The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing (Little Books. Big Profits)

209 Pages·2007·2.3 MB·English

by  Louis Navellier

That
MAKES
YOU RICH
A Proven Market-Beating Formula
for Growth Investing

LOUIS NAVELLIER

John Wiley & Sons, Inc.

T

H

E

L

I

T

T

L

E

B

O

O

K

ffirs.indd v
ffirs.indd v
8/20/07 7:18:23 PM
8/20/07 7:18:23 PM

ffirs.indd iv
ffirs.indd iv
8/20/07 7:18:23 PM
8/20/07 7:18:23 PM

That
MAKES
YOU RICH

T

H

E

L

I

T

T

L

E

B

O

O

K

ffirs.indd i
ffirs.indd i
8/20/07 7:18:21 PM
8/20/07 7:18:21 PM

Little Book Big Profi ts Series

In the Little Book Big Profi ts series, the brightest icons in the fi nan-
cial world write on topics that range from tried-and-true investment
strategies to tomorrow’s new trends. Each book offers a unique
perspective on investing, allowing readers to pick and choose from
the very best in investment advice today.

Books in the Little Book Big Profi ts series include:

The Little Book That Beats the Market, where Joel Greenblatt,
founder and managing partner at Gotham Capital, reveals a “magic
formula” that is easy to use and makes buying good companies
at bargain prices automatic, enabling you to successfully beat the
market and professional managers by a wide margin.

The Little Book of Value Investing, where Christopher Browne, man-
aging director of Tweedy, Browne Company, LLC, the oldest value
investing fi rm on Wall Street, simply and succinctly explains how
value investing, one of the most effective investment strategies ever
created, works, and shows you how it can be applied globally.

The Little Book of Common Sense Investing, where Vanguard Group
Founder John C. Bogle shares his own time-tested philosophies,
lessons, and personal anecdotes to explain why outperforming the
market is an investor illusion, and how the simplest of investment

ffirs.indd ii
ffirs.indd ii
8/20/07 7:18:22 PM
8/20/07 7:18:22 PM

strategies—indexing—can deliver the greatest return to the greatest
number of investors.

The Little Book That Makes You Rich, where Louis Navellier, fi nancial
analyst and editor of investment newsletters since 1980, offers read-
ers a fundamental understanding of how to get rich using the best
in growth investing strategies. Filled with in-depth insights and
practical advice, The Little Book That Makes You Rich outlines an
effective approach to building true wealth in today’s markets.

The Little Book That Builds Wealth, where Pat Dorsey, director of
stock analysis for leading independent investment research provider
Morningstar, Inc., guides the reader in understanding “economic
moats,” learning how to measure them against one another, and
selecting the best companies for the very best returns. (Coming
Winter 2008)

ffirs.indd iii
ffirs.indd iii
8/20/07 7:18:23 PM
8/20/07 7:18:23 PM

ffirs.indd iv
ffirs.indd iv
8/20/07 7:18:23 PM
8/20/07 7:18:23 PM

That
MAKES
YOU RICH
A Proven Market-Beating Formula
for Growth Investing

LOUIS NAVELLIER

John Wiley & Sons, Inc.

T

H

E

L

I

T

T

L

E

B

O

O

K

ffirs.indd v
ffirs.indd v
8/20/07 7:18:23 PM
8/20/07 7:18:23 PM

Copyright © 2007 by Louis Navellier. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

Wiley Bicentennial Logo: Richard J. Pacifi co

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form
or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as
permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior
written permission of the Publisher, or authorization through payment of the appropriate per-copy fee
to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone],
fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should
be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken,
NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts
in preparing this book, they make no representations or warranties with respect to the accuracy or
completeness of the contents of this book and specifi cally disclaim any implied warranties of
merchantability or fi tness for a particular purpose. No warranty may be created or extended by sales
representatives or written sales materials. The advice and strategies contained herein may not be
suitable for your situation. You should consult with a professional where appropriate. Neither the
publisher nor author shall be liable for any loss of profi t or any other commercial damages, including
but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our
Customer Care Department within the United States at [phone], outside the United States at
[phone] or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print
may not be available in electronic formats. For more information about Wiley products, visit our
Web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Navellier, Louis.
The little book that makes you rich / Louis Navellier.
p. cm.—(Little book big profi ts series)
ISBN 978-0-470-13772-7 (cloth)
1. Stocks. 2. Investments. I. Title.
HG4661.N385 2007
332.63'22—dc22

2007024240

Printed in the United States of America.

