Membership Statement: October 2013

Membership Statement: October 2013
September was a strong month for the market as a whole and an even stronger month
for our Family Trust portfolio. Our portfolio gained 4.3% for the month, well ahead
of the S&P 500’s 3.0% gain. And for our newest members who joined us at the
beginning of the month, we’ve begun the process of catching you up by investing in
four stocks at or below our desired entry prices, and we have a couple of more orders
outstanding. I also expect us to add some new stocks to the portfolio in the coming
weeks, which will be for both new and longtime members.
September is often a bumpy month for stocks, but it was very strong this year. So
what happened? Well, the market caught its second wind after consolidating in
August, and the main reasons for that were the Fed’s decision not
to “taper” quantitative easing (QE) yet and higher expectations
for the upcoming third-quarter earnings season.
Highlights—September 2013
Looking ahead to October and the last quarter of the year, I
expect this positive convergence of forces to continue, which
combined with the fact that the fourth quarter is usually the
strongest has me very excited about what’s to come for both the
market and our Family Trust portfolio.
Total Return Since Inception: 9.9%
Performance in September: 4.3%
Cash Position: 3%
Portfolio Yield: 2.5%
Avg. Sales Growth: 24%
Avg. Earnings Growth: 47%
So the three main drivers creating this positive dynamic are:
1. The Fed’s money pump remains wide open. After all
the hubbub leading up to the September Federal Open Market Committee meeting, Chairman Ben
Bernanke and company punted. Quite simply, the unemployment problem is not yet fixed, and that
makes it hard for the Fed to cut back on its stimulus.
We have the next government jobs report on Friday, but on Wednesday of this week, ADP’s private
payrolls report showed fewer jobs were created in September than expected, and August’s number was
revised downward. We’re seeing that same trend in the Department of Labor’s numbers, which will
continue to make it tough for the Fed to taper. I’m still not convinced that any sort of QE reduction is
imminent, but even if we do see a cutback, it will be small and more symbolic than substantive.
2. Earnings are about to accelerate. The market has done well this year even with lackluster earnings.
This has been the missing ingredient, and it’s about to reappear. Earnings on the S&P 500 may grow at a
6% annual rate in the third quarter and should continue to improve even more in the fourth quarter. So if
we add this to the already favorable mix, cash should continue to pour in off the sidelines. The
fundamentally superior stocks like the ones we own in our Family Trust portfolios are in excellent
position to do well. Our stocks on average exhibit 24% sales growth and 47% earnings growth, so I look
for buying pressure to increase as investors take note of the strong earnings and continue their flight to
quality stocks.
3. History is on our side. The first part of October can be choppy, but once we get into the second half of
the month, history strongly indicates that the market will move higher. Since 1928, the S&P 500 has
gained an average of 0.4% in October, followed by average gains of 0.6% and 1.4% in November and
December, respectively.
Good News Is Winning
So all in all, I continue to like where the market is and how we’re positioned here in Family Trust. We do need
to keep an eye on the government shutdown, but so far, Wall Street has made it a non-event, and the talking
heads on TV have run out of things to worry about. The bottom line is that good news is overpowering bad
news with the overall earnings environment improving, the happy time of year fast approaching and economic
growth continuing to steadily improve. I expect Wall Street to increasingly focus on improving corporate sales
and earnings instead of the Fed pumping, government shutdowns and other macro distractions, and these
positive feelings should continue to influence the stock market.
I will also say that some stocks are getting frothy (thanks to ETFs buying good and bad stocks) and becoming
increasingly vulnerable to pullbacks. However, that’s not a problem for us here in Family Trust. Our focus on
high-quality, mostly conservative stocks minimizes our portfolio’s overall volatility, and our strategy of buying
stocks at the low end of the trading range also reduces our risk.
