Navellier Growth: your source for market-beating growth stocks

Let me see if I have this right, the Fed cut rates by 0.25% yesterday and the market drops 362 points today.

Yes, I know it's painful to see, but this week I'm going to tell you about a stock market that's up over 120% this year. But there's one hitch: It's not in the United States—it's in China.

The Shanghai Composite Index is currently near 6,000. To put that in some perspective, two years ago, the index stood at 1,100.

As bad as things look for the U.S. dollar (which just hit a 130-year low against the Canadian loonie), the plunging dollar is a gigantic boon for emerging markets. In fact, my Global Growth service has been making huge profits in China and other foreign markets.

Consider these numbers. Last week, my Global Growth recommendations, rose 6% on average. In comparison, the S&P 500 rose just 2.3%. My top three Global stocks had a "slow" week, up 2.46%, but my 11 China stocks rose an average 7.38%, and I just added two new China stocks this week.

Last week, 14 of our 36 stocks gained 9% or more. One South Korean stock was up 16.2% and a Chinese stock was up 19.7%. In the last ten weeks, my Global stocks are up 49.9% compared with 6.3% for the S&P 500. It gets even better. In just ten weeks, my top three picks are up 126.8%.

Before I get ahead of myself, you can subscribe to Global Growth for three months at $1,395 or one year for $5,000. I know it's pricey but there's no other investing service I know of that scans the world for the best growth stocks with a record of beating the S&P 10-to-1. So sign up today!

Would you believe that one of my favorite China stocks isn't even in based in China? It's a Greek shipper!  Athens-based DryShips (DRYS) is just one of the many companies that's benefiting from the emergence of China as a world economic power. Since I first added DryShips to our Global Growth Buy List in January, the shares are up an astounding 570%.

Before I tell you about my one of my favorite China stocks and how you can profit from the dominant growth story of this decade, let me fill you in on some of the details of the Chinese economy.

The G7 nations recently called on China to accelerate the pace of the yuan's snail-paced rally. Naturally, they didn't say anything about the euro's strength or, for that matter, the dollar's weakness. Rodrigo Rato, the head of the IMF, chimed in by saying, "It is in China's interest to let its currency be determined by market forces, and right now we see it is considerably undervalued."

Well, Rodrigo, let's just say that China doesn't seem too worried about world public opinion. The head of the Chinese Fed, Zhou Xiaochuan, skipped on the meetings last week so he could attend the Communist Party Congress in Beijing.

Either the food is a lot better at the Commie confab or China is simply going to do whatever it wants. I'm guessing it's the latter. Don't get me wrong. I'm not saying I approve of China's policies, but I will look at global dislocations for profit opportunities. In Greece or China or wherever. My team and I leave no market behind.

Two years ago, China stopped pegging the yuan to our dollar and instead pegged it to a basket of currencies. The yuan doesn't exactly float freely like our dollar (cough, cough) but since the peg changed to a basket of currencies, the yuan has gained nearly 10% against the dollar, and slipped more than 5% against the euro.

As a result, the valuation on the yuan is a major concern in Europe because the euro is at a big disadvantage, and there are concerns that Europe's growth is slowing. For example, it was recently reported that Germany's IFO business climate index slipped in October to 103.9 from 104.2 in September. In contrast, China posted another stunning quarter of GDP growth, +11.5% for the third quarter.

The brewing problem isn't so much China's incredible economic growth, but that inflation there continues to rise. The government just reported that consumer prices rose 6.2% in September. Compare that to the hand-wringing over inflation in the United States where consumer inflation is less than half that.

Due to the high inflation, the Chinese Fed will more than likely raise rates soon. The Chinese have negative real savings deposit rates relative to inflation, and that leads to speculation in real estate and stocks. It's an old story but it's now happening in a new ball field. This is why the Chinese Fed has to raise rates so it can prevent an asset bubble as Chinese investors seek higher returns.

The inflation problem is worst in food prices; especially pork. The Chinese government will try its best to contain double-digit food inflation because higher food prices can lead to widespread hunger and social unrest. Remember Tiananmen Square? Well, so does the government. Also, keep in mind that the Beijing Olympics are only nine months away.

It's possible that the People's Bank of China will wait until after the Party Congress is over to hike rates. Personally, I expect a rate hike sooner. Despite the inflation problems, the Chinese economy is red hot. The economy grew at an annual pace of 11.1%, 11.9% and 11.5%, for the first three quarters of this year. Now you can see why I like this sector so much.

The Global Growth China stock that I want to tell you about this week is Baidu.com (BIDU). This is basically the Google of China. In fact, Google used to be a major investor in Baidu. Last week, BIDU reported outstanding earnings. The company's profits doubled to 70 cents a share. Wall Street was expecting 63 cents a share. The stock has exploded on the news and it's up 17% in the last week. Personally, that's the kind of inflation I like.

That's all for this week. Stay tuned for next week's issue for the names of two more stocks that will continue to soar—no matter what the U.S. market has in store.

Sincerely,

Louis Navellier

P.S. Today's market is just an overreaction to the fear running ramped on Wall Street.  The key is that not all stocks will sink like rocks.  Select stocks will lead the market back to firm ground.  Want to know which stocks?  Check out my exclusive stock screening tool, Portfolio Grader Pro, free—with no strings attached.

P.P.S. Also, I hope you subscribe to Global Growth. China will only emerge once on the world economic stage. Don't let this opportunity pass!