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Across My Desk: Louis Navellier's Newsletter



I found Louis Navellier's Newsletter dated March 30, 2007, to be of interest. Hope you do too.

Here's part of it:

"In January and February, $110 billion flowed into stock and bond mutual funds, an all-time record. International stock mutual funds attracted $27 billion in the first two months, while domestic stock funds attracted $16.4 billion. The rest went into bond funds.

However, after the big February 27th sell off, international stock funds had some outflows, and it appears that some of that money moved over to domestic stock and bond funds. This is one reason why the stock market was able to "snap back" after its big downdrafts on February 27th and March 13th. In fact, it appears that March 13th was a successful retest of the February 27th lows.

What's more, lately many growth stocks have been "melting up" from all the money pouring back in. As a result, there's a sweet-spot developing in our area of expertise, namely fundamentally superior growth stocks. And if Q1 earnings season is stronger than expected, we could experience a very nice surge higher in the weeks ahead. Earnings season officially begins on April 10, with Alcoa's announcement.

There is another reason why growth stocks have gotten off to a strong start in the first quarter. There has been a big shift away from value to growth this year. Mid-cap growth led the way in January, large-cap growth in February, and small-cap growth in March. No matter how you analyze it, growth stocks are leading the way this year, which is very refreshing after watching value dominate for seven straight years.

Worries over the subprime crisis have helped put the nail in the coffin for many value stocks, since many financial stocks, especially banks and saving and loans, have subprime exposure. Meanwhile, the inverted yield curve (i.e., the difference between short-term and long-term interest rates) has been punishing earnings for many of these stocks.

But the bottom line is value has been dominant for seven years. In other words, that's very long for a typical cycle. In the April 9 issue of Forbes, look for an article called 'Sell Your Value Stocks'. In this article it states that 'value stocks are not only expensive relative to 2001, they're more expensive than at any time over the past 40 years.'

The attitude lately seems to be that if the stock market or economy has a problem, investors can still profit by buying quality growth stocks with predictable earnings and more reasonable valuations."

And that's one man's opinion. Time will tell if value has lost its pizzazz and growth is where the action is.


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