In the coming weeks, we will add more high-quality opportunities, beginning very soon. These will help us in
the strong finish to the year. We won’t buy for the sake of buying, but rather stay selective in the kinds of stocks
we blend into our portfolios and maintain our discipline of buying stocks at the low end of their ranges. As I
mentioned, these new buys will be for both longtime and new members. (Newer members: Please see page 5 for
the buys I recommend you place orders for right away to get your portfolio caught up. Longtime members who
may not have positions in these stocks should also place orders if possible.)
For those who have been with us a while and are fully invested, I do expect more of our sell orders to execute in
the near future, freeing up cash for new buys. In addition, I will likely adjust our order prices on some of our
stocks to get out of them soon so we can redeploy that cash. As I often say, we sometimes need to sell good
stocks to buy better stocks, and that’s what we’re doing here to take full advantage of what should be a fun a
profitable end of the year for us. As always, I will be in touch with a Trade Alert whenever it’s time for our next
move, so stay tuned.
Now, let’s take a few moments for an overview of our portfolio and a look at the recent activity for longtime
and new members.
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In Your Monthly Statement…
September $250,000 Portfolio Snapshot ................................................................................................................................................ 4
September $100,000 Portfolio Review .................................................................................................................................................... 5
September $250,000 Portfolio Review .................................................................................................................................................... 6
Recent Buys ........................................................................................................................................................................................................... 6
Our Sell Orders .................................................................................................................................................................................................... 6
Our Dividend Payments ................................................................................................................................................................................... 7
Your Questions Answered ............................................................................................................................................................................... 8
Recent Portfolio Activity
Sell Orders
Original
$250K
Portfolio
Alon USA Energy @ $12.05
Calumet Specialty (CLMT) @ $33.75
Cynosure (CYNO) @ $25.75
Kinder Morgan (KMI) @ $38.25
Southern Co. (SO) @ $43.25
Smith & Wesson (SWHC) @$12.25
Stewart Information (STC) @ $32.35
Our sell orders for AGNC, AZZ and
WMT triggered this month.
Catch-Up
$100K
Portfolio
We don’t have any sell orders at this
time for the $100,000 catch-up
portfolio.
Navellier Family Trust
Open Orders
New Positions
We don’t currently
have any open
orders, but I am
watching closely for
buying opportunities
in October.
Qihoo 360 (QIHU)
Biogen (BIIB)
Southwest Air (LUV)
Hertz Global (HTZ)
Johnson & Johnson (JNJ)
Provident Financial (PROV)
Qihoo 360 (QIHU)
3
September $250,000 Original Portfolio Snapshot
Total Return
Cash
Yield
Sales Growth
Earnings Growth
$24,718.84 (9.9%)
3%
2.5%
24%
47%
As you can see above, our Family Trust investing strategy centers around companies that are trouncing the market average in
terms of sales (24%) and earnings growth (47%) as well as dividend yield (2.7%). Furthermore, our portfolio is heavily
weighted in Conservative stocks (78%) while Moderately Aggressive stocks (20%) and Aggressive stocks (2%) are peppered in
for growth potential.
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September $100,000 Catch-Up Portfolio Review
Recent Buys for New Members
Hertz Global Holdings (HTZ) is the owner of The Hertz Corp.,
the world’s largest car rental brand. With 10,400 locations in 150
countries, Hertz has a presence in most major airports. The stocks
recently fell after the company lowered guidance, but I still like
HTZ’s earnings power going forward.
New Positions in September
Ticker
JNJ
PROV
QIHU
HTZ
Date
9/9
9/9
9/16
9/25
Price
$88.75
$18.37
$83.25
$26.50
Allocation
2%
2%
2%
2%
Johnson & Johnson (JNJ) was founded in 1886 as the Johnson
brothers sought to spread the practice of sterile surgery in the U.S.
That mission continues today, only now, the company maintains
this standard worldwide. J&J consumer products can be found in households everywhere, from Band-Aids to
Listerine to Tylenol to baby shampoo.
