Navellier Growth: your source for market-beating growth stocks

 

Let's not kid ourselves. The economic picture looks bleak; so bleak, in fact, that even Ben Bernanke acknowledges that the US economy is heading into a recession! Unemployment is up and consumer spending is down, the latter dragging down with it the backlogs of most US industries. Consumers are wary about how they spend their hard earned dollars.

The prices of homes continue to fall and that has people running scared. Homeowners that used to refinance their homes every few years to pay off bills can no longer do so. In a recent statement released by the Federal Reserve, mortgage debt now outstrips home equity in the United States. This is unprecedented in the 30 years I've been observing the markets. The housing news will continue to negatively influence financial stocks. Many market analysts across the country think there are still tens of billions of losses ahead for Wall Street's largest banks and brokerage firms.

To add insult to injury, the prices of many commodities are striking all time highs. People continue to pay the high prices for food, clothes, and gas. I also expect the dollar to weaken against other currencies in the coming months, further worsening the rampant "agflation" and high cost of energy.

Is this environment conducive to investing in stocks? Absolutely! The Federal Reserve has shown that it is willing to do whatever's necessary to fix the current problems. They have lowered rates and created new ways for banks and brokerages to obtain the capital they need to continue operations. I believe the Bernanke Fed will remain steadfast in its efforts to combat inflation and provide financial institutions with the support they so desperately need to stay afloat.

That is not to say that I am bottom fishing the stock market. My years of research have demonstrated that the companies with strong fundamentals subject to tremendous buying pressure by large institutions are the ones that lead to consistent profits for investors. Given this economic background, which companies meet the criteria? My buy list should answer that question.

To state the obvious, stocks that benefit from higher commodity prices are profitable investments. We own energy and energy service companies whose sales, earnings and cash flows have grown as a result of higher energy prices. We also own companies that benefit from the weak dollar like McDonalds (MCD) and Pepsi (PEP).

Consumers think twice about how to maximize the value of their entertainment dollars, which is why we've purchased stocks in companies that produce cost-effective home entertainment like video game consoles and satellite television. Since the global demand for food has risen, we've invested in global companies that sell food and fertilizer. As energy costs soar, we've bought stocks in companies that specialize in developing forms of alternative energy, such as solar.

I am a numbers guy. By relying on numbers instead of opinions, my subscribers and I have dodged the cycle of fear and greed that often embraces Wall Street. Right now, the backdrop seems scary. But the reality is that the very low interest rates and the overall weakness in financial markets are encouraging large institutions to look for superior investment ideas to invest the billions of dollars they control. They're chasing after the great companies we've already claimed our stake in! This buying pressure is pushing the value of our stocks way up.

My investment strategy continues to benefit us regardless of the broad market's bleak economic backdrop.

Recent Market Analysis Articles:

04.16.08 - A Look at the Current Market
04.04.08 - Earnings Season: Reaping the Benefits of Investing Money
04.04.08 - Are we in a recession?
03.21.08 - How to Invest Despite the Falling Dollar
03.19.08 - Stimulus Package: The President's Plan

Visit the Market Analysis Archive
Visit our complete article archive