Louis Navellier Sees Oil Price Collapsing: Avoid Sector (Audio)

a gain there of one tenth of one percent. Down, Industrials down twenty two a drop there of one tenth of one percent. Ten Ure yield one point five three percent, Gold down five ten the ounce, a drop of four tenths of one percent. And crude oil West Texas Intermediat up one point three percent, up fifty eight cents of barrel forty one right now on West Texas Intermedia Crude. I'm Charlie Pallett, and that's the Bloomberg Business w you're listening to Taking stock with Kathleen Hayes and Pim Fox

on Bloomberg Radio. Stocks will soon exhibit a flight to quality. The price of oil will soon collapse. While we're very happy to welcome someone to the show who when he says something like that, when that's something he wants to talk about, you must realize that he is widely recognized as an expert who translates academic techniques into real market applications, a discipline quantitative analysis on stocks on the overall market. That's what Louis Navalier is known for. Chairman, founder and

chief investment officer at Navalier and Associates. LOUI, welcome to the show. It's good to be here. So in your words, just some up for our listeners who may have not followed your analysis over the years. How would you yourself say, what is it that you do that you have put your whole, your whole career, your whole reputation behind. Well, I'm read the original quant but I give my research

away free in the public domain. So whether it's my Stock Greater or divon Greater, they're all out there either on my newsletter side or money management site, and folks and go there and keep their stocks and I great them ABC d F And obviously the dividend models totally different than the growth stock model, but they're both two very good models. And but what's happened this year that's interesting is a lot of low quality stocks of rally,

especially in July and August. But it's been going on since February eleven, and it's largely uh financials and energy. And I'm most worried about the energy sector right now because I think people confuse seasonal strength with real strength. It always goes up in the spring, and it always goes down the fall, and we have a glut that's not dissipating. And I'm very, very worried that a lot of people are gonna get hurt. Louis will this also

hurt non energy stocks, it hurts the whole market. Um. You know, people are buying UM, chasing dividendial, they're buying these big baskets of stocks. They have no idea what they're buying. In the first quarter, UM, we had a lot of dividend cuts were in the energy patch. Second quarter, with the price recovery, we didn't have the problem. I

should add the natural gas prices. It looks very very strong because of the hot summer we had and then the Farmer's almanecas forecasts a very cool winter and UH so natural gases is the exception in the energy patch. But I'm very worried about the glad of refined product, the glad of crude oil, which is a worldwide phenomena, and I'm just worried that we'll get in the seasonal swoon and it's going to hurt a lot of these stocks,

and the dividend cuts may resume. Are you then concerned, Louie, that we're going to return what we saw earlier in the year where one of the things that you could just day to day no the stock market was going to trade on more than anything else, was whatever the price of oil was doing. You think we're gonna return of that kind of volatility, in that kind of lock step action. I hope not, but you can see the markets are manipulated. Uh, every day there's a new rumor.

Whether it's pudin Saudi Arabia, rock iron, doesn't matter. You know, we live in a world where not everybody has Bloomberg, and you know there's blogs out there and people just put stuff out to see what happens. And you know, crude oil future traders are are pretty interesting characters. Uh, It's not unusual for crude oil to move nine and three or four days, especially towards the end of the month,

if they try to cover their positions. So this is where the sharks swim on Wall Street, and guys like me to calculate volatility just wouldn't go here because it's just too hot to handle. And then guys like me also check out fundamentals and then they can check out. So I've been avoiding this entire sector and been a kind of warn everybody all year, and now here comes to September swoon, and I'm worried about folks. All right,

you're worried about folks. And also you posted some weekly ratings changes, and wonder if we could just take a select few and give get your thoughts on them. Berkshire Hathaway, you've rated that a quantitative grade of B with also a fundamental grade of B. What about Berkshire Hathway attracts you to the company. Well, Berkshire Hathaway rightly wrongly is a big reinsurance portfolio, and they've gotten lucky on natural disasters. Uh. I always sent a hurricane up the East coast last week,

but they got they got lucky. And also their benefit from the big bond rally so um the it's funny and the reinsurance business. Their biggest disaster in recent years has been the floods in Taiwan and Jimmy Thailand. Thailand. It took out a lot of the destroyed companies. Louis, you also have given uh cbs B s across the board. You like them. Why, it's just that's where everybody goes. Walgreens isn't bad either. It's uh, you know, we all

