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67 of 76 people found the following review helpful:
2.0 out of 5 stars
The Little Book that might make you a little more money than some folks some of the time., November 5, 2007
This review is from: The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing (Little Books. Big Profits) (Hardcover)
The title of this book is very catchy, entirely appropriate if you had invested with Navellier through the `80's and `90's when the market went from less than 1,000 to almost 12,000 (and the NASDAQ even more so, of course), but, if you were with Navellier during the market tank of 2000-2003, then you would know that the title of the book is more than a little misleading. The success of Navellier is 100% dependant upon the overall stock market. When the market is going up, then the title of this book is OK. When the market is going down, it is easy to lose money much faster than the market does. There are exceptions to every rule, but overall, these "fundamentally superior" companies with outstanding earnings just follow the stock market. Normally, when the market is going down, these stocks will lose against the market up to twice or three times as much on a percentage basis on any given day. Normally, when the market is tanking and your account is also, you'll receive a nice E-mail telling you to sing the "Don't worry, be happy" song, for every downturn is nothing but a buying opportunity. However wonderful that may be for Forbes, who wrote the forward, and Navellier himself, since they are both richer than Pharaoh, it is not a joyful experience for the normal investor. Since the normal investor is fully invested, exactly what money do we have sitting on the sidelines? Usually we are fully invested with the limited money we have, hoping against hope, to make some money, and have no from-under-the-mattress sack of cash to pony up since we just lost our shirts during this "buying opportunity"! Navellier recommends what he calls his "Oasis" stocks, to ameliorate your losses when the market is dropping. The only problem is that these "oasis" stocks won't save your portfolio, for they will drop like rocks also, at least in the market of 2003 - 2007. In early March 2006, the market dropped from a high of 11,600, but by October 2006, had recovered to 11,600. All of Navelliers stocks had lost his investors tens of thousands, if not hundreds of thousands of dollars, and were way down from March through October, not recovering until the spring of 2007. For relatively new investors, during that period we all lost everything we had made back to our principle, while the market was flat. Mr. Navellier stated that during that time period "growth" stocks had fallen out of favor. No kidding! "Out of favor?" I would hate to see how much money we all would lose if the stocks became downright unpopular. Once, at a seminar, Mr. Navellier showed a chart that had a rapid rise and then fall. He states that he told those investors after the fall that at least his stocks had made 3% more than the market. That is a far cry from anything else stated by Mr. Navellier, for double, triple, even quadruple gains are the norms, going up, but the mirror reverse, which is never mentioned, is true when the market is going down. There is a chart for the Quantum Growth Stocks in this book, which shows a 1,500+ point rise since 1998, including making money during the down market of 2000-2003. There are liars, darn liars, and statistical number crunchers. I would have to see the raw data that was "back tested" before I could believe this chart. Certainly, these stocks utilize stop orders, so there is a somewhat limited downside, but normally the stops that have not been exceeded are just lowered, and until these stocks hit their stop order limits, they can lose your shirt for you also. The unfortunate occurrence in today's market is that it wanders up and down, up and down, up and down. If that is repetitive, so is the market. Every time his investors make a little bit of money, the market drops and we lose it all over again. And again. And again. The Little Book That Makes You Rich is titled with a marginally verifiable statement, for both Forbes in the forward and Navellier know the reality of these "fundamentally superior" stocks, and sugar-coat it out of existence in this book.
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29 of 32 people found the following review helpful:
3.0 out of 5 stars
Good for Beginners,, October 20, 2007
This review is from: The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing (Little Books. Big Profits) (Hardcover)
This small and easy to read book provides a good introduction to the fundamentals of growth investing. However, the experienced investor will find little inspiration in reading that stock valuation is based on earnings and sales growth as well as other Finance 101 parameters such as betas and alphas. The book doesn't go into much detail on how the 8 parameters for growth investing fit together so you can calculate your own valuation score and tweak it for your own needs. To find a stock's valuation score, you'll have to go to the book's companion Web Site where you'll find a carefully crafted set of pages that feel like they were designed by a marketing consultant. The stock database is interesting but of limited value to an investor. The registration process is done in two steps: first you sign up and get a generic account that doesn't let you save a portfolio, then two days later you get an email that allows you to create your own username which can then be used to save a list of stock picks. Why is this necessary? This feels like it's part of a marketing campaign that aims at increasing your hunger for more. Once you get to the database, you'll notice that many A rated stocks are overvalued and at the peak of their hype cycle. Blindly building a portfolio of A rated stocks seems like a good way to loose your money. In the end the book leaves you with a hunger for more. How do ratings evolve over time? How do you weight the 8 fundamental indicators? What is the "Quantitave Grade" that mysteriously appears in the stock database but never gets explained in the book or on the site? It's hard to believe that all of these open ended questions are not part of a more elaborate strategy: Give the reader a taste of Navellier investing and then let them eat the full meal by buying into his funds.
