Yes, let me begin today by again making it very clear: It ain’t my guarantee. When I put stuff in quotation marks, it means I’m borrowing the language from the letter or ad that I’m sleuthifying — I know that quotation marks are a fairly ordinary part of our language, but I still get lots of folks accusing me of being a Bernie Madoff-style crook whenever I use words like these.
And frankly, I understand the skepticism even if it’s slightly off-target — Louis Navellier’s newest ad guarantees that he’ll make you an utterly ridiculous eight times richer this year if you sign up for his Quantum Growth newsletter ($5,000 a year), but of course the guarantee isn’t that Navellier himself will step up to top off your brokerage account if the results don’t hit that 8X level, it’s that he’ll give you your money back. For the first 30 days, at least, so if you’ve got to make 8X your money in 2011 and do it in just the next month so you have time to get your Navellier refund, well, that’s an even higher hurdle to jump.
Navellier makes this claim pretty consistently, saying that his service has beaten the S&P or the broad market 8-to-1 or 3-to-1 or even, on occasion, 25-to-1, and from what I know if his results I’d urge you to take that claim with a grain of salt. Or a whole salt lick, if you’ve one at hand. I don’t know the results of Quantum Growth specifically, but he says that his Blue Chip Growth subscribers have beaten the market 3-to-1 since 1998, and that Quantum Growth folks have been able to beat that result 8X over (that’s where the eight times comes in) with a 25-to-1 beat of the market. So you have to first believe that he has had 3X better-than-the-market returns over the last 13 years, but also that his more aggressive service has done 25X better than the market over that same 13 year time period.
According to Hulbert, who actually tracks the portfolios of about 200 newsletters, Blue Chip Growth has, on average beaten the market since 1998. But it sure as hell hasn’t done three times better. If you take just the annual averages, which doesn’t necessarily reflect buy-and-hold performance, then Blue Chip has almost done twice as well as the Russell 2000 — roughly 12% a year versus roughly 6.5% for the broader market. I suppose it might be possible that Quantum Growth has averaged more than 100% a year every year for 13 years, but I don’t think it’s likely — I suspect I would have heard far better things from his subscribers if that was the case (of course, subscribers almost always do worse than newsletters report — people don’t follow newsletters religiously, and they also, unfortunately, tend to buy high and sell low, something that exacerbates bad experiences with “buy high” momentum newsletters like Navellier’s).
But anyway, I think we’re probably all smart enough to know that there isn’t a newsletter out there that can reliably do 25X better than the market every year — or even 3X better every year. Trying to beat the market by just a small smidgen is the life’s work of thousands of brilliant people, and for a lot of ’em it’s a life’s work wasted. Doesn’t mean it’s not fun to try, of course, or that we mightn’t beat the pants off the market at least some of the time. So that’s a long way of getting around to the question, “what stock is Louis Navellier teasing today?” Well, we can bet that it’s a stock that has probably gone up rapidly over the past six months or so … but to get more specific we’ll have to sniff around some of the clues in the ad:
“A Quick Look at Tonight’s Top Trade, and You’ll See Why I Can Guarantee We’ll Make You Eight Times Richer in 2011 …
“… just like MIPS Technologies that just handed us a 67% profit in six weeks, this NEW TRADE is also riding the wave of technology spending—and is making even more money doing so with quarterly revenue growth that’s nearly 10 times greater than the industry.
“The company makes precision optical monitoring systems that are integrated into wafer polishers and other semiconductor processing equipment….
“… company’s customers are THE TOP 20 chipmakers in the world, including Applied Materials, Ebara, Lam Research and Novellus.
“… the company’s revenues jumped 112% last quarter as earnings zoomed 330%—all as investors doubled their money in 12 months.
“… the company expects revenues to increase by 60% by 2013 …
“The company’s recent announcement that they are now expanding to include 3D integrated circuits, which it views (as we do) as one of the faster growing segments moving forward…. “
And the last little tidbit? Next quarter’s earnings come out … tomorrow! (February 15) … so of course, Navellier wants you to buy fast so you can catch the “big move when earnings come out.”
So which stock is he teasing? Well, one of my readers actually pre-sleuthified this stock when he forwarded the ad to me, and suggested the solution … so I could leave the Thinkolator out in the garage and just confirm the clues, and, no surprise (Gumshoe readers are not just good lookin’, they’re also the wisest souls in cyberspace), he was right: This stock is Nova Measuring Instruments, Inc. (NVMI)
Yes, it did book a 112% revenue growth number last quarter (actually, 112.5% … so you can round up to 113% if you’re feeling lucky), and the earnings did hit 330% growth in that same quarter, so that’s a precise match. And actually, this is an Israeli company so they’ll be reporting in the morning before the market open tomorrow (while it’s still during working hours at their HQ in Rehovot, just down the road from Tel Aviv) — and actually, the conference call starts just at 9:30 while the market is opening, so if they say anything big during the call the morning trading might be a bit jumpy in these shares.
Nova is in the semiconductor equipment space, meaning they sell stuff to the semi companies — their little niche appears to be measurement and “process control” … or, as they put it, “The company’s systems utilize a combination of Spectroscopic Reflectrometry and Scatterometry to measure CD, trench depth, photoresist height, thickness and shape of complex layer stacks, as well as a variety of other features and parameters guaranteeing the delivery of tight wafer-to-wafer and within-wafer control.”
And there are several words in that sentence that I’ve never seen before, so I’m going to leave you on your own to try to understand what it means — my interpretation is that they’re from the “measure twice, cut once” department.
It’s a little company, with a market cap of just about $250 million (and about $50 million of that is net cash), so it wouldn’t be surprising to see more volatile trading in the stock — the shares have indeed at least doubled over the past year, with a particularly nice chart over the past six months or so as it has gone almost straight up, but even so there have certainly been plenty of periods in the last couple months when the shares bounced up or down by 5-10% in just a few days.
There are a few analysts covering the shares with positive ratings, but I haven’t actually seen any earnings estimates, so we can’t really gauge what the forward PE might be — the trailing PE (or as we might prefer to think of it, the “real” PE ratio, with actual numbers) is about 14 — and they have pretty nice 20%+ profit margins, so if they’re able to maintain that kind of profitability and grow their revenues by 60% over the next two years, well, I’d be happy to own the stock.
Can’t say that I’m gushing over with little hearts over the stock just yet, though — I know almost nothing about this company and just started looking into ’em this morning, so there could well be plenty of reason for suspicion, they’re such a small company in a huge and fast-moving business that I imagine there must be a lot riding on whatever technological advantages or proprietary products they might have. So for more today, dearest Gumshoe friends, you’ll have to do your own digging — please do let us know, though, if you think NVMI will awe us all with more awesome growth in the morning, or if you think they’ve got competitors on their heels and bad news to share, I’d be delighted to hear either way … and the comment box below awaits your considered opinion.