A Raging Bull on Growth Stocks

05/22/2007 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, chairman, CEO, and chief investment officer of Navellier and Associates, told last week’s Las Vegas Money Show that growth stocks are more undervalued than he’s ever seen them, and that he finds two good opportunities.

This market will go a lot higher because valuations are phenomenal with the lowest P/E ratios I’ve seen in 27 years I’ve been doing this. A lot of money is coming into the market. Most stockbrokers are not selling the stock market right now.

The average stockbroker is telling his client to get out of the country. But the real reason is the dollar is weak. And when the dollar is weak you can buy stocks in Europe or elsewhere and you get the currency appreciation plus whatever that home market does. So this is holding the market back. The main things that are driving our market today, are corporate buybacks and the merger mania that is underway by the private equity folks.

The growth P/E ratios today are ridiculous and in the markets growth is undervalued. Growth is so undervalued now we could beat the value guys by 20%-30% going forward. So we think growth is great. We think your best defense is a strong offense. We think the value guys are cooked. And I’m just admiring what is going on Wall Street in that I got into these big security firms and not a lot of people are selling stocks. So I think we are still probably in the first or second inning of the stock rally.

The truth of the matter is the Fed is going to be cutting rates. They do not want to kill the economy. But the bottom line is that our Fed will be cutting. I suspect they will be cutting in five to 11 weeks.

And here is what we like right now. We love defense contractors. Defense spending fell 6.6% in the first quarter. One of the reasons the economy slowed down in the first quarter was because of budget battles in DC. Clearly we’ve got to fund the troops. Clearly they are using the stuff. Our allies are buying a lot of stuff. The pipeline into the defense business is relentless. Lockheed Martin (NYSE: LMT) would be my favorite. (It closed just shy of $99 Monday, slightly below its all-time high—Editor.)

I love DirecTV (NYSE: DTV). What’s happening is, as everybody gets more high definition televisions, you need to get the good signal and they have more HD offerings than anybody. They are launching two more satellites and they will soon have 100 full-time HD channels later this year. I expect them to buy Echo Star later in the year, especially if the XM Sirius merger goes through. (The shares closed a bit below $24 Monday, not far beneath its all-time high—Editor.)

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