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.

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52 Comments on "Navellier and Mechel — Cautionary Tale"

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steve
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steve
July 29, 2008 3:57 pm

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
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spreadtrader
July 29, 2008 7:01 pm
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
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Bigdummyjoe
July 29, 2008 7:46 pm

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
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spreadtrader
July 29, 2008 10:10 pm
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
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DonBull
July 30, 2008 9:52 am

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
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July 30, 2008 9:54 am

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
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July 30, 2008 10:07 am

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
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Elissa Stein
July 30, 2008 10:27 am

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
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Indya
July 30, 2008 10:28 am

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
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Gerry
July 30, 2008 10:48 am

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
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Keith
July 30, 2008 10:48 am

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
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Dan
July 30, 2008 10:54 am

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
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SageNot
July 30, 2008 10:54 am
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
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TC
July 30, 2008 12:38 pm
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
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Nick
July 30, 2008 5:02 pm

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
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Tom
July 30, 2008 5:54 pm

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
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JohnnnyB
July 30, 2008 6:31 pm
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
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Read&Invest
July 30, 2008 10:35 pm
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
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Bart
July 31, 2008 9:48 am
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
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A.Nony Mouse
July 31, 2008 10:43 am

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
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Big Mo
July 31, 2008 8:51 pm
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
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August 1, 2008 9:56 am
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
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August 1, 2008 1:25 pm
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
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August 1, 2008 4:22 pm

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
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Lawless
August 6, 2008 9:15 am

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
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August 6, 2008 5:52 pm
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
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August 6, 2008 6:03 pm

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.

Investorgirl
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Investorgirl
July 30, 2008 9:55 am

I agree. I also think the govt has let us down with the defense statements that cover mis leaders like this. This and most of the entities as such are hiding behind that cover, and helping many new investors to go broke, while they sit behind a desk, and figure how to legally scam their next victim. This should be illegal! Lies are just that, and should never be covered by any type of protection. PLUS I wonder if Warren Buffet would have really dropped his money here!

Davidrmm
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Davidrmm
July 30, 2008 10:45 am
Best advice I have learned is set a stop and sell when it drops below it. Effect on overall portfolio is minimal i.e. 10 % drop on 10 % of portfolio is 1%. Keeps money to fight another day. 2nd is don’t just Buy and hold. Move your stops up as the stock goes up and take profits as it goes up. There is no profit until you sell. It is all on paper. Look at the recent oil plays in the Bakken to see what I mean. BYTW I use Vector Vest to help identify stocks and strategies and… Read more »
Stan
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Stan
July 30, 2008 11:40 am

Which Stephen Leeb letter did you subscribe to and for how long? I have subscribed to his The Complete Investor for about 2 years and it has done pretty well. I’m not familiar with his AYR pick.

Of course, no one can be expected to get them all right.

If you don’t like any of the investment letters, then do you make your own picks?

sequential
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sequential
July 30, 2008 11:53 am

I hear his currency options service does well would like to hear from any others that have tried it
Thanks S

Myra
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Myra
July 30, 2008 1:28 pm

Hey guys. Has anyone know the track record of gorillatrades.com? Would like some feedback….thanks

Karen
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Karen
July 30, 2008 2:19 pm

I made a decision long ago that I would never trade anything Russian. There are plenty of other ways to earn a dollar.

dan
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dan
July 30, 2008 3:23 pm

how can u say say that hus has made u money? in the last several months most of his stocks plunged over 50% compared to 10% everywhere else. I don’t even read his recs anymore. EJ, lfc, cogo rio. Hsu past success was no different ten shooting darts at a board when the chinese market was going up.He is useless

Davidrmm
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Davidrmm
July 30, 2008 4:10 pm

Got in a couple of years ago. Took profits as they went up and with signal from Vector Vest on 11/1/2007 started getting out. But you are right all the gurus are pretty good, as is most anyone, in a charging bull market. I agree, as I watched Hsu over time, I find he doesn’t know anymore than any of the rest and I no longer subscribe to his service.

Anyone else notice the 25 point swing of BEXP today? crazy market.

Chap
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Chap
July 30, 2008 8:57 pm

Regarding Gorilla Trades – no assessment is fair without considering the market – though the major indexes are down about 20% each so far this year, according to my calculations (the site lists every closed transaction), the closed confirmed trades have netted more than a 2% profit…not bad in such a bad market, they’re beating the indexes by 22%.

Al George
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Al George
July 31, 2008 4:38 am

You’re obviously from Gorilla Trades. My suggestion: get off this board and STAY OFF!

Myra
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Myra
July 31, 2008 1:51 pm

Thanks very much for your assessment, it was very helpful for me.
Al, I am NOT from Gorilla Trades so no need to get all hot under the collar.

