Navellier Growth: your source for market-beating growth stocks

What a crazy week for the stock market! On Tuesday, the market threw a hissy fit when the Fed cut by only 25 basis points. The Dow plunged nearly 300 points.

The Fed tried to back-pedal yesterday with its plan to lend money to banks. Initially, the market loved the idea and surged 271.75 points, but then had second thoughts and fell as much as 111.13 points. Sheesh, will they make up their mind? That's a 382-point swing in one day. Eventually, the Dow closed higher by 41.13 points.

Personally, I was hoping for a 50-basis point cut, and I think that's what the market needs. In my Monday report to my Quantum Growth subscribers I said: "If the Fed cuts by only 0.25%, the stock market could sell off temporarily." It certainly has. At one point, we were down 120 points today.

I'm currently working on the January issue of my Blue Chip Growth Letter. By the way, this is a great newsletter for those of you who are new to investing or are small-portfolio investors. I firmly believe that the stock market is for everybody, even if you only have a modest amount to invest.

I'm also happy to announce that Blue Chip Growth just celebrated its 10th anniversary. Next month, The Hulbert Financial Digest will unveil its list of best-performing newsletters for the past decade, and Blue Chip Growth  should be near the top of the list. We've gained over 240%. That's nearly triple the market's performance during the same span of time!

You can sign up for one year of Blue Chip Growth for $149, or take advantage of an even better deal by purchasing two years for $279. This is a great time of the year to get your financial house in order for 2008. Also, if you sign up now, you can find out about the four new buys I'm going to have in our January issue. In fact, two of the new buys are in the exciting solar cell industry. Subscribers will get the new names and buying instructions on Saturday, so don't delay and sign up today.

Perhaps the biggest change going on in the market today is the seismic shift out of value stocks into growth stocks. Every investors needs to understand this. This is very good news for our Blue Chip Growth Buy List, which is riding the growth wave and is set to beat the market for the eighth time in the past 10 years.

This is also important because most value indexes are heavily weighted towards financial stocks, and that's the area that has seen the most pain recently. Just look at what happened to Washington Mutual (WM) this week. My fellow institutional investors, especially, have been dumping value stocks over the past several months and moving towards growth stocks. The shift only accelerated when financial advisors did their third-quarter client reviews and reported that most value managers were down, while most growth managers were up.

If you're invested in a value mutual fund, especially one of those hot small-cap value funds that did so well between 2000 and 2006, you may have a major headache coming your way. These funds could be loaded with "imbedded" capital gains. Guess what happens when this asset class flames out and there are heavy redemptions? 

What happens is that those imbedded capital gains have to be realized. Ergo, it's very possible that you can lose money in your value fund yet still have to pay taxes. Talk about adding insult to injury—paying taxes on top of losing money! This is what happened to some of those high flying growth funds in 2000 that flamed out and were hit with massive redemptions.

One of my proudest accomplishments in Blue Chip Growth is that we steered our Buy List to a profit in 2000 even though so many growth stocks plunged 80% or 90%.

The trauma of embedded capital gains is another reason why, when style shifts occur, they can snowball and last for years. By the way, when an asset class grows, the money pouring into that asset class dilutes future capital gains distributions. This means that many of the hot international funds in recent years have had minimal capital gains distributions due to their impressive asset growth. Capital gains in the mutual fund industry are like one huge game of musical chairs. You don't want to be left standing when the music stops.

Now that growth investing is hot again, the fastest-growing growth funds will likely be tax efficient. Financial advisors will naturally steer their clients toward the best-performing and most tax-efficient growth funds. 

My advice for investors is to not let yourself get rattled by the market's post-Fed temper tantrums. The strongest growth stocks will emerge from the chaos and lead the market higher. This is exactly what happened to the market 12 years ago as we began another election year.

Sincerely,

Louis Navellier

P.S. For the best large-cap growth stocks, check out my legendary Blue Chip Growth Buy List. Two excellent stocks being featured right now are: Goodrich (GR) and Express Scripts (ESRX). Remember: It's always best to buy when folks are selling.