Book Review: The Little Book that makes you rich – by Louis Navellier

Although I am skeptical of those self-help books such as “How to be a millionare” this book does a good job covering the key topics involved in growth investing – number-based fundamental analysis, risk management and portfolio planning. It is a short book and is easy to read.

The key point to take-home is to focus on numbers as opposed to stories. Numbers tell the truth. Wall Street and company management is often selling stories but the numbers are numbers which cannot hide anything but the facts. Louis Navellier covers 8 fundamental variables that are a good measure of how the company is doing. . Thanks to the author, he has provided access to his exclusive stock rating tool that gives qualitative rating to each fundamental variable for over 5000 stocks in his database.

http://www.getrichwithgrowth.com/

One point he calls out is that his weighing of the fundamentals vary from time to time. And how he does that would be one of his secret sauces. Another interesting topic he touches upon is alpha. According to him, the key driver behind alpha is the institutional buying. He claims that today most pundits and gurus incorrectly use the term high-alpha stocks. Since this is an important differentiator I expected him to give more coverage on this topic through examples. An important point I liked is the fact that it is not enough to have strong fundamentals; if there is no buying pressure then the stock may not move for a significant period of time.

All in all, it’s an easy-to-read book that covers the essentials for growth investing.

Wish there was a BRIC currency ETF

Dollar has been in a free fall. Against, the Euro, it has depreciated by 20% over the last two years. Over the same time frame, the dollar has depreciated 20% against the Brazilian Real, 13% against the Russian Rouble, 15% against the Indian Rupee, 9% against the Chinese Yuan. In the long run, however, it’s the BRIC currencies against which the dollar will depreciate the most. Just like many currency ETFs that already exist, I wish there was a BRIC ETF that allowed us to take long positions against the BRIC currencies.

First, there are the macroeconomic fundamentals that are driving growth of these nations and thereby causing the currency to appreciate. In fact, the year of 2007 may prove to be the year of divergence where the BRIC nations take the baton for driving global growth from the developed nations.

Second, currencies of China and India are managed float. They are not free float. Which means when they would be allowed to float, it would get a quick bump to those currencies.

Finally, the sovereign funds have been big buyers of the BRIC currencies. According to Stephen Jen, chief currency economist at Morgan Stanley, the sovereign wealth funds have been an important driver of currencies in emerging markets, particularly the BRIC countries.

I hope that a BRIC currency ETF is introduced soon.

Short-term dollar rally?

A while back it was the financial press that was negative on the dollar. These days, it’s the turn of the regular press. If everyone so negative on the dollar, the contrarian thinking would expect a dollar rally.

Last week, the press was all over the news that Gisele Bundchen would only accept Euros for her work because the U.S. dollar is "too weak." On Thursday, the tourism ministry in India issued orders that foreign tourists visiting ticketed monuments and heritage sites in India would need to pay in rupees instead of dollars.

Although in the longer-term, the fundamentals are stacked up against the greenback, in the short-term a dollar rally may be in hand. This may result from a global sell-off. If the global stock market sees further routs, the cash will flow into the safe havens of the US Treasuries thereby driving the dollar up.

Will Technology propel the next leg of the bull market?

Check out the traffic on Highway 101. It has a good correlation with Nasdaq. Although the corporate balance-sheet is strong, the long-awaited business spending has eluded the technology sector. While consumer spending on technology has been strong, business spending on technology has remained a laggard. With slowing productivity growth and rising labor cost business is ramping up their technology spending. Wall Street journal has an article on technology sales surge in its July 21st publication. The article highlights the growth in information-technology spending with increasing shift towards software related spending. IBM, Microsoft, Oracle and SAP stocks are seeing a great deal of buying interest.

With the Financial sector bogged by sub-prime worries and the Energy sector having a good run over the last few months is it time for Technology sector to pick-up the baton for this mature bull to charge higher?