Saturday, March 7, 2009

Louis Navellier and FSYS

It took over 6 months to Mr. Navellier to unders
tand he bought junk at the worst possible time. I am not going to report all the nonsense he wrote about FSYS in his newsletters and in his numerous spam. I just want to report what he just wrote to his Emerging Growth subscribers:

FLASH ALERT: 03.06.09

Fuel Systems Solutions (FSYS) announced earnin
gs last night and the news wasn't good. First, let me apologize for recommending this stock. Needless to say, I'm very upset with this company.

Here are the details: FSYS, a maker of alternative fuel components, posted lower quarterly earnings and forecast weak revenue for 2009 and its shares slumped by as about 25%. The company posted a fourth-quarter net income of just $641,000, compared with $4.8 million a year earlier. Equally troublesome was that Fuel Systems forecast revenue of $330 million to $360 million for 2009 when analysts had expectations of $429.2 million. That kind of guidance is just inexcusable.

So how could an A-rated stock like FSYS post suc
h dismal earnings? Well, the quarterly results included $5.9 million of additional provisions and expenses–that's 22% more than the profits from this period last year. Such big losses erased all the good things this company did. These losses were due mostly to currency hedging and exchange rates. Since FSYS does a lot of business overseas, it relies heavily on a "currency tailwind" created by a weak dollar and a favorable exchange rate with other currencies. The dollar has had an artificial rally recently, and unexpectedly ate into this stock's profits.

Looking forward, I do not expect the gre
enback's artificial strength to last. The U.S. dollar's rally has been prompted by the market woes as investors look for a safe haven. After gold, the greenback has always been a good place to hide in rough times. But clearly this flight to the dollar won't last, because President Obama's massive spending spree is causing America's deficit to soar and is calling into question just how "safe" a currency the greenback really is.

Unfortunately, the future is irrelevant to FSYS–the damage has already been done. That's why I want you to sell FSYS. Whether you unload the stock today or in the coming weeks on a market bounce is merely academic, because I simply don't believe the stock will ever get back to its previous highs in 2009.

I won't sugar coat what's happened with FSYS–I know selling this stock at such a loss is going to hurt, and I sincerely apologize. I was counting on a standout earnings report, but the
se one-time expenses ruined the quarter. I'm not going to make any excuses for what happened with FSYS, but I do want you to know that this is an extremely rare occurrence that has been fueled by a once-in-a-lifetime bear market.

This event is a sobering lesson on the importance of being diversified. FSYS was in the aggressive portion of our portfolio, so my hope is that you followed my 60-30-10 strategy and kept FSYS in the lesser 10% portion of your portfolio. This stock was in the "Aggressive" category for a reason.

I know you may still have some questions, such as "Which stock should take the place of FSYS in my portfolio?" I'll have details for you in the March issue of Emerging Growth that I'll be sending to you later today after the marke
t close. So please stay tuned for further details.

At lease, for one time, he apologizes. That's good. My question is: if he bought FSYS on August 29th at $51.83 (at that time with a ridicolous PE ratio ranging between 50 and 60) why did he wait until now to sell it?
Even if FSYS posted an amazing quarter it could have jumped 20% or 30% from $20 to $24-$26. That would have been a loss of 50% anyway. Why waiting so much? FSYS was to be sold in September when it went below $45. No later.

If sold at the day max ($14.59) the result of this FSYS trade was a 71% loss.

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