Ian Wyatt Interviews Louis Navellier

• Ian Wyatt
• On 2:05 pm EDT, Wednesday October 7, 2009

This week we're honored to feature Louis Navellier, editor of Blue Chip Growth. During his 27 years as an investor and investment expert, Louis has earned a national reputation as a savvy stock advisor and portfolio manager. Louis shares with us today his thought on growth oriented stocks and even shares a few of his best recommendations.

Ian:  Louis you're one of the best-known investment experts in America today with your best-known service, Blue Chip Growth, around since 1998. There's been a lot of talk about emerging markets, particularly China, as the place to be for growth. What do you see as the future for investing in solid, blue chip stocks?

Louis: You know I'm a growth guy through and through. I am extremely excited about the growth in China because it has created a real sweet spot for my strategy and my subscribers. That's why I've recommended a number of stocks that are either based in China or are U.S. stocks that are capitalizing on the growth there.

The average Chinese stock doubled from December 31 to August 1, and I expect a lot of future growth from Chinese blue chips in the coming months as industrial production increases. Due to a weak U.S. dollar right now, we should see China's exports really take off.

But I think China's explosive growth could be duplicated in other emerging markets, too, so I encourage investors to think about other regions as well. The bottom line is that if you want to be a successful investor in blue chip stocks, you have to keep an eye on your international exposure and make sure you have enough of it. But, China certainly isn't the only option for this right now. There's money to be made throughout Latin America and Asia.

For instance, I'm very bullish on Sociedad Quimica y Minera (NYSE:SQM - News). This Chilean chemical company is one of the world's top lithium suppliers. Lithium is used in electronics like laptops and cell phones, but most importantly is a component of the fast-charging batteries in hybrid autos. My Blue Chip subscribers have made a hefty 40% profit in just a few months in SQM, and the stock is one of my Top 5 Buys for October.

This is a perfect example of how to find the opportunity in international blue chips.

Ian: Your 2008 Winner's Circle stocks had quite a few technology stocks like Apple, Google, RIMM, and MEMC. Which sectors do you like for the remainder of 2009 and even more so going into 2010?

Louis: I still like tech. In fact, as part of Blue Chip Growth, I offer sector-based ETF recommendations that I call Advanced Sector Alerts. These are meant to indicate emerging sector trends and get us in the hottest industries first. And right now, we currently own the iShares DJ US Technology Sector Index Fund (IYW) and have made a nice profit of 17% since our July issue. No specific stocks have quite the numbers I'm looking for yet, but this ETF is a great way to play this sector with low risk. I expect winners from the tech sector will emerge as we get into 2010, so I'm more bullish on tech long-term.

If I had to choose my favorite sector, however, I would pick materials as the biggest profit opportunity right now. I'm talking stocks in the metal and mining business, oil companies and other commodity-based plays. Since materials like crude oil, gold, copper and steel are all priced in U.S. dollars, these commodities inflate in price as the dollar declines-and companies that deal in these goods naturally see their bottom lines increase. Remember the days of $150 per barrel oil in the summer of 2008? The weak dollar had a lot to do with that. The dollar is currently on the decline and has helped push precious metals like silver and gold to new heights.

Ian: Along those same lines, what are your favorite stocks right now?

Louis: My favorite stocks are the mix of those two strengths we talked about-international companies with a foothold in commodities.

Sociedad Quimica y Minera (NYSE:SQM - News), which I already mentioned, is a great example of this. Another is the Chinese oil powerhouse CNOOC Ltd. (NYSE:CEO - News). Though crude oil has been flat for months, this stock is up 85% since March! This is exactly the kind of stock we look for at Blue Chip Growth. The recession hit stocks and businesses hard. When you find companies that were not only surviving, but growing through this time, it's a keeper. In the case of CEO, the stock has performed beautifully despite flattening oil prices and weak worldwide demand for crude. As the global economy improves, the sky is the limit for CEO. This is why CEO is one of my Top 5 stocks in the October issue of Blue Chip Growth alongside SQM.

Another good example is GoldCorp (NYSE:GG - News), one of the largest precious-metal mining companies in the world. This mining stock operates mainly in Canada and South America. The company produces more than 2.3 million ounces of gold annually and has about 45 million ounces in proved and probable reserves. But don't be fooled by the name-GoldCorp also owns 1.2 billion ounces of proved and probable silver reserves and 1.4 billion pounds of copper reserves. Silver and copper prices have been on a tear lately, and the diverse mining operations of GoldCorp make it a great investment right now.

Ian: I was reading through your blog recently and came across an interesting bit of information: On September 28th you state that there's $3.5 trillion in cash still on the sidelines. Do you see much of that coming back into the market anytime soon? And if so, how will that affect individual investors? What investment opportunities should they look at to capitalize on this?