10 9 8 7 6 5 4 3 2 1

ffirs.indd vi
ffirs.indd vi
8/20/07 7:18:24 PM
8/20/07 7:18:24 PM

Contents

Foreword
xi

Preface
xv

Acknowledgments
xix

Chapter One
Let’s Start at the End
1

Chapter Two
Counting On Growth
13

Chapter Three
Emotional Rescue
21

Chapter Four
Revise, Revise, Revise
32

ftoc.indd vii
ftoc.indd vii
8/22/07 7:41:58 PM
8/22/07 7:41:58 PM

Chapter Five
Surprise, Surprise, Surprise
39

Chapter Six
Sell, Sell, Sell
47

Chapter Seven
Expand, Expand, Expand
53

Chapter Eight
Let It Flow
60

Chapter Nine
It’s All Variable
68

Chapter Ten
Know Your Alpha Beta
77

Chapter Eleven
Don’t Be a Deviant
87

Chapter Twelve
The Zigzag Approach
100

[ V I I I] C O N T E N T S

ftoc.indd viii
ftoc.indd viii
8/22/07 7:41:59 PM
8/22/07 7:41:59 PM

Chapter Thirteen
Putting It All Together
110

Chapter Fourteen
Quantum Leap
122

Chapter Fifteen
It’s the Economy, Stupid
133

Chapter Sixteen
It’s a Small World After All
146

Chapter Seventeen
A Watched Pot Will Boil
154

Chapter Eighteen
Lions and Tigers and Bears, Oh My!
163

Chapter Nineteen
Keep Your Eyes on the Prize
175

C O N T E N T S [ I X]

ftoc.indd ix
ftoc.indd ix
8/22/07 7:41:59 PM
8/22/07 7:41:59 PM

ftoc.indd x
ftoc.indd x
8/22/07 7:41:59 PM
8/22/07 7:41:59 PM

F oreword

HERE’S WHY THIS BOOK will be so helpful to you.

Most individuals in the stock market swear that they
are long-term investors and that they are disciplined in
their investment decisions. Alas, most end up being the
exact opposite. When the market takes a hit, for instance,
all too often people ask, “Is it too late to get out?” And
when it comes to trading individual securities, folks are
swayed by an infinite variety of factors—something they
have seen on TV, heard at a cocktail party, read in a news-
paper or magazine article, or spotted in a newsletter.

�

fbetw.indd xi
fbetw.indd xi
8/22/07 7:42:58 PM
8/22/07 7:42:58 PM

Result: You get whipsawed by buying too high and/or
selling too low. The market masters you instead of it
being the other way around.

That’s why the two most pregnant phrases in invest-
ing are: “down the slope of hope” and “climbing walls of
worry.” In a bear market, which invariably follows a vig-
orous up market, people believe the downturn is an
aberration. When a market rally occurs, they figure the
bad news is behind them and the market is back on an
upward trend. Then stocks get hit again, and this is
followed by yet another so-called suckers’ rally. Finally
investors cry, “Just get me even and I’ll never go into the
market again.” That’s usually a stock market bottom.

Conversely, in a bull market investors are aware of the
bad news and the things that can go wrong. They are cau-
tious, wondering if the market is about to take a big hit.
They either sit on their cash or go into equities very cau-
tiously. Only in the latter stages of a bull market does
euphoria take over.

Are you tired of being whipsawed by the market, of let-
ting your emotions dominate your investing decisions, of not
having a disciplined approach to fortify you in tough mar-
kets and prevent you from getting too giddy in up markets?

If so, you will enjoy—and profit from—this wee book.
Louis Navellier has had a most enviable long-term invest-
ment record. Sure, he has had fallow periods, and some

[ X I I] F O R E W O R D

fbetw.indd xii
fbetw.indd xii
8/22/07 7:42:58 PM
8/22/07 7:42:58 PM

of his stock picks have turned out to be clunkers. But—
and this “but” is key—he has a disciplined method of
investing that over time has given him, and can give you,
impressive, far-above-average returns.

Navellier lists eight fundamental factors that go into
his stock picking (see page 3). Early on he recognized
that focusing on one fundamental can lead you astray.
Wall Street is one heck of an emotional place. As Louie
says in this book, “The stock markets have all the
psychological symptoms of your average severe schizo-
phrenic,” and “The biggest risk of all to successful growth
stock investing [is] human emotions, such as fear and
greed, which all too often lead us to do the wrong thing at
exactly the wrong time.” Wall Street is more addicted to
fashions than Hollywood or the garment industry are.
You don’t want to fall into the rut of the flavor of the
month. A particular variable may serve you well for a
period of time, but it can then let you down as other inves-
tors catch on to it. The weighting Louie gives to each of
his eight variables will vary over time, but he avoids the
perils of focusing on only one or two that seem hot at
the moment.

His book also takes great pains to discuss reducing
risk while shooting for excellent returns. He includes an
eye-opening discussion on two much talked about but
sometimes misunderstood terms, beta and alpha.

F O R E W O R D [ X I I I]

fbetw.indd xiii
fbetw.indd xiii
8/22/07 7:42:58 PM
8/22/07 7:42:58 PM