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[BonVivant]

Hotline
January 11, 2003

This is Louis Navellier. It is Saturday, January 11, 2003.

I have to tell you that I’m pretty ecstatic with what I’m witnessing here. The stock market is doing very, very well. Even on Friday, which was a down day, my large-cap growth fund was up. So when the market is soft, we’re still drifting higher.

Let me put it in better perspective for you. This dividend tax relief that President Bush is proposing is unbelievable. I had hoped for this but I’m still in shock that he actually proposed it. I thought he was going to propose 50% dividend tax relief, not 100%. When he proposed this dividend relief, he appealed to senior citizens and to the middle class, which are huge stockholders. If you add the middle class and the senior citizens together, they comprise over 50% of the vote in the United States. So the odds of this going through are pretty high.

There is some opposition mounting, but it’s very weak and it’s very fleeting because nobody wants to irritate senior citizens that are hungry for higher yields. Already, bond funds are trying to buy high dividend-yielding stocks. You can read about this in Friday’s Wall Street Journal. That’s unbelievable.

That means that if you’re a yield-hungry investor, you can get a better yield in stocks than you can in bonds. Please remember that as interest rates go higher, bond values erode. But if interest rates go higher, sometimes the stocks will go higher and still pay high dividends. So right now, stocks are safer than bonds for many yield-hungry investors and that is causing money to pour into the market.

The dividend package is much more revolutionary than that. The excuse that a lot of tech companies use for not paying dividends is that they were double taxed and up to 80% of the dividend proceeds ends up with the tax authorities in California and Massachusetts. The other excuse they use is, "We’re going to hold that cash so our stock goes up more and then you can just pay capital gains [20% capital gains rate instead of ordinary income]."

If dividends are tax free, nobody is going to care about capital gains and everybody is going to clamor for these companies to pay dividends. In fact, corporate sellers are going to embrace this because why would they want to pay taxes when they sell their stock when they could just declare a dividend and give themselves the money tax-free?

The ramifications of this are just mind-boggling. Now I’m convinced that the market is going to be up 60% - 100% this year at least for my stocks. The broad market might only be up 40% or so. So I think this is very, very bullish.

The other bullish news we’ve had this week is that the market is really focused on earnings and that is extremely important. Last quarter, it wasn’t. So companies that are pre-announcing poor earnings are selling off and companies that are guiding higher are doing great. Anheuser Busch (BUD) is an example from this week.

So the market is coming my way. I’m very pleased. Even when the market is what I would call "back and filling" or settling down like it did on Friday, I’m drifting higher on those days. So I’m very happy now.

Let me tell you what is going on with our stocks. Starting with the conservative stocks, Air Products & Chemicals (APD) is doing better. I still have a "hold" on it but it has improved here. Don’t buy any more, but I am encouraged.

Anheuser Busch (BUD) had been very soft but it is very strong right now on news that it reiterated its strong earnings guidance. Some analysts have criticized it for being too low profile about its success. But Anheuser Busch is going to have blowout earnings and is really firming up here nicely and it has guided higher.

CNOOC (CEO), the Chinese oil company, is holding steady. I still have a "hold" on it. Coca-Cola (KO) was soft but it’s now getting much stronger. The weak dollar is going to help Coca-Cola’s profit, but I still have a "hold" on it. ConAgra Foods (CAG) had been very strong but it is now basing. It’s still within range.

ENI (E), the Italian oil company, has pulled back and I think it’s a great buy. It has vast interests in Iraq. If it has pulled back for any reason, it is because it looks like an invasion of Iraq is going to be postponed. The UN is in charge now and the US just can’t go in there willy-nilly. So it looks like if anything is going to happen to Iraq, it’s not going to happen in the next month or so. It looks like it’s just going to get delayed further.

Harley-Davidson (HDI) is very strong right now. It’s always strong just before the earnings come out. It’s rallying in anticipation of good earnings and I’m very pleased with Harley right now. Procter & Gamble (PG) pulled back and I think it’s a good buy right now. There was news that a Merrill Lynch analyst cut her price target for Procter & Gamble, but she cut price targets for the entire market. Procter & Gamble is benefiting from the weak dollar and it’s probably the best buy this week.

Progressive (PGR), the auto insurance company, has pulled back and I think it’s a good buy right now. Stryker (SYK), one of our Top 5 stocks, is out of range now. You can buy it if it moves back within range. Teva Pharmaceuticals (TEVA) is basing and I think it’s a very good buy right now. It was strong earlier and it’s looking pretty good. It’s not a bad time to buy Teva.

United Health Group (UNH) had been recovering. I still have a "hold" on it. It has pulled back. Medicare sued tenet for its aggressive billing practices. That’s hurting the entire health care industry and that’s unfortunate. But I expect United Health Group to release good earnings and firm up here. Still, I maintain a "hold" on it. I will probably sell a lot of the health care stocks on my buy list just because of volatility. But United is one of the flagships that is doing better than most.

Wrigley’s (WWY) is very strong right now. And it’s very steady, by the way. It’s still within range.

Moving on to the moderately aggressive stocks, Dell Computers (DELL) has sold off here sharply and I think it’s an excellent buy right now. Dell is a cash-rich company. It had been very strong and the selloff is just profit taking, so it’s a good window here to buy Dell.

Johnson & Johnson (JNJ) is getting stronger. I’m very pleased with it. Lockheed Martin (LMT) had been quite strong in anticipation of an invasion of Iraq, but now it looks like that’s going to be postponed, so it’s kind of leveling off. I’m still maintaining my "hold" on Lockheed Martin.

Nissan Motors (NSANY) is still getting stronger here near-term. They had a lot of good products at the Detroit Auto Show and they just continue to capture market share with a revolutionary product line. They are heavily influenced by the French auto company, Renault, which basically owns most of Nissan right now. They keep capturing more and more market share, so it’s a really, really hot automotive company right now and it’s very well structured financially.

TJX Companies (TJX) had pretty good same store sales news so it’s looking stronger here. Wal-Mart (WMT) is kind of breaking out here near-term but I expect it to settle down. Their same store sales aren’t bad, either. Their report came out in the Wall Street Journal this week.

WellPoint Health Networks (WLP) is pulling back and I’m probably going to have to sell this stock. It didn’t recover as much as I wanted it to, so I’ll probably sell it. I’ll be working on the new newsletter this weekend and I’ll let you know in next week’s hotline whether or not I’m going to sell Well Point.

Moving on to the aggressive and more powerful stocks, Bed Bath and Beyond (BBBY) is out of range and you can buy it if it moves back within range. Fox Entertainment (FOX) is very strong and about to go out of range, but you can still buy it here near-term.

Lennar Corp. (LEN), the homebuilder, came out with great earnings. They earned $3.16 per share, $0.06 higher than the estimates. They also guided much higher for the year. So Lennar is just looking great right now. They have a good order backlog and they sell inexpensive homes. That’s the strength of the real estate market right now. Luxury homes are soft but reasonably priced homes are very strong. You can buy it if it moves back within range but right now it’s out of range.

Lowe’s Corp. (LOW) is looking much stronger here. I’m very pleased with it. It’s going to have blowout earnings. Home Depot’s earnings problems are largely due to Lowe’s success.

That’s all that’s happening. Our stocks are doing well. The market is focused on earnