Eight fundamental factors are highlighted in a Navellier & Associates client newsletter as important in uncovering growth stock winners. A recent American Association of Individual Investors article, Finding Growth Stock Winners: Focus on 8 Fundamental Factors ($), also highlighted these factors utilized by Louis Navellier in his investment discipline. The AAII article is an excerpt from Chapter 1 of Navellier's book The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing.
The AAII article notes:
These indicators measure the financial health of a company, how well their products are selling, and whether they are able to maintain and even increase a very high level of profitability. A company that scores very high across all eight of these mental model variables is highly likely to have all the characteristics of a potential 10-bagger growth stock.
- Positive Earnings Revisions
- Positive Earnings Surprises
- Sales Growth
- Operating Margin Growth
- Strong Cash Flow
- Earnings Growth
- Earnings Momentum
- Return on Equity
Why does Navellier use the above eight factors and not simply one magic bullet variable?
"These indicators measure the financial health of a company, how well their products are selling, and whether they are able to maintain and even increase a very high level of profitability. A company that scores very high across all eight of these mental model variables is highly likely to have all the characteristics of a potential 10-bagger growth stock.
I cannot emphasize enough that you need to use all of these variables when seeking market-beating growth stocks to add to your portfolio. Why not just focus on one or two variables that have performed the best over time?
There will be periods of time when the market favors stocks with earnings momentum, and periods where operating cash flow or earnings before interest, taxes, depreciation and amortization (EBITDA) are the darlings of the day. As soon as the dance cards are full and everyone can be found chasing after the same thing, the band will stop and the party will be over.
Instead you should focus on all eight variables. The amount each variable counts may be changed or tweaked over time, but all eight variables need to be considered.
By concentrating on the numbers, and just the numbers, you can take the guesswork out of picking winning stocks."
Navellier Market Outlook Letter
Navellier & Associates
December 31, 2007
http://www.savefile.com/files/1314535
Finding Growth Stock Winners: Focus on 8 Fundamental Factors ($)
American Association of Individual Investors
By: Louis Navellier
January 2008
http://www.aaii.com/login/index.cfm?CALLER=/includes/DisplayArticle.cfm&denied=jrnl&Article_Id=3329&CFID=6034584&CFTOKEN=84844249
No comments :
Post a Comment