Quality Growth from Navellier

07/30/2004 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

This is a great environment for growth stocks," says Louis Navellier, one the market’s leading expert in modern portfolio theory. "The strongest earnings in over a decade and reasonable p/e ratios cannot be ignored forever." Here are some of his latest buys.

"Since the stock market has failed to respond to this year’s record earnings, p/e ratios have plummeted. In fact, we’re now seeing the best growth-to-p/e ratios in over a decade. The average stock on the Buy List should continue to post approximately 30% sales growth and 60% earnings growth, which will be about three times stronger than the S&P 500. I expect that the stocks on my Buy List will appreciate steadily in anticipation of their strong second-quarter earnings. Investors should be fully invested in our quality growth stocks.

"Avon Products (AVP NYSE) is the world’s largest direct-seller of cosmetics. Avon has signed up approximately 4.4 million independent representatives, with hopes of adding younger reps, to sell the company’s new business lines. Direct selling remains the firm’s ‘modus operandi,’ but sales also come from catalogs, mall kiosks, a day spa (The Avon Centre) and the company’s Web site. The company has benefited from surging demand for anti-aging skin care products and sharp growth from overseas. It recently boosted quarterly and full-year earnings forecasts due to its strong international operations. It now expects second-quarter earnings of 46 cents a share, 28% above a year ago and three cents higher than its previous forecast. Fiscal-year earnings are now projected at $1.70 a share, 22% higher than a year ago. I’m placing AVP in the conservative group, as a buy below $47.

"Motorola (MOT NYSE) is rapidly capturing market share from global leader Nokia. The company is the #2 manufacturer of cell phones and two-way radios. Motorola is also a leading supplier of wireless infrastructure equipment, such as cellular transmission base stations, amplifiers, and network switching systems. The company’s semiconductor unit is a top maker of embedded chips used in wireless, networking, automotive, and consumer products. Motorola’s largest customers include wireless carriers, such as Nextel and electronics distributors. Last quarter’s sales and earnings were far above analysts’ expectations, thanks to Motorola’s increased market share. I cannot wait to see Motorola’s next earnings report, which should be spectacular. The stock will go into the moderate group with a buy-below price of $19.

"Research In Motion (RIMM NASDAQ) makes the BlackBerry, a small wireless product with a built-in keyboard that lets you send and receive text messages. The company is benefiting from surging sales of its larger handheld units, which include Internet browsing and phone capabilities. These large handheld units are very popular with people who want to access the Internet with their cell phones and use full keyboards. The company sells to corporations, resellers, and wireless carriers. RIMM also has partnerships with wireless service providers like Cingular and T-Mobile. Although it’s an aggressive stock, it has been a favorite of institutional investors. After a big advance, the stock just recently pulled back and is now a good buy. The firm just split its stock 2-for-1. Don’t be alarmed by the stock’s high trailing p/e ratio. The company is expected to earn $1.50 a share this year, which will give the stock a much more reasonable earnings multiple going forward. Buy below $73.

"Starbucks (SBUX NASDAQ) is the world’s #1 specialty coffee retailer. Named after the coffeeloving first mate on the Pequodfrom Moby Dick, the company operates over 7,500 coffee shops in more than 30 countries. These shops offer a variety of coffee drinks and food items as well as coffee and coffee accessories. Starbucks operates more than 4,700 of its shops in five countries (mostly in the US), while licensees operate more than 2,800 units (primarily in shopping centers and airports). It also owns and franchises the Seattle’s Best Coffee and Torrefazione Italia chains in the US. Starbucks also markets its coffee through grocery stores and licenses its brand for other food and beverage products. The stock has been performing exceptionally well. It has very steady earnings growth, which is attracting more institutional investors. SBUX is a conservative buy, with a buy below price of $47."

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