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?
- 05/27/08 – Top 3 Stocks: MTL is booming. (51$)
- 06/02/08 – Top 3 Stocks: Mechel rose 17% last week (and 78% for the year so far). (56$)
- 06/09/08 – Top 3 Stocks: Mechel’s annual dividend will be about $1.12 per ADR. (53$)
- 06/16/08 – Top 3 Stocks: MTL still performing well. (51$)
- 06/23/08 – Top 3 Stocks: Mechel still going strong. (50$)
- 06/30/08 – Top 3 Stocks: MTL to offer 11.67% of share base in a deal that could raise $2.74 billion. (50$)
- 07/07/08 – Top 3 Stocks: MTL still a steel powerhouse. (44$)
- 07/14/08 – Top 3 Stocks: MTL jumps 5% on strong quarterly report. (46$)
- 07/21/08 – Top 3: MTL is exactly the type of stock we want to own. (40$)
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.
How do you make sense of it all?I check my net worth and my portfolio (combined from several different brokerage accounts) using Personal Capital at least once a week, it's free and brilliantly organized.
Personal Capital has great tools for tracking spending (they can cut your spending by 15%), but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.