Growth Stocks Take Up the Slack

09/04/2007 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, chairman and CEO of Navellier & Associates, says growth stocks are as cheap as he’s ever seen them, and he recommends a couple of promising ones.

Despite volatile financial markets, tighter credit conditions, and the ongoing correction in the housing market, the Federal Reserve still expects moderate growth in coming months.

The fact of the matter is that there’s nothing wrong out there fundamentally. Earnings are great. P/E ratios are low. Corporate buybacks are relentless. In fact, the average stock on our Blue Chip GrowthBuy List has posted over 25% annual sales growth and over 40% annual earnings growth due to expanding operating margins, yet it is trading at less than 18 times forecasted earnings!

In the 27 years that I have been working as a financial professional, I have never seen such strong growth combined with low P/E ratios. I am confident that the “flight to quality” from battered financial stocks into our fundamentally superior Blue Chip Growthstocks will continue.

I also expect the Fed will be cutting the federal funds rate (the interest rates we really care about) at their September 18th meeting by at least 25 basis points. In addition, I believe the Fed will cut rates another 25 basis points in October.

For more than a century, Praxair (NYSE: PX) has specialized in the international production, sale, and distribution of industrial gases. Besides designing, engineering and building equipment to produce industrial gases, Praxair also supplies surface coatings and powders to aircraft, printing, plastics, metals, textiles, and other industries.

The company [has] announced a $1-billion share-buyback plan and forecasted 2007 sales growth of 10%–12%. Due to the recent boom in aviation and health care, PX’s business will remain healthy and profitable. It’s a very good moderately aggressive buy below $78. (It closed Friday below $76—Editor.)

We sold Transocean (NYSE: RIG) back in January for 56% gains—it’s time again to RIG in more profits in the oil service sector. The company specializes in deep-water drilling. It’s not afraid of getting its feet wet with operations in the world’s major offshore oil-producing regions, including Brazil, Canada, the Middle East, the Gulf of Mexico, and the North Sea.

Transocean has a fleet of 82 mobile offshore drilling units, inland barges, and support vessels, including semi-submersibles and drill ships, jackup rigs, and other rigs. As the premier deep-water driller in the world, the company has a massive order backlog and is still charging very high day rates.

RIG’s second-quarter earnings recently soared 145% on record vessel day rates and improved drilling efficiency. The company earned $1.84 per share compared with 75 cents per share last year. Sales increased 67% to $1.43 billion. The average day rate for one of Transocean’s vessels reached an all-time high of $202,400 in the second quarter. Simply put, the oil service industry remains very strong due to the perennial search for more reliable sources of crude oil. The stock is a great moderately aggressive buy below $107. (It closed at around $105 Friday—Editor.)

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