Provident Financial Holdings (PROV) is a holding company for Provident Savings Bank that provides
community banking and mortgage banking services to consumers and small to mid-sized businesses in Southern
California. The company’s community banking activities include checking, savings, money market and time
deposits. It also provides loans for individuals and businesses alike.
Qihoo 360 Technology (QIHU) provides Internet and mobile security products in China and is the nation’s
second-largest search engine after well-known Baidu.com (BIDU).
Our Open Orders
Biogen Idec (BIIB) is the world’s oldest independent biotech
company. Its specialty is developing treatments for multiple
sclerosis (MS), a chronic disease that attacks the central nervous
system like Avonex and Tysabri. Biogen also produces Rituxan,
the most prescribed treatment for non-Hodgkin’s lymphoma.
Southwest Airlines Co. (LUV) is by far the most efficient
passenger airline in the U.S. With nearly 700 aircraft in its fleet,
Southwest serves 97 destinations across 41 states, the District of
Columbia and Puerto Rico.
Recent Orders in September
Ticker
BIIB
LUV
GTC
Allocation Current
Price
Price
$210.25
2%
$246.75
$13.75
2%
$14.66
NEW MEMBER TIP: Are you receiving my trade alerts? If not, there are three things you can do:
1. Bookmark the $100,000 portfolio page—this is the first place I update with new trading actions.
2. Check the News and Notes section of the homepage, where I post all recent trading activity.
3. For each and every trade, I write and post an update to the website—here is the archive of all past updates.
4. Sign up for text alerts here!
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September $250,000 Original Portfolio Review
Recent Buys
Qihoo 360 Technology (QIHU), as I covered earlier, is one of my
favorite Internet plays right now. The company’s core Internet
New Position in September
security products include 360 Safe Guard, a solution for Internet
Ticker Date
Price
Allocation
security and system optimization, 360 Anti-Virus, an anti-virus
QIHU 9/16 $83.25
2%
application that uses multiple scan engines to protect against
malware, as well as 360 Mobile Safe for Google Android, Apple iOS
and Nokia Symbian smartphones. In addition, the company has
online browser products that provide secure browsing and malicious website blocking.
I’ve set my sights on China because with the economy growing at a 7% annual rate, companies there are posting
strong sales and earnings growth. But even among that fast-growing pocket of the world, Qihoo 360 stands out.
In the past month alone, the analyst community has revised the third-quarter consensus earnings estimate up
$0.07, or a whopping 23%, to $0.37 per share. Analysts now predict 116% sales annual growth and 85%
earnings growth.
Our Sell Orders
Right now, my top priority for the $250,000 portfolio is to fine-tune it in preparation for third-quarter earnings
season and beyond. So I’m not going to wait to cut ties with stocks that aren’t living up to the standards I’ve set
for the Family Trust. At the end of the day, we’re building a portfolio by strategically blending them together to
both reduce risk and maximize performance.
If you haven’t already, here are the GTC sell orders I recommend you place (and you may want to act quickly,
as several of these positions are approaching their GTC sell prices).
Sell ALJ @ $12.05. I last revised this sell order on September 12. Click here to read my revised sell Alert.
Sell CLMT @33.75. I recommended this sell order on August 7. Click here to read my original sell Alert.
Sell CYNO @ $25.75. I last revised this sell order on September 12. Click here to read my revised sell Alert.
Sell KMI @ $38.25. I last revised this sell order on September 12. Click here to read my revised sell Alert.
Sell SO @ $43.25. I last revised this sell order on September 12. Click here to read my revised sell Alert.
Sell STC @ $32.35. I recommended this sell order on August 7. Click here to read my original sell Alert.
Sell SWHC @ $12.25. I recommended this sell order on September 12. Click here to read my original sell Alert.
