Saturday, October 4, 2008

Emerging Disaster

Another great lesson about how NOT to invest is brought to you by Mr. Louis Navellier and his latest 11 sells for his Emerging Growth newsletter.

Last month Mr. Navellier was writing: Our Buy List Is Ready to Soar.

This month he is writing: You’ll remember that when we launched the new Emerging Growth strategy a few months ago, I vowed to employ stricter standards for our Buy List. Those requirements include a market cap of under $10 billion, at least 25% sales growth and at least 50% earnings growth. As the market has gone haywire in the past few weeks, a number of our stocks have weakened and now fail to meet these requirements. They are AK Steel (AKS), Charles River Labs (CRL), Covanta (CVA), Deckers Outdoor (DECK), General Steel (GSI), ITC Holdings (ITC), Monolithic Power Systems (MPWR), Newmarket (NEU), Plains Exploration & Production (PXP), Partner Communications (PTNR) and Western Digital (WDC).

Waiting so long before selling made Mr. Navellier (and his paying readers) lose all the gains he made on these trades. Let's proceed with order.

Mr. Navellier told his subscribers to buy AKS on July 2007 at $37.37. AKS almost doubed to $70 between May and June 2008, but Mr. Growth waited 3 more months for AKS to go to $20.30 before selling. An almost 100% profit magically turned into a 45% loss.

CRL was added to the Emerging Growth portfolio on January 2008 at $65.07. It quickly lost 20% of its value but came back to $65 in August 2008. A good chance to get his money back for Mr. Navellier, that waited two more months for the price to go down to $53.86 (the minimum since bought...) before selling. A nice 17% loss.

Buy date for CVA was May 2008 and by price was $28.77. For a few months CVA did not move much and in September it started to move down. Sell price is $20.44 for a 28.9% loss.

The only profitable trade of this round (if you don't consider the missed profit).
DECK was bought on April 2007 at $71.02. It went to $160 in December 2007 for a more than 100% gain. Mr. Navellier sold it yesterday at $89.10. Profit is $18.08 per share (or 26%) while missed profit was $70 per share ($160 to $89.10).

Mr. Navellier bought GSI on January 2008 at $7.90. GSI doubled, going to close to $16 a couple of times. Far from closing a profitable trade, Mr. Navellier waited two more months for GSI to go down to $6.53. His subscribers should promote a class action against him for this 100% profit turned to a 17% loss.

ITC Holdings was added to the Emerging Growth portfolio in November 2007 at $57.00 and sold yesterday at $50.49 for an 11% loss. Not much to say here.

Added to portfolio on on August 2008 at $23.70, it went to $28 before sinking to $15.52. Stop losses are unknown to the icon of growth investing... and a 34% loss is the result.

Bought on March 2008 at $66.95 NEU moved to $90 for an imaginary profit of 34% before collapsing. Mr. Navellier waited for the price to go to $47.85 before telling his readers to sell and bring home a 28.9% loss. In April issue NEU was one of the Top 10 stocks. If anybody bought it at that time the loss is close to 50%.

Another great trade is PXP, bought in August 2008 at $55.21 and sold two months later at $29.50 for a remarkable 46% loss in two months.

We are close to the end of this issue.

Bought in January 2008 at $21.26. Sold at $19.44 for only an 8% loss.

Finally WDC. It entered Mr. Navellier portfolio on March 2008 at $30.87. It moved to $40 in June 2008 for a missed 30% gain in 6 months. The guru waited for WDC to go to $18.80 before selling. Thanks to Mr. Navellier strategy his subscribers got a very unforgettable 39% loss.

Average loss for there 11 trades was 22.6%.

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