“Action Plan for the Wipeout!” Navellier

By Travis Johnson, Stock Gumshoe, December 18, 2008

Louis Navellier started marketing his services late on Tuesday with an email that has the subject line: “Today’s Cut Takes us to the Brink!”

He’s selling what he calls his “Action plan for the wipeout,” which he introduces thus:

“I have been telling my customers for several weeks now that this is the greatest buying opportunity of our lifetimes. But let me clarify: It’s not as simple as buying any old stock that’s cheap now, it’s about owning a mix of the highest quality stocks.

“That’s why I have spent the last few weeks creating what I call Action Plan For The Wipeout. Act today and you can put this plan to work for you, beat the market by over 3-to-1 AND be able to look at the morning news without flinching.

“Here is exactly how to implement this Action Plan For The Wipeout.”

He teases us with a handful of big growth stocks, which are always his bread and butter, and you may not be surprised to hear that they’re pretty much the same teases — and the same stocks — as he was touting a couple months ago, though the shares for the most part haven’t moved significantly in the interim.

Louis essentially tells us that we should be looking for the highest quality growth stocks, and that many of them look cheap now — he specifically mentions that he’s looking for great cash flow, high and rising margins, and earnings surprises.

So, without further ado …

The “Best High Growth Blue Chip Now”

“Our top high-growth blue chip helps cancer patients live longer, better lives. It’s got a ground-breaking product line, ready to go, and the growth profile is glorious—there’s just no other word for it.

“In 3 weeks it reports. In the last 4 reports, it has come in way ahead of expectations, and the stock has reacted with a 7% – 10% jump of joy. Buy it now.”

This one is almost certainly Intuitive Surgical (ISRG), the maker of the da Vinci surgical robot, and they have a history of often beating earnings estimates, and have been a growth darling for years. He has used this same language to tout ISRG before, but they’re probably not going to report in three weeks — they reported their last quarter in mid-October, the last time I wrote about a similar ad from Navellier, so the next report is more likely to come in mid-January at the earliest, and their last January report came on January 31.

I bought back in to Intuitive Surgical a few weeks ago, at more or less the same price it’s trading at as I type this. They trade largely based on their sales of new da Vinci systems at this point, but they have a strong and growing cash flow from the sales of the semi-disposable tools that are used by the robot, and from service contracts. At some point the growth will plateau, but they should remain a very profitable company — the question is, will the plateau of adoption of the surgical robot come in the next couple years, or do they have many more years of dramatic growth ahead? They still have essentially no competition in this niche.

Oh, and these machines are expensive — $1 million+. So if hospitals can’t raise the money to buy more of them, they could easily take a short term hit … ISRG doesn’t depend on debt, but their customers certainly do. It’s as cheap as it’s been in quite a while, but it’s only cheap if you believe the growth will continue… and I own shares now and have followed the company for many years, so I’m quite possibly biased on this.

Moving on!

“The Best Long Term Blue Chip”

“This cereal stock pretty much guarantees you market-beating returns for the next decade. Plus, as people skimp on eating out, they become bigger users of discount coupons. This is where our cereal company absolutely dominates.

“PLUS, wheat and corn prices are down—which sets ups up for a nice surprise in earnings season. It trades at 16 times earnings, too—so you snap up a bargain.”

Going just from those clues it could be either Kellogg (K) or General Mills (GIS), and both are given an A rating by Navellier’s portfolio grader service. Given his past writing about this sector, I’d be fairly certain that he’s talking about General Mills. Those two companies have very similar financial profiles, but General Mills is arguably a bit more diversified and value priced at the moment. If you want to go down the chain in the same sector, you could also look at a smaller company like Ralcorp, which owns Post and makes store brands (and owns a big chunk of Vail Resorts for some reason), but if you’re looking for steady blue chip growth you’d probably be happier with GIS or K, and my money would be on Navellier picking GIS.

Certainly nothing shocking here, when the economy goes South lots of folks retreat to the food companies … and they do get a nice boost, one expects, from falling commodity prices, but the cost of corn matters almost not at all (the box, and the transportation of that box, and the marketing, all cost more than the few cents of corn that goes into a box of Corn Flakes). It’s probably true, though I haven’t researched this, that the price of oil has much more to do with the cost of a box of cereal than does the price of corn or wheat.

And General Mills just upped their view for the year thanks to stronger sales, and released a good earnings report. Not bad! These guys are well respected as steady growers and recession resistant stalwarts, they’re not as cheap as some beaten-down names but even everyone’s favorite manic Jim Cramer was touting them last night. And who doesn’t love Cheerios?

OK … next one?

“Best ‘SAFE HAVEN’ Blue Chip”

“We’ve seen: Anything can happen. And we’ve learned: Anything will happen. So what’s the stock that will stand tall and strong through the fiercest hurricane?

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“This HAS to be a company that’s grown through every conceivable threat, acquired a seasoned management team and has diversified across the globe wisely, without losing control of quality. Many claim this crown, but only one blue-chip is undisputed king.