MEMBER TIP: For a complete listing of the Navellier Family Trust positions that we have sold and orders we have
cancelled in the past quarter, you can click here or past this link into your browser:
http://navelliergrowth.investorplace.com/family-trust/closed-cancelled-positions.html
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Our Dividend Payments
I’ve said it before and I’ll say it again: The ultimate goal of the Family Trust is to ensure smooth and steady
returns. So dividends are a crucial part of our investing strategy. At the time of this writing, our overall average
yield is 2.5%. Among our dividend paying stocks, the average yield is 3.6%, and average annual dividend
growth is a strong 8.3%. Several of our companies paid dividends in September and we also have a few dividend
payments coming out soon. You’ll want to keep the following dates on your radar. (To access the most current exdividend dates at any time, please visit the Family Trust portfolio page.)
Dividend Payments in September
Ticker
Date
Amount/Share
ABC
WMT
V
SO
AMGN
SHW
MPC
PROV
JNJ
HD
ALJ
VTR
9/3
9/3
9/4
9/6
9/6
9/6
9/10
9/10
9/10
9/19
9/19
9/27
$0.21
$0.47
$0.33
$0.5075
$0.47
$0.50
$0.42
$0.10
$0.66
$0.39
$0.06
$0.67
Upcoming Dividend Payments
Ticker
WFM
MPW
TMO
MITT
Ex-Dividend
8/16
8/7
8/14
8/1
Amount
$0.10
$0.20
$0.15
$0.60
Pay Date
10/8
10/10
10/15
10/28
MEMBER TIP: For any open orders you have, be
sure to set them to “do not reduce” (DNR) before
the stock goes ex-dividend. (Details below)
Once you get these dividend payments, if you don’t need to use the money right away and are still building your
portfolio, I recommend that you reinvest. Use the Allocation Calculator to determine if you are underweight in
any of your holdings and add to it if you are (remember, always add at the set GTC order price). If you are fully
invested, you can take the cash.
The other important thing to note is that many GTC orders will automatically adjust lower when a stock goes
ex-dividend. For example, if you have a GTC order for $10 and that company pays a dividend of $0.50, your
GTC will likely be automatically adjusted to $9.50 on the day the stock goes ex-dividend. I don’t want you to
have your price adjusted, so when you place your order, look for the option for “do not reduce,” or DNR. If you
talk with your broker, you can also instruct them to “do not reduce.” This should keep your GTC at the
specified level. You can also go back in and manually reset the trigger price on your order if it does reduce.
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Your Questions Answered
Questions From Veteran Members (Joined Before Labor Day 2013)
Q: I joined Family Trust in February 2013. Because I did not join in September 2012, there are several purchases
that I missed out on because their prices continued to run up. I understand every portfolio will have its winners and
losers. But as you continue to seek new buys for your new members in the $100,000 catch-up portfolio, please consider
and suggest new buys for existing members who were not able to purchase all of your original recommendations.
A: You raise an excellent point. I want to start by addressing some of the performance issues you’ve encountered with
your portfolio. As I mentioned in the September Monthly Statement, during the first year of the Family Trust we
contended with a historically strong market, so this threw a wrench in allowing later groups to catch up with the original.
You joined right around the time that the market was going full steam so those stocks had gotten away from their initial
GTC order prices. Due to these factors, the second wave of Family Trust members (those, who like you, joined in
February) didn’t get the chance to buy a handful of Family Trust positions. The upside is that you should have been able
to get into positions like FleetCor Technologies Inc. (FLT) and Winnebago Industries (WGO)—both up 50%, and
LinkedIn Corp. (LNKD) and Acadia Healthcare Co. (ACHC), which are both up over 38%. But that still leaves the fact
that you missed out on a few of those initial Family Trust positions, and I understand why that is frustrating.