need our drugs, even me. All right, tell us about hotels, Intercontinental hotels a group bees all around for I h G. Is this anything to do with the consumer spending more money or is it specific to h G. It's specific to them, and some of its business travels from consumer travel, but a lot of it's also the acquisitions. You know there where's acquisitions out there in the hotel and so that's good. So you have also downgraded from by to hold a few big names, one of them costsc. It's

got seas across the ward. That's not so bad. But what's going on, Well, I'm glad you brought that up. I think Costco. I probably should write their their PR stuff for them, uh, their Samester sales aren't bad, but a lot of their sales are gasoline related. So I guess what happens in gas prices dropped their sales drop. And I think they really need to separate that more because you know, people react to the headlines and they

may not look at the details. And I think they need to say in a nice way that, um, that outside of gasoline, it's not that bad. Now, they did have an international expansion that that slowed them down as well. And you know, we just live in in a world where people will focus on the negative or in the positive, And so if I was writing a pr thing, I

would basically try to have more positiveness. Louis, when do you determine to sell us stock when it's poorly performing or when it's reached a certain level that you're willing to take the profit when they get too hot to handle. We keep the least sixty of our portfolios and conservative socks molly aggressive and teen percent aggressive. Now, risk tomy isn't the angle of sense dispersion. So probably the best case study is we thought Facebook was a lot safer

than Kroger. Now that may not be intuitive to most people. They would think, well, my goodness, Facebook, so tech sock as high multiple. Uh you know it's it's the people. It should be acting a nervous manner. No, No, it was going up in a much smoother manner than than than Kroger. And and Kroger did miss by a penny one quarter so that a while back, so they probably you know, affected it. But uh, you know, when we do our quantitative screens, we naturally gravitate towards ever is

going in a very smooth city manner. Risk to us isn't the angle of sentence dispersion. And in our case, Facebook still looks safer than Kroger at this moment, just on your your weekly list of changes. But I'm wondering how you rank and rate Apple, especially after they've come up with their latest iPhone iterations today. Yeah, Apple is a dividend stock right now. Obviously it's a very low

PA stock. It's UM. It sells a ton of debt to UM just sustained that healthy dividend and as well as by its stock back last I look, I think the second biggest stock by back company out there. Um. You know, I'm a little worried about him, but I think that the there you know, they have a cult and a lot of people upgrade the iPhone seven. I'm mostly worried about them in emerging markets, um, where they

haven't been as a successful. But let's face it, that little Sampson problem they have with the battery exploding was probably the best thing ever happened to Apple on the iPhone. So, uh, you know, I think they had a six US to launch today. Now we just got to make sure the orders are there. Um. You know, Apple, you know hasn't had earnings growth for a couple of quarters, so let's hopefully have real sales, real earnings moving forward. But if you want to lopee and nice David Niel, that's fine.

Right now. Apple shares up about a half a percent right now at five with the yield of two percent. Louis, what's the biggest mistake that you've made over the last twelve months? Um, basically not trimming stocks as they get too volatile. I mean I do trim them, but sometimes they move a little faster than I can. If there's an extraordinary event and something gaps down that that that's what happens. Um. I think the main thing I like to stress to your to your viewers. Is that the

market is actually dying on us. You know, the actual stock market is physically shrinking. The stocks that seemed to rank the highest in my system are the ones that buy their stock back and we had record that issuance in August. That's gonna mean a lot of buy backs. Um. Normally a lot of my stocks pulled back after earning season, but lately the buybacks are so navy um that they firm up after any season. So I'm very, very bullish

on the on the market. As long as you have these low rates and fairly low price raage racials, companies are going to contain to borrow by this dock back, and Gilead and Apple are leading the way. Uh. How do you connect the dotsley? Just quick final question. When you look at something like the Institute for Supply Management and Manufacturing the services, do you ignore that is in your kind of analysis? There is the way you connect

the dots to yours dot com. Well, I talked about all that because they're right for a living and and basically that creates more uncertainty and it's creating a more narrow market. September is a flight to quality month, and our big pitch in our client correspondence is that we had a bit of a low quality rally in July and in August, and although we did okay, but we expect that a lot of the energies will leave the way down in September and they'll be these huge flights

of quality. And we are especially excited at the last week in September because the professional managers have to make their portfos really pretty poorly in the quarter, so they'll kick out the stuff that's not going to earn and buy our stuff, hopefully by the the last week of September. Although last week we know one of my funds will stop one percent, so you know, the flights of quality is definitely underway in September. We've got to leave it there.

Louis Navalier, chairman, founder Navalier Associates