News on Quantum Growth

I thought about stopping writing about these guys, but they continue to send so much spam in our mailboxes that I am going to talk about some of their latest trades.

Today I will start from Louis Navellier's Quantum Growth, a $5.000/year service from the guru of growth investing. In his latest issue Mr. Navellier show 4 sells:

1. American Italian Pasta Co. (AIPC)
2. InterDigital (IDCC)
3. Lancaster Colony Corp. (LANC)
4. Longtop Financial (LFT)

Let's start analyzing these trades.

AIPC

The one just closed was the second AIPC trade this year. The first was between February and May 2009.

AIPC was trading below $15 in November 2008. As soon as it doubled and went over $30 Mr. Navellier jumped in. Here is what he wrote about AIPC from February, when he bought at $30.52 until May, when he sold it at $25.33 for a modest 17% loss:

• February 23rd 2009: American Italian Pasta Company (AIPC) is the largest maker of dry pasta in North America and offers some 300 different pasta shapes ranging from angel hair to ziti. Its consumer brands—like Mueller's, Golden Grain, Heartland, R&R and Mrs. Grass—can be found in almost every supermarket here in the U.S., as well as in many overseas locations. The company’s customers include most major U.S. grocers and club stores, as well as foodservice operators and other food manufacturers.
  American Italian Pasta recently announced that its latest quarterly earnings rose 1,657% to $26 million or $1.23 per share compared with $1.4 million or 7 cents per share in the same quarter a year earlier. During the same period, the company’s sales rose 53.3% to $171.2 million compared with $111.7 million. American Italian Pasta beat the Street on both fronts, posting a whopping 186% earnings surprise and a 17.3% sales surprise! Due to higher wheat prices, American Italian Pasta’s retail sales volume rose 16%, while its average price rose 45%. At restaurants, the company’s sales volume rose 7%, while its average price rose 36%. The stock is a great buy. Buy below $34.29.
• March 2nd 2009: Top Stock #4. American Italian Pasta Company (AIPC) is the largest maker of dry pasta in North America and offers some 300 different pasta shapes. Its consumer brands, such as Mueller's, Golden Grain, Heartland, R&R, and Mrs. Grass, are staples on supermarket shelves throughout the U.S., as well as overseas. The company’s customers include most major U.S. grocers and club stores, as well as foodservice operators and other food manufacturers. AIPC is essentially a recession-proof stock since more and more consumers are buying pasta products the cost less than other food items. Demand for this company’s products remains strong, and I expect AIPC to have another strong quarter. Buy below $33.68.
• March 9th 2009: Top Stock #4. American Italian Pasta Company (AIPC) is the largest maker of dry pasta in North America and offers some 300 different pasta shapes. Its consumer brands, such as Mueller's, Golden Grain, Heartland, R&R, and Mrs. Grass, are staples on supermarket shelves throughout the U.S., as well as overseas. The company’s customers include most major U.S. grocers and club stores, as well as foodservice operators and other food manufacturers. AIPC is essentially a recession-proof stock since more and more consumers are buying pasta products the cost less than other food items. Demand for this company’s products remains strong, and I expect AIPC to have another strong quarter. Buy below $32.68. (yes, copy/paste from previous week)
• March 16th 2009: Top Stock #5. American Italian Pasta Company (AIPC) is trading at a bargain on a price-to-earnings basis, which is why it remains a great buy. Here’s a bit of interesting information on the company: AIPC is Walmart’s (WMT) only pasta supplier, which at last check accounts for 22% of the retail giant’s sales. This just goes to show how popular AIPC’s products are with cash-strapped consumers. Buy below $35.66.
• March 23rd: Buy below $34.67.
• March 30th: American Italian Pasta (AIPC) hit a new 52-week high last week. The company is the largest maker of dry pasta in North America. AIPC is also a commodity play since it benefits from higher wheat prices. AIPC’s consumer brands such as Mueller’s, Golden Grain, Heartland, R&R and Mrs. Grass are staples on supermarket shelves throughout the U.S. and abroad. In the last year, AIPC is up more than 500%! This stock is an outstanding buy. Buy below: $37.05. (you got it: new 52 weeks hight -> great buy!!! Ready for the dive?)
• April 6th 2009: Buy below: $35.78.
• April 13th 2009: Buy below: $37.60.
• April 20th 2009: Buy below: $34.86.
• April 27th 2009: American Italian Pasta Company (AIPC) is a small-cap gem that has put the broader market to shame—in spite of the market meltdown in 2008, the stock is up +350% since last year! That kind of performance in a bear market has made a lot of investors skeptical, and as a result, AIPC has drawn a lot of interest from short-sellers. But AIPC has resisted the selling pressure thanks to the company's remarkable fundamental strength. Each earnings season, this stock proves its stuff. Just look at the 82% earnings surprise this stock posted February 12—and the 16% surge in share price in trading that day! In the past 30 days, AIPC's earnings expectations have been revised 6.5% higher. Even though the company hasn’t supplied an earnings announcement date yet, I expect another great performance. Buy below: $31.50.
• April 30th 2009: Buy below: $31.50.
• May 4th 2009: Top Stock #5. American Italian Pasta Company (AIPC) proves its stuff each earnings season. Just look at the 82% earnings surprise this stock posted on February 12—and the 16% surge in share price in trading that day! In the past 30 days, AIPC's earnings expectations have been revised 6.5% higher. Even though the company hasn’t supplied an earnings announcement date yet, I expect another great performance. Buy below: $33.22.
• May 11th 2009: Top Stock #3. American Italian Pasta Company (AIPC) released its earnings announcement date last week. The company is scheduled to report tomorrow, May 12. In the last 90 days, AIPC’s earnings estimates have been revised 41.5% higher. Positive analyst revisions typically precede earnings surprises, which is why I’m expecting another phenomenal quarter from this stock. Buy below: $35.07.
• May 18th 2009: American Italian Pasta (AIPC) has a great track record of reporting very strong results quarter to quarter. The time around was no exception: AIPC earned $26.2 million, or $1.21 a share, compared with $9.4 million or 50 cents a share in the same period a year ago. Revenue also rose 16% to $162.3 million thanks to higher selling prices and trading volumes. Analysts on average were expecting earnings of 75 cents a share, so AIPC posted a whopping 61.3% earnings surprise!
  The stock gapped down sharply Tuesday just after it reported earnings. Let me explain what happened. Even though AIPC clearly blew estimates out of the water, analysts’ expectations typically exclude one-time or special charges. The company’s adjusted earnings actually came in a penny short of estimates when you include those charges, which indicates that AIPC’s gross margins shrunk during the quarter because of much higher costs. I expect this is a temporary setback, as I’m confident AIPC has the fundamental strength to increase its growth rate and lower its production costs going forward. Buy below: $28.13.
• May 26th 2009: American Italian Pasta (AIPC) is down 17% since I first recommended it 13 weeks ago. Unfortunately, the company hasn’t recovered from its post-earnings pullback. As I said last week, the stock gapped down sharply because AIPC’s adjusted earnings actually came in a penny shortof estimates, which indicates that the company’s gross margins shrunk during the quarter. As a result, Portfolio Grader has downgraded AIPC’s fundamental grade to a B, which means it no longer meets our strict Quantum criteria. The stock is up 2.5% today, so let’s take advantage of this bounce and sell into strength right away. Price: $25.33