However, I see good news for all of us ahead. Thanks to the Fed’s wide open money pump and a clearer timeline for
tapering we’re seeing a comeback in our dividend stocks. This has given us an opportunity to sell some of our positions
into strength and I expect more of our pending sell orders to trigger in the coming weeks. We’ve also just entered the
month of October, which by its end gets us into historically the strongest season for the market, and are fast approaching
what is supposed to be a strong third-quarter earnings season. This, compounded with year-end pension funding and the
general optimism that comes with the holidays, should boost the performance of both Family Trust portfolios through the
end of the year. (I have the full details on my 2013 forecast in the September podcast)
Speaking of both portfolios, you pointed out that I need to remember my “veteran” Family Trust members while seeking
new buys for new members. You couldn’t be more right! In fact, all new buys will be added to both portfolios. So every
time I add a new recommendation for the $100,000 catch-up portfolio, I’ll also add it to the original $250,000 portfolio.
You’ll get the full benefit of my new stock research and recommendations. That being said, it works both ways—I won’t
add any new stocks to the original portfolio without also adding it to the catch-up portfolio. After all, my goal is to have
this latest wave of members fully “caught up” to the September 2012 members within the year.
I know the variances caused by different market conditions at different times are frustrating, but over time, I do expect our
performances to align ever more closely. The longer that you trade alongside the Family Trust tick-by-tick, the closer you
will get to matching my returns and those of the original wave of members. Depending on what’s going on in the market,
this can sometimes happen pretty quickly or take a while to play out. Either way, I expect the work we’ve done to pay off
nicely for us in the coming months and especially into 2014.
MEMBER TIP: Do you have questions about our current positions, Family Trust investing strategy or about the
general market? Feel free to post them on the Family Trust Forum here. Also, please consider joining me for my next
Live Chat Event on Monday, October 14 at 12:00 PM E.S.T. I will email complete details shortly and instructions on
accessing the Live Meeting can be found here.
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Q: My sell order for WMT was not executed. Do you think I will get another chance or should I just get out at market
price?
A: For now, please keep your existing sell order in place. I’m sorry to hear that your sell order wasn’t executed but I
think you’ll see WMT hit $76.55 again in the near future. There is buzz that Wal-Mart is adding distribution centers to
compete with Amazon, and this compounded with the excitement of third-quarter earnings season could lift the stock and
trigger your sell order.
Questions From New Members (Joined After Labor Day 2013)
Q: As size of my portfolio grows, when I make new purchases will I base the allocation upon the original size of my
assets or will it be based upon the new total?
A: If you want to ensure that you have enough cash for future purchases, I recommend that you stick with your base
amount for the near-term. However, if you were to have a windfall and find yourself with a lot of extra cash, here's how
you can increase your total portfolio size:
Most importantly, I want you to add to your current positions using our order prices. It is crucial that you do your best to
match the allocations established in our portfolio. And you can use the custom $100,000 allocation calculator to do this:
1.
2.
3.
4.
Type in the revised total amount that you want to invest and hit “calculate.”
Review the total shares and dollar value to allocate to each stock.
Compare with your current holdings to figure out how many more shares you need to add.
Add to your positions at the set GTC price. If a stock is trading over the GTC price, wait for a pullback or if I
decide to adjust the price.
Like I said, you may want to wait and get a feel for how the Family Trust works before you adjust your total portfolio
size. In the end, you'll want to make sure that you have enough cash on hand to place GTC orders right alongside me and
my family. I hope this helps.
Q: Most of my money is in an IRA. Is that OK for the Family Trust?
A: The Family Trust is appropriate for all account types. Whether you are investing via a 401K, IRA, Roth IRA or other
investment account, you will be able to make each trade right along with us. It is up to you, however, which type of
account you wish to use for this service, but I will give you some helpful points to help you decide:
•
•
•
We will be, whenever possible, as tax efficient as possible with each of our recommendations. We will aim to
hold each position for at least a year to avoid paying higher capital gains tax.
We will be investing in Master Limited Partnerships (MLPs) from time to time. If you own these in a taxable
account, you will receive a K1 form each year—just like you would a W2 or other income form—and you will
pay 35% on your profits for these positions. If you own them in a non-taxable account like a Roth IRA or 401K,
this will not be a consideration for you.
