Guru Grades

Louis Navellier: Calculating the Market's Moves (Last Updated 5/9/08)

As suggested by reader Henry Bee of Vancouver, Canada, we expand here an evaluation of the public stock market forecasts of Louis Navellier. Forecasts since the beginning of 2004 come from his weekly "Marketmail" archive. Pre-2004 forecasts (back to March 2001) come indirectly via MarketWatch columns. Louis Navellier is Chairman of the Board, Chief Executive Officer and Chief Investment Officer of Navellier & Associates, Inc. He is the editor of several investing newsletters with the central belief that "a disciplined quantitative analysis system can discover stocks that should significantly outperform the overall market over the long term." Peter Brimelow states that "Navellier never times the market. He is always fully invested." However, he does comment on the prospects for the overall stock market. The table below presents overall U.S. stock market forecasting highlights from his public commentary and shows the performance of the S&P 500 index over the 21, 63, 126 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those that the market has subsequently proven right (wrong). We conclude that:

• Louis Navellier's "Marketmail" forecast horizon is typically one to three months, so we sample the first of these weekly newsletters from each month. When the first issue has no testable stock market forecast, we consider other issues within the same month. We skipped a couple of months for which none of the newsletters offered a testable forecast.
• His timing comments focus on earnings, with wide-ranging references to economic factors (oil, the dollar, Federal Funds Rate, other interest rates, employment...). He also makes frequent references to stock market seasonality and the Presidential term cycle.
• Since many of his forecast comments are conditional, we seek the dominant forecast tone for each newsletter. It is sometimes difficult to distinguish between his comments on the overall stock market and those directed at his recommended stocks/sectors.
• Two of the newsletters contain complex forecasts that proved to be about equally right and wrong, so we evaluated them as "0" and graded them both right and wrong.
• Based on our judgment, Louis Navellier's accuracy rate regarding the future behavior of the overall stock market is about 58%, which is pretty good. His forecast sample size is moderate, as is our confidence in this score.

Here are some additional notes to augment the tabular summary below:

From Peter Brimelow in MarketWatch (7/18/02): "Over 15 years, MPT Review [now Emerging Growth] is up 14.9 percent annualized, vs. 10.4 percent annualized for the Wilshire. ...Navellier's MPT Review, is down only 7.7 percent over the past year. That is, Navellier has succeeded in outperforming a bear market -- by losing less -- even though he's fully invested."

From Peter Brimelow in MarketWatch (12/27/04): "MPT Review [now Emerging Growth]...was number five, up 25.9 percent in a year when the dividend-reinvested Wilshire 5000 gained 8.7 percent. Since 1985...it has gained...20.5 percent annualized, vs. the Wilshire 5000's...12.7 percent annualized."

From Peter Brimelow in MarketWatch (2/21/05): "...as of Jan. 31, a technical service was the top-performer over the past 20 years -- Louis Navellier's Emerging Growth Letter, up 19.5 percent annualized vs. the dividend-reinvested Wilshire 5000's 12.3 percent."

From Mark Hulbert in MarketWatch (9/20/06): "Over the past 12 months...this newsletter has actually produced a loss...: minus 9.7% vs. an 8.9% gain for the DJ Wilshire."

From Ari Charney in MarketWatch (2/14/07): "While Navellier achieved seven consecutive years of truly eye-popping returns from 1985 through 1991, his record since then has been spotty. He's lagged the market, sometimes considerably, in seven of the past 15 years. ...[T]he lessons from the success of his system...have since been absorbed and replicated by a greater number of players. With so many players now chasing many of the same high relative strength stocks, the profitability of such a system may diminish. Though Navellier is still capable of trouncing the market, such as during the three years from 2003-2005, his strategy may no longer be sufficiently compensating investors for the volatility they must endure when following his advice over the long-term. ...[H]is risk-adjusted returns...have lagged the market over a number of time periods over the trailing 15 years."

From Peter Brimelow in MarketWatch (4/5/07): "Louis Navellier's Emerging Growth...is up...19.3% annualized since...1985, vs. 12.7% for the dividend-reinvested DJ Wilshire. ...Yet in the most recent 12 months...Navellier's Emerging Growth lost 4.9%."

From Peter Brimelow in MarketWatch (12/27/07): "...[H]is Blue Chip Growth Letter [appears] in the Top Ten [for 2007], up 25.5%... His Emerging Growth letter, focused on smaller-cap stocks, more or less matched the market this year, up 7.8%, but has beaten it over the much longer term."

Navellier & Associates, Inc. regularly reports the performance of their mutual funds for various intervals over the past five years versus benchmark indexes.

In summary, Louis Navellier's performance in forecasting the behavior of the overall U.S. stock market is pretty good. Confidence in this conclusion is moderate.

See our blog entry of 10/29/07 for a review of Louis Navellier's 2007 book entitled The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.