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16 of 18 people found the following review helpful:
2.0 out of 5 stars
Not too informative, but some interesting insight, November 15, 2007
This review is from: The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing (Little Books. Big Profits) (Hardcover)
I'm not sure why the book is getting some much press other than the fact that Mr. Navellier has been doing a lot of promotion (which by the way is cleverly aimed at indirectly promoting his newsletter services). I had never heard of Louis Navellier before I came across the book, so I did a little researching into his recorded stock market performance record. Navellier has six publicly traded mutual funds. The best of the group as far as five year annualized performance is his International Growth Fund (NAIMX) at 20.86% ... not amazing and certainly no CGM Focus (33.52%) or Kinetics Paradigm Fund (26.95%), but respectable non the less. Overall, "The Little Book That Makes You Rich" is a decent book that describes a system for growth stock investing that is very similar to the IBD method. Navellier doesn't really go into enough detail for the reader to exactly replicate his strategy without using his companion website tools (which you have to sign up for his newsletter to get full access to). However, he does lay out the general frame work for his strategy which revolves around grading stocks based on eight fundamental grades and a quantitative grade. The eight fundamental grades are: 1. Positive Earnings Revisions 2. Positive Earning Surprises 3. Increasing Sales Growth 4. Strong Cash Flow 5. Earnings Growth 6. Positive Earnings Momentum 7. High Return on Equity Navellier does not explain his quantitative grade in detail but he does explain that it is an indicator of institutional buying pressing on the stock. He also eludes that the grade is determined by the stock's reward/risk ratio, which he does describe in a fair amount of detail and is actually one of the more interesting discussions in the book. Navellier defines reward/risk as alpha divided by standard deviation for the trailing 52 weeks. He further explains that it's important to calculate alpha based on a relevant index. For example, when determining alpha for a stock in the NASDAQ, it's important to use the NASDAQ composite index to measuring alpha against, not the DJIA. He also goes into a rather incoherent discussion about how alpha is not the same as relative strength: "Relative Strength measures how a stock is doing relative to the index at any moment. For example, if a stock tracks a market benchmark precisely with 100 percent correlation, and that benchmark rises 50 percent in a year while the stock rises 100 percent, that stock will end up having a beta of 2 and an alpha of 0. Now, I know what you are thinking: How can a stock that does double the overall stock market have an alpha of 0? It's simple, the entire stock return was completely explained by it's high beta and none was explained by it's alpha." Now that sounds like a decent explanation of alpha verses beta, but I don't see how this explains how relative strength is involved. In any case, this excerpt shows Navellier's relaxed style of writing that he uses throughout the entire book. His writing style is similar to Peter Lynch's writing style, both use a common sense, simple approach to explaining things that tends to work a little better for Lynch. Essentially, Navellier's strategy revolves around picking stocks that score high on all his fundamental grades and his proprietary quantitative grade. He also states that extremely high returns can be had by aggressively trading stocks that only score within the top 20 percent in all the eight fundamental grades. He claims that by sticking to a strict policy of only buying stocks that comply with this criteria and selling them the minute they no longer do, one can average better than 50 percent annual gains. Aside for the fundamental and quantitative grading, Navellier makes several other points worth mentioning: - He recommends a portfolio of a 60/30/10 mix between conservative/moderately conservative/and aggressive stocks - Navellier is a strong proponent of the IBD (so he definitely has good judgment there!) - He is a believer in the sell-in-May-and-go-away philosophy - He also believes in the first and third year of a presidential term as a better time for market returns - He claims making new investments in March, June, September and December is a good idea for growth stocks because it puts you in a good position for earnings releases - Navellier says the best way to protect from accounting fraud is to screen stock for good grades in operating margin, return on equity, and cash flow as it's difficult to manipulate all three of these - He reminds us to always remember Wall Street is a sales machine (very good advice in my opinion) - Navellier points out that "The ETF effect" can cause stocks to get bid up based on rebalancing of index funds and not necessarily performance And so there you go, "The Little Book That Makes You Rich" isn't the most informative or ground breaking read and often reads like a sales pitch for Navellier's newsletter, but it has some interesting insight and lays out a decent method for stock picking. If you have a couple of days to mow through a quick read on growth investing, it's worth picking up.
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