reach my buy price. Got the lastest reco about some “$13 solar doubler”. Maybe its SOLF. Not sure.

JohnnnyB
Guest
0
JohnnnyB
Todays discussion has one aspect not asked by anyone. Who are these investment letter writers really working for? Your financial health and well being or theirs and the company they are touting? The comments about gambling are very true. I think about that aspect of investing each time I make a trade and challenge myself (are you gambling today JohnnyB or are you making a reasonable investment choice?) That is a tough call. I wonder how many of us are in it for the excitement and adrenalin rush it brings to be on the right side of the trade. The… Read more »
Read&Invest
Guest
0
Read&Invest
I tried Crooks and used my money=back guarantee. I was not impressed. Navallier has a good long term track record, but it’s based upon the market going up more than down. You will lose money with him and almost anyone in a bear market. Lately I’ve made $ selling deep out-of-the money put options on big down days where the expiration is less than a month away. You’d be surprised how much people will pay you when they are scared and greedy. I own a small amount of SOLF. I haven’t made money on it yet, but one nice earnings… Read more »
Bart
Guest
0
Bart
I’m with you guys. It appears to me that Navallier’s stocks are generally high priced with little room to move, so the average investor probably can’t do it. Only if you can play the average on the portfolio as a whole and be in when he is does it appear you have a shot at it working. It’s more like educated gaming. On Russia, there is no power struggle. Putin controls the government. He merely moved to a different position because time was up on how long he could be president. His boy was put in that job so he… Read more »
A.Nony Mouse
Guest
0
A.Nony Mouse

In Hsu’s latest update, he states that subscribers who followed his buy/sell advice on Mechel would have booked a 249% profit. Admits he was lucky with his sell call timing. A word of advice to perspective Hsu subscribers…wait for the $199 13 week sale on his AsiaPacific Edge Newsletter. The gains are much better than China Stratgy. Plus If you have a little bit on the ball you can learn how he thinks and can become you own Robert Hsu with the help of Investor’s Business Daily weekly top 100 stocks

Big Mo
Guest
0
Big Mo
JohnnyB, you are right. The investment letter writers are basically in it for themselves (though there are a few exceptions). One thousand subscribers at $200 apiece is a cool $200,000. Spamming costs nothing. Think about it. Is it any different from the old ads that claimed “Make $6,000/month in your spare time at home stuffing envelopes. Send me $20 to find out how.” Or “How I made $1 million in real estate in 18 months with no money and no experience. Send $50 for my information kit.” If the stock picker, the real estate expert, and every other get-rich-quick hypster… Read more »
womanwithportfolio
Guest
0
Hello, fellow Gummies. Long time no see. I just wanted to put in a word for three aspects of investing that have been slammed of late ( often for good reason, I admit). One is the “story,” the other “fundamentals,” and the other is “buy and hold.” When a market is in volatile bear territory, there is often little rhyme or reason to why stocks get bought and sold, other than momentum, sector swing and herd instinct, as well as black-hole hedge fund action, in which case both the story and the impetus to hold for a better day are… Read more »
womanwithportfolio
Guest
0
Farley, I agree that simply indexing the S&P is not the way to riches, though using dollar-cost averaging over the past ten years would improve your results over a lump sum initial investment, and considering dividend reinvestment, you’d have made money on your simple S&P index. And you wouldn’t have been hammered as hard by the huge losses some folks experienced in the dotcom bust, discouraging them from the market for good. There is a smart way to indexing, which many successful institutional investors use, and which individuals can use as well. You can use ETFs as well as funds,… Read more »
Donato
Guest
0

To Woman With Portfolio . . .
Those were two very well put posts’. It has taken me awhile, but I’ve come to accept the fact that successful investing in the stock market (for me anyway) is a combination of using the technicals, fundamentals, value investing, and trends.

As long as I use those four concepts in somewhat equal portions, I make money.

Lawless
Guest
0
Lawless

I got stopped out of Mechel long before Navellier recommended to sell. I’m glad I didn’t follow Navellier’s recommendation of not using stop losses.

womanwithportfolio
Guest
0
With regard to institutions shifting to indexing, here’s a recent development. The Massachusetts state pension fund pulled $2 billion in assets from Legg Mason Inc.’s Bill Miller and four other firms as part of a plan to shift all U.S. equity assets from managers who actively pick stocks to buy and sell. The board of the $50.6 billion pension fund approved the switch at a meeting today, citing “inconsistent performance,” said Francy Ronayne, a spokeswoman for Massachusetts Treasurer Timothy Cahill in Boston. The money was assigned to portfolios run by State Street Corp. and three hedge funds that are designed… Read more »
Gravity Switch
Admin
12

WWP — Certainly that’s the basic strategy that probably most folks should start with, at least (though it’s hard in years like these, the anomaly years when actively managed funds on average beat the index). If your goal is to beat the market, you have to at least start by doing as well as the market, which is surprisingly difficult to do on a consistent basis.

wpDiscuz