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The Little Book that might make you a little more money than some folks some of the time.
on November 5, 2007
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.