Top Performer's Top Picks

02/18/2005 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier has an uncanny knack for being in the right stocks at the right time. In the latest rating from The Hulbert Financial Digest, he scored at the top of the 20 year performance list. Here, from the InvestorPlace Panel, he discusses his latest favorites.

"The markets are narrow and they are getting even more narrow and more selective. In the summer of 2003, the top 32% of the stocks in our database looked good. Now it’s only the top 15%. Meanwhile, I continue to buy quality. In fact, while the market has gotten progressively more selective, our approach has gotten stronger. Last year, we beat the market by over 14%. The year before, when lower quality stocks were outperforming, we only beat the market by about 7%. And today, the quality stocks are leading. So we love this narrow market environment.

"What are the best stocks right now? When we run our screens, we find a lot of oil and steel. Our Blue Chip Growth Letter is about 40% in energy, which it has been for a long time. We’re overweight in energy because I think it’s safe now. They have incredible earnings and p/e ratios are low. In Emerging Growth, we have a lot of oil tanker companies and the yields have been extraordinary. In our most aggressive Quantum Growth, we are swinging for the fence, and we are predominantly in steel stocks.

"In Blue Chip Growth, which is our most conservative letter, we still like Apple (AAPL NASDAQ). The company set the tone for many stocks on our buy list when it released spectacular earnings. The company reported profits of 70 cents a share on sales of $3.49 billion. This was terrific news. The analyst community was expecting Apple to earn 49 cents a share on sales of $3.19 billion. So this means that the company topped Wall Street’s profit forecast by more than 40%, and it beat the sales forecast by 9%. That’s not all. Apple also said that it expects next quarter’s earnings to come in at 40 cents a share on sales of $2.9 billion, which is also above analysts’ expectations. Obviously, consumers won’t buy music on albums for much longer. It will all be digitized. Teenagers are leading the way. Find any teenager today, and they will have an iPod. Apple has already become a big winner for us. In just two months, we’re up over 27%. This will be a safe tech stock to own in 2005.

"In Emerging Growth, we have Nordic American Tanker Shipping (NAT NYSE), a great tanker company. It just boosted its dividend yield. The stock has done particularly well recently, as merger mania is alive and well in the oil tanker business. Meanwhile, Nordic and other oil tanker companies have some of the best growth-to-p/e ratios on Wall Street. Since Nordic’s primary customer is British Petroleum, I expect that it will continue to have consistent profits, even if the spot charter market for oil tankers cools off. Ipsco (IPS NYSE) is a great steel stock. The stock was very steady over the past month while the stock market was shaky. That is probably because most steel companies have phenomenal growth-to-p/e ratios. In the case of Ipsco, during the past year, its sales have soared by over 91%, while its earnings grew over 7,500%! Yet the stock is trading at barely six times this year’s estimated earnings!

"Interestingly, there are two stocks that have made the recommended buy list of all three of my newsletters. They are America Movil (AMX NYSE), the Mexican cell phone company, and Valero Energy (VLO NYSE), the biggest independent refinery in the US. Valero finished up an outstanding year in 2004. The stock is near another new high, and I expect more great things in 2005. We have a 47% profit in just eight months. Buy below $52. Finally, another stock I like is Cummins (CMI NYSE). They build power diesel plants in China. If you want a safe US stock to play the China boom, Cummins is a great way to go."

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