Trading fees should not exceed 1% of your transaction costs. So if you have an account with far lower fees, I
recommend that you consider that account for your Family Trust investments.
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Do not hesitate to ask more questions about account type and please use our broker comparison chart for more
information on common trading fees.
Q: I follow your other newsletters and am noticing different buy limits for the same stock across the various
newsletters. Why is that?
A: Here's the deal: There are overall risk assessments, holding times and the near- and long-term outlooks that are very
different in each of my Navellier portfolios (Blue Chip Growth, vs. the Family Trust, vs. Ultimate Growth vs. Emerging
Growth). Just because we sell a stock in one service doesn't mean it's a bad stock for another service. So there will be
instances where we will sell a stock in one service and continue to hold it in another service.
The same rules apply for our buy prices. Blue Chip Growth and the Family Trust operate under very different investing
principles, with the former being better suited to stock picking and the latter being a fully integrated portfolio. When
stacking up the Family Trust against Ultimate Growth, it's a matter of timing. Because we're looking to minimize taxes
and maximize profits, the Family Trust strategy is centered on long-term capital gains. Meanwhile, Ultimate Growth is a
much faster-paced service designed to opportunistically lock in gains.
So with all of these factors in mind, there is no “one-size-fits-all” buy price or investing horizon across all of the services.
The reason that I established each of these newsletters is to accommodate the varying investing preferences of my readers.
As an investor who follows multiple newsletters, you will find that there is variation from time-to-time. But rest assured
that I take a lot of care to tailor my recommendations according to each newsletter's goals and to provide you with the best
service I can.
Q: I’m also interested in your Ultimate Growth newsletter. Is it a good “fit” with the Family Trust?
A: My Ultimate Growth and Family Trust newsletters follow very different investing strategies, so Ultimate Growth is
not designed to fit with the Family Trust. Actually, each of my newsletters, for that matter, operate separately from each
other. That being said, plenty of my readers follow multiple newsletters as a way to satisfy their particular investing
needs. Unfortunately I can’t speak to your exact situation in terms of investing preference, tax specifics, etc., so I don’t
know if having Ultimate Growth and Family Trust simultaneously are the best fit for you.
But I can tell you this: Ultimate Growth is one of my more aggressive newsletters while Family Trust is by far the most
conservative. With Ultimate Growth, you can expect to make two to three trades a week, all focused on the top 1% of
stocks. If you look at the Ultimate Growth Buy List, you see that the returns vary more widely than the Family Trust
portfolio. You’ll also notice that I don’t tend to hold these stocks nearly as long before selling them—our oldest holding
has been on the Buy List since December.
Meanwhile, the Family Trust is all about getting smoother and steadier returns. After all, with each trade I have to answer
to both my wife and my mother—both who hate seeing anything but a positive return from month-to-month. We usually
make a handful of trades each month and shoot to own stocks for at least year when possible. So you’ll notice that more of
our Family Trust portfolio is weighted towards more conservative stocks, those well-established industry leaders that
oftentimes pay a healthy dividend (like JNJ). And then we have the "spicier" stocks peppered in—which will typically
have a smaller allocation, usually of 1%.
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I hope this information helps you while you figure out what is the best fit for you. I’m very proud of both my Ultimate
Growth and Family Trust newsletters, so I invite you to take advantage of both of them. Cases like this are exactly why I
have a 30-day money back guarantee on Ultimate Growth, so you should have some time to get a feel for the service and
whether it lives up to your expectations.
Q: I am having service issues. Who do I contact?
A: My customer service team is ready to help get you on track. You can call them at 800-304-1728 or email them here.
For general service questions that may involve personal information, I recommend you use these contacts instead of
posting to the boards to ensure that your information remains secure.
Sincerely,
Louis Navellier
Navellier Family Trust
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