Tom H.
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Tom H.
August 10, 2008 12:32 am

I finally canceled my GorillaTrades subscription after 3 years. My results were well under 1% gain over that time period, compared with about 6% return for another (less active) newsletter that was value-oriented rather than momentum-oriented. I think that value and dividend yields are going to be the name of the game over the next few years; we may be lucky if we break even after inflation in the equity sector.

A.Nony Mouse
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A.Nony Mouse
July 31, 2008 10:33 am

I believe it’s called INcome Investor or something like that. And he has NUMEROUS DOGS on his buy list including CIti Group a three or four months ago as well as a a couple other financials. I took a 1 yr sub for $49 and believe me I won’t waste money renewing.

Judy
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Judy
July 17, 2010 8:51 am
Are there any of these guys fairly accurate. I'd like to subscribe to one of them, but they are all missing a lot. I don't have much to invest and would at least like to make some money. I've read Satnsberry is awful and, of course,, Investor Place is part of Stansberry. I don't want anyone to have access to my accounts and just take money out when it is due. I've also read Stansberry will keep taking money out and you can't get them to stop. Some of Investor Place is willing to do this also.
Brian B.
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Brian B.
July 31, 2008 11:20 am

NOT SURE HOW RECENT YOUR TALKING ABOUT, AND DON’T FOLLOW HIM TOO CLOSELY, But Buffet was buying railroad stocks 6-9 months ago and then JNJ on dips to 60/share, then Mars candy bar marker with a merger aquisition. Hope this helps.

Judy
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Judy
July 17, 2010 8:40 am
I don't know which stock you are talking about? Buffett has been buying Becton Dickinson. Also Buffett and Gates have bought a large amount of Republic Services (RSG)–a waste managment company, Their competitor is Waste Management (WM) . Both stocks are around $30. In N.C., WM is here, I haven't seen RSG here. Also check out iCad Inc (icad). It is a virtual colonscopy. It is a penny stock. Runs betwen $1.87 and $2.45. Obama has had it, but not available for Medicaid or Medicare yet. It should be big eventually. I"m watching it.
TC
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TC
July 31, 2008 11:49 am
JohnnyB, One person that I’ve really come to trust over the last year and a half for advice and solid picks and information (besides the Gumshoe) is a guy by the name of Don Harrold. He runs his own site, http://www.donharrold.net, does his own videos and writes his own newsletters. He’s really a down to earth guy who is a true patriot. He adamantly encourages everyone to STOP listening to mainstream media (CNBC, FOX, et al) for stock and market advice. Most of his picks fly in the face of every ‘popular’ adviser because he doesn’t have buzzers and whistles… Read more »
Judy
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Judy
July 17, 2010 9:32 am
Self-directing is best, but you have to do your homework. Mutual funds go up and down like a yoyo. If you lock in your profits, and put them in money markets. Go to the free stock option seminars,, but don't buy them. You learn a lot. You have to pick your own strategy and don't deviate from it or you will lose.. Some do covered calls, and some buy call $1.00 up and put $1.00 down on the same stock before Quarterly Earnings come out. If it is good, then they sell the put, if it is bad, then they… Read more »
Gravity Switch
Admin
11
August 1, 2008 10:09 am

Well put, WWP.

farley5
Member
0
August 1, 2008 12:02 pm
Unfortunately, Indexing your portfolio is not the path to riches. If you had money in the S&P 500 ten years ago, you are right where you started today. All investors must treat their investments like produce. Some produce is fresh and cheap in season, and nasty and high priced out of season. WWP, I know you do a lot with sectors so you know that is true. If an investor likes the STORY, then she can jump in if demand is there. If not, she has not lost any money in a dead or declining stock. My clients have had… Read more »
Donato
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0
August 1, 2008 4:01 pm

Both gambling and investing are quite simple. One of the biggest differences is that investing just takes a little more time (research) and patience (buying low).

Gravity Switch
Admin
11
August 1, 2008 4:11 pm

Also, I tend to do a lot more drinking when gambling than I do when researching investments. And actually, I tend to get much higher returns on the gambling, at least if you annualize them — maybe that’s my mistake, I need to hire a cocktail waitress to help out during market hours. Hmmmm.

Donato
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August 2, 2008 12:18 pm

Maybe I should get much higher on returns. I mean, maybe I should drink when gambling on investments. Hey, where did that cocktail waitress go that I was marketing . . .

Carlo
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August 28, 2008 5:02 am
Judy
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Judy
July 17, 2010 9:44 am

I've read a strategy like you describe. I just can't figure out which put to choose. Also, the seminars on options tell you to go out 60-90 days and give yourself time to make money, but they do usually trade within a week or so.

Please write back and help me with this. I've some questions that I can't figure out the answesr. Thanks

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