This teaser comes in with Navellier happily boasting that his strategy is on the ascent — that value managers are headed for the exits and growth managers are shooting out the lights … which does certainly appear to be the conventional wisdom these days (value managers, after all, are almost all stuck with huge positions in the big financial stocks that are still stinking up the joint).
And after his little bit of (perhaps deserved) braggadoccio, Navellier notes that he thinks there are three great stocks from his portfolios that are the best picks for this month (yes, it really is 2008 — when did that happen?)
So what are they?
Well, they’re nice short teasers … let’s look at them one at a time:
#1: A solar company that “signed contracts with two leading Chinese and Italian integration companies just last week.”
The stock was down a little bit on this news, but is up 9% in “less than a month” ….
so is that enough to find out what this stock is?
Don’t insult the Gumshoe, my friend! Even this puny amount of information fed slowly into the mighty Thinkolator 4000 can tell us that this company must be …
This is the maker of the most efficient solar panels currently available, though with solar becoming more and more of a commodity business that might not necessarily be enough to make them the industry leader. There’s always the chance that higher volume producers in China and elsewhere will undermine any pricing power SPWR might have.
Still, this company, still largely owned by Cypress Semiconductor (which is a cheaper way to own SPWR if you like Cypress at all — in much the same way that EMC is a cheaper way to own VMWare … Cypress’ ticker is CY), is a leader in the field and has had a heck of a year (meaning twelve months, not three days).
SPWR does get an “A” rating in Navellier’s quantitative system right now, so that’s another piece of evidence … and the other two pieces, the Italian and Chinese integrators, sort of fits.
SPWR in December agreed to buy Solar Solutions, an Italian integrator and distributor, and while it’s a small acquisition it should be accretive in this first quarter of 2008 (meaning that the acquisition will add to earnings, not that earnings mean all that much to solar companies these days as they almost all remain wildly red hot).
And they also signed an agreement within the last month or so with Jiawei in China — not really an integrator, this is more of a silicon supply swap, but Jiawei is sort of affiliated with SunPower’s Chinese manufacturing affiliate SunEnergy, so I suppose we can let that get by with a small stretch.
And depending on when they bought, there was a 10% dip in December and it’s certainly possible that they’ve gotten a 9% gain in a month — this one moved around quite a bit.
Personally, solar scares the bejeezus out of me at these valuations — SPWR would be one of my favorites in the industry, though I’d probably buy Cypress instead, but the only one I have the guts to hold at the moment is MEMC Electronic Materials (WFR), which is a little further up the food chain as a polysilicon wafer supplier to the solar companies.
So that’s my best sleuthifyin’ on that one … what’s next?
#2: “This leader in crop nutrients and animal feed lands a spot on our Top 5 list for the second straight month in a row. Why spoil a good thing? Give it time to let it grow…and that’s exactly what it’s doing! This stock handed us an incredible 84.9% since November!”
Now, I must confess that this one is a bit tough for me — there are several good candidates but none that I can find that would have given a 84.9% return since November. Lots of them have returns in the neighborhood of 50% for that month+, which is crazy enough — that includes Potash Corp. and Mosaic Companies, which are the two most likely picks otherwise (most of the fertilizer companies don’t necessarily focus on animal feed as well, but these two do). Those two companies, POT and MOS, both get pretty compellingly high A grades from Navellier, too, though I expect all fertilizer-related companies, including Agrium, Terra Industries, Terra Nitrogen, and any other you could imagine) also get A grades in this growth and momentum grading system.
So … got an other feed and fertilizer company that has popped 85% in the last month or two? If so, let us know, otherwise I’ll assume he exaggerated a bit … for what it’s worth, Potash is the company I’ve certainly seen most often recommended by other analysts, and it’s certainly in an enviable position as one of the few companies with an abundant supply of fertilizer available for the digging … but of course, it ain’t cheap.
And #3: “This stock just announced a new seven-year maintenance contract with Dubai-based airline Emirates launching shares to a new 52-week high! We’re up 10.3% in just two month.
The thinnest of all clues, but a few moments with the Thinkolator and I can’t help but conclude that this one is …
Goodrich Corporation (GR)
Again, it’s got top grades in Navellier’s system, it has grown quite a bit over the past year (though it’s down a bit after hitting those 52 week highs right around the time that the Emirates maintentance deal was signed in the middle of last month). This is an old school aerospace contractor, they provide components for many airplanes (the workhorse Airbus airliners in the case of Emirates). The Emirates deal covers “Actuator systems.”
No, I don’t know what “Actuator systems” are, either. That’s not that surprising, since I also have a hard time believing in Bernoulli’s Principle, and feel like the likelihood of all those actuators failing while I’m in the sky is disturbingly likely. According to the Charlotte Business Journal article I read on the topic, “Goodrich’s actuation-system division makes parts included in flight controls, engines and helicopter and tail rotors.”
So, sounds pretty important. I do happen to believe that global aerospace is probably a nice sector to be involved in for quite some time — even my favorite emerging market airline, GOL, just placed a big order for more planes, and folks that get a little more money in their pocket find it quite easy to get used to measuring their traveling time in hours rather than days, so the sector appears to me to have significant tailwinds.
But Goodrich? I don’t know much about them at all. Their valuation is about average, they’re pretty big, and they have a diverse set of products and capabilities … but that doesn’t necessarily make them stand out very much in this business filled with many like firms. Feel free to let me know if you understand the secret sauce that makes Goodrich a good bet.
That’s it for today — happy investing, everyone!