Louis: I do see cash returning to Wall Street over the next several months-and when it does, I expect trading volume to pick up dramatically and push the market higher. But you have to know that we're in a new market. This wave of cash that will come back to the market will not distribute evenly. It will be a select group of stocks that will attract the bulk of the buying pressure and will post the lion's share of the gains. Investors have been burned too many times since the start of the financial crisis, and they're going to make every effort to make sure that doesn't happen again.

This time, when investors come back to the market with their cash in hand, they're going to want to keep risk to a minimum. We'll see a new market leadership emerge as investors start to focus on quality stocks-companies with strong sales and earnings instead of risky bargain stocks. In fact, this is already starting. Look at Intel (NasdaqGS:INTC - News), which reported great numbers on July 14 and then gapped up 10% in two days on remarkably high volume. Once the company proved it was growing and prospering, the floodgates opened up and money rushed into the stock.

So while I do expect the cash on the sidelines to come rushing back into the market, beware that a rising tide will not lift all boats. So make sure you own strong companies that are prepared to grow in the coming months. Speculative plays are not going to bring you the most bang for your buck in this new market reality we all face.

Ian: In the October issue of Blue Chip Growth, four of the five stocks in the "October's Top 5 Stocks" are in the energy or utilities sector. Do you consider this one of the best sectors going forward? How do you pull out the compelling stocks from the crowd?

Louis: One energy stock in the Top 5 is the oil company CNOOC Ltd. (NYSE:CEO - News), which I've already covered. But I didn't intentionally load up on energy picks and utilities to make a sector bet-each company is a leader and has a unique way to profit in this market.

Consider Enersis (NYSE:ENI - News), the largest utility in Latin America. Based in Chile, the company distributes power to almost 12 million customers in regions of Chile, Argentina, Brazil, Colombia and Peru. These regions have experienced much stronger growth than the rest of the world in the past year. Brazil's GDP growth in the second quarter rivaled China's, soaring at a 6% annual rate! A growing economy demands more electricity, meaning big profits for ENI. What's more, the growing middle class in Latin America continues to demand more power for cell phones, computers and televisions-an extra boost for Enersis.

What makes CEO and ENI such great stocks is that they have the momentum of a booming emerging market behind them, have strong fundamentals and have a unique corner on their industry. They both just happen to be related to energy. But more importantly, each of these companies routinely posts big earnings and sales growth even in tough economic times-and that's why they are Top 5 stocks.

Ian: Last question: Second-quarter earnings beat expectations, primarily due to deep cost-cutting by firms. With third-quarter earnings starting in the next couple days and very little room left for firms to do cost cutting, how do you see this earnings season playing out? Should investors be loading up on stocks now or consider profit-taking in advance of possibly poor earnings?

Louis: It's time to lock and load! Investors who do not get fully invested right now are going to miss out on one of the biggest earnings parties that Wall Street has seen in years. Third-quarter earnings will be phenomenal, and I expect stocks to skyrocket as a result.

How can I be so sure? First, Q3 numbers will naturally be inflated due to ridiculously favorable year-over-year comparisons. Considering how bad things were for many firms last fall, the bar isn't set very high for them this time around.

What's more, the weak seasonal periods that you used to see mostly in September and October were distorted in the old days-but no more. Analysts used to hype stocks at the beginning of the year and slash their estimates at this time. Analysts aren't allowed to hype stock anymore. It has to do with that pesky Mr. Spitzer and all the scrutiny on Wall Street… So the seasonality trap of the past is not a factor this year.

All that adds up to a tremendous earnings season. This is great news for growth investors like me, because earnings season is when I make most of my profits. Fundamentally strong stocks tend to attract big buying pressure after positing positive sales and earnings, and I only buy stocks that have a proven track record of big revenue and profits that are tailor-made for this time of year. My extensive Portfolio Grader database ranks 5,000 stocks based on their earnings and sales performance, and I only select the very best companies this tool identifies.

In a nutshell, it's up, up and away! Good quarterly reports will tip off investors to the best stocks, and then it's a race to see who can buy shares first. If you're smart, you'll arrive at the party early and snatch up stocks before the earnings frenzy pushes them out of reach.

Let me make it easy for you: I have 5 stocks I want to make sure you're holding now. These must-have companies are just hitting their stride and are the investments to outperform the market in the short-term. My special report will not just tell you the best sectors right now, but the best stocks too! It's all FREE inside my important investing guide, Top Five Stocks for October.

Louis, as always, thanks for the great information and taking some time today to show investors where the growth opportunities are.

I invite you to take Louis up on his offer of his Top Five Stocks for October. These are certainly exciting times to be an investor and it's nice to know we've got good guys like Louis on our side.

Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor PRO (http://pro.smallcapinvestor.com) and author of the book, "The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks." You can learn more about his book at http://www.smallcapbook.com.

Buzz up!