I’ve come to like these books in Wiley’s The Little Book series. Whether you like the book or not, at least you are not investing a lot of time into it, because, it’s a little book. This is another one in the series. The title is The Little Book That Makes You Rich. It’s about growth investing, which is the opposite strategy to value investing, as outlined in The Little Book of Value Investing by Christopher Browne.
The author Louis Navellier is a money manager. He manages mutual funds and wrap accounts with few billion dollars under management. He also publishes four investment newsletters: Blue Chip Growth, Emerging Growth, Quantum Growth, and Global Growth, which cost from a low of $149 a year for Blue Chip Growth, to a high of $5,000 a year each for Quantum Growth and Global Growth. That’s clever marketing if you ask me. Nobody has to subscribe to Quantum Growth and Global Growth. They are there to make Blue Chip Growth look like a great value.
Navellier advocates in this book the strategy of investing in growth companies. He describes how he does it. He evaluates stocks by these eight “tried-and-true key fundamental factors that drive stellar stock price performance”:
- Positive earnings revisions
- Positive earnings surprises
- Increasing sales growth
- Expanding operating margins
- Strong cash flow
- Earnings growth
- Positive earnings momentum
- High return on equity
He runs screens on these factors for all stocks and he assigns grades (A/B/C/D/F) to each stock. These fundamental factors account for 30% of the overall grade he gives to each stock. The other 70% of the overall grade comes from some quantitative evaluation, which he did not elaborate in the book, other than mentioning “institutional buying power.” He then buys stocks with better grades. Perhaps I missed it but I didn’t see much concern about price. That’s a big difference between growth investing and value investing. Value investors often miss the boat on growth companies like Google. They will say it’s a good company but the price is too high. A growth company’s stock price is always too high because it includes anticipation for future growth. While value investors are skeptical, growth investors will let the growth drive the stock price. Navellier explains in this book how each of the eight fundamental factors contributes to the superior growth of a stock.
Growth investing is exciting. Imagine if you catch a Microsoft in the early years. Or even a Krispy Kreme Doughnuts or Crocs while the growth and the anticipation were going strong. Just remember to get out before the growth fades. Not my cup of tea.
There is a lot of self-promotion in this book. Navellier keeps saying how great his picks worked out. I don’t recall any example for how a stock looked good by the eight factors but it crashed and burned. That must have happened. He just doesn’t mention it. Instead, he gives examples for how he was able to detect that a company’s growth was deteriorating and he exited the stock before it crashed. This makes the book read like a marketing brochure.
Navellier also has a companion web site for this book. The companion web site offers a free PortfolioGrader Pro service. If you enter one or more stock symbols, it will give you a grade on each of the eight factors, plus a fundamental grade, a quantitative grade and an overall grade. It won’t give you a list of A- or B-grade stocks. I guess you will have to subscribe to one of his newsletters for that. I entered the stocks in the Dow Jones Industrial Average. Only one stock, Home Depot, received an overall A grade. Four other stocks, IBM, JPMorgan Chase, McDonald’s, and Verizon received B. Others got C and D, with Caterpillar and GE getting an F. If you like speculating on stocks or if you have some legacy positions you are debating whether you should hold or sell, this PortfolioGrader Pro could be useful for getting a second opinion.
Navellier manages these mutual funds:
- Navellier Fundamental A (NFMAX)
- Touchstone Large Cap Growth A (TEQAX)
- Touchstone International Growth A (TAIMX)
Three of his other funds are closing shop. You can research his performance. I didn’t see anything spectacular.
Rating: * (poor). Too much hype and self-promotion. I want to read a book, not a marketing brochure.
Say No To Management Fees
If you are paying an advisor a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.