But that is not all. After a couple of months, on July 27th, Mr. Navellier decided to buy AIPC again, this time at $30.52, a good 20% more that the previous sell price and exactly the same buy price as the first time. Here is what Mr. Navellier wrote before selling AIPC at $30.32:

• July 27th 2009: This Week’s New Buys
  Between this week’s sells and trims, we’re able to take some profits off the table and use that cash to fund our two exciting new buys! Remember, if you have cash to invest, I always want you to invest in our new buys first.
  In these tight times, consumers are dining out less and eating more at home. And cheap comfort foods like pasta are at the top of their shopping lists, which is why we’re adding American Italian Pasta (AIPC) back to our Buy List. This company is the largest maker of dry pasta in North America. AIPC’s consumer brands such as Mueller’s, Golden Grain and Heartland are staples on supermarket shelves throughout the U.S. and overseas. In addition to grocery sales, AIPC also supplies foodservice operators and other food manufacturers.
  This company’s strength is reflected in the numbers: In its latest quarter, AIPC’s sales rose 16% and its earnings rose 142% compared with the same period a year ago. The company is clearly benefiting from lower wheat prices and strong pasta sales as consumers spend more on inexpensive foods at supermarkets. At the end of June, American Italian Pasta was added to the Russell 2000 index. Its presence in this index has helped to attract institutional buying pressure. William Blair recently initiated coverage of the company with a “Market Perform” rating, and I rate it a very strong buy. Buy below $33.61.
• August 3rd 2009: American Italian Pasta (AIPC) has announced that it will release its latest quarterly sales and earnings results on Thursday, August 6. Analysts are expecting the company to earn 63 cents a share on total sales of $159 million. The stock is a great buy. Buy below $34.90.
• August 10th 2009: Top Stock #2. American Italian Pasta (AIPC) is the largest maker of dry pasta in North America. Last week, AIPC announced that its latest quarterly earnings rose 1,760% to $20.2 million, or 93 cents per share, compared with $978,000 or 5 cents per share in the same quarter a year ago. Analysts were expecting earnings of 63 cents per share, so the company posted a 47.6% earnings surprise! AIPC is clearly benefiting from lower wheat prices and strong pasta sales as consumers spend more money on low-cost foods at supermarkets. Despite this retail strength, the company’s revenue during the quarter declined 7% due to a slowdown in product sales to restaurants. The stock consolidated a bit last week after its sales and earnings announcement, but in my opinion, AIPC remains a great buy. Buy below $33.56.
• August 17th 2009: We’re also unloading American Italian Pasta Company (AIPC) and Lancaster Colony Corporation (LANC) this week. As I told you in last week’s Briefing, AIPC reported that its latest quarterly earnings rose 1,760%. Those are stunning results, but they added little in the way of momentum. If those profits aren’t enough to set this stock on an upward trajectory, then we’re better off selling this stock now and moving into a stock that delivers the breakout gains we demand from all our Quantum stocks.

I am stopping here for now. I will continue in a few days if I see you appreciate this blog.

Cheers.