“Especially look at its stock price during this crisis: from the low $40s a year ago to the mid $50s today. During this crisis, it has totally revamped its marketing, to promise consumers a better lifestyle in troubled times. It’s brilliant and sales show: It hits home.”

The clues are not exactly thick on the ground here — but from that, the best fit is probably Wal-Mart (WMT), there are very few companies that have gone from the low $40s to the mid-$50s in the last year, unfortunately (though almost every big consumer staple blue chip is priced in or near the mid-$50s, so it’s hard to be certain). Another fairly close candidate would be McDonald’s, though you have to go back more than a year for prices in the $40s. And Wal Mart has indeed revamped their marketing in recent months, and the share price has gone up as investors speculate that they will be the last store standing when consumers have no cheaper place to go to (except maybe the dollar stores).

Wal-Mart has not been a fabulous performer, and relative to their extremely strong growth in their early years the shares look a little pathetic … but relative to the rest of the stock market today it looks much better.

Wal-Mart and McDonald’s both get an A from Navellier’s quantitative system, by the way.


“Best High Yield Blue Chip”

“Dividends are back. Investors are remembering the old truth: 97% of your total returnon your investment in your lifetime will come from dividends. So what’s the best?

“Our top blue chip offers a fat 7% yield. That’s TWICE what a 10-year Treasury offers!

“Plus, net profit in this specialty steel mill just soared 85%. PLUS, as the dollar gets cheaper, our profits just keep getting better.”

The best match I can find for this one is a Brazilian company, Gerdau (GGB). Like it’s fellow Brazilian steel company, Companhia Siderurgica (SID), it’s been a B in the Navellier grading system. Gerdau comes closer to matching that profit number, however.

Gerdau has reported some good earnings growth in past quarters, but Brazilian companies have been taken out behind the barn and put out of their misery of late — it’s down about 80% from its Summer highs of around $25, you can pick it up today for less than $7 if you’re interested. Many Brazilian firms have been severely punished by the recovery of the dollar because of their currency trading and hedging, I have no idea whether Gerdau is in that boat, and I know very little about the company.

This one is certainly a bit of a guess — there aren’t many high-yielding steel stocks at the moment, but this one does not match Navellier’s net income numbers precisely, at least according to the numbers I’ve seen. And the dividend yield numbers jump around because the dividend changes, but last time around this one looked solidly like Gerdau, and it seems unlikely that would have changed. This is the one that has moved quite a big since that first tease, it was down in the $5+ range then, with a trailing yield that looked higher at 12% because the lower November dividend hadn’t yet been issued.

And one more — are you tired yet?

He says you should buy this one IMMEDIATELY, and that this is his …


“Best Blue Chip to Buy First.”

“My top Trigger stock this week is a video game company with 10 million subscribers on a monthly billing cycle. As recession looms, this industry has caught fire. Honestly it looks like games are more than “recession resistant”—they appear to THRIVE on an economic slowdown!

“This blue chip gamer is about to GUIDE HIGHER—right ahead of earnings. Last quarter, under very similar circumstances, the stock jumped 25% in 10 days. That’s a risk-free 25% gain!”

This pretty well has to be Activision Blizzard (ATVI), the company behind Guitar Hero and World of Warcraft (which did surpass the 10 million subscriber mark early this year).

If you think this quarter is similar to last quarter anywhere in the stock market, I’ve got a portfolio to sell you — you’ll have to pay my mark to model price, of course, since I’ve personally decided not to use mark to market accounting for my holdings. They have had some nice performance after earnings in recent quarters, and they certainly have some of the hottest game franchises. The financials are a little confusing because of the merger between Activision and Blizzard less than a year ago, but it looks like analysts are pricing this at about a PE of 16 based on fiscal 2010 earnings projections of 75 cents or so, which will start for them next Spring.

If you believe that games are recession resistant, this might be one that’s worth a look — it is more profitable and has probably a better portfolio of games than Take Two Interactive, and it’s certainly performing better of late than the giant of the industry, Electronic Arts, which has been mired in a search for growth for the last year. Or you could always take a flier on the big companies that compete with World of Warcraft in China, where multiplayer online games are still huge — some of them, like NetEase, have even managed to stay afloat in the China selloff, others — like Shanda and The9 — have not been so lucky.

For full disclosure, I do own shares of Intuitive Surgical, and I do not personally own ATVI but I have written it up in more detail for the Irregulars.

Much of the information in this article was published previously as the Navellier Smorgasbord when he first started mailing a similar ad, it has been updated.


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Derf
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Derf
December 18, 2008 3:05 am

An alternative to General Mills would be Gabelli Healthcare & Wellness Trust (GRX). The name is a little misleading as their primary industry holding is Food including recession resistant stocks like General Mills and Campbell Soup. Nice 26% discount.

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KA
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KA
December 18, 2008 9:51 am

In his spam “get Ready For The Wipeout” Navellier was saying to shun half of his Blue Chip stocks…

http://investorcrap.blogspot.com/2008/09/ready-for-wipeout.html

KA
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KA
December 18, 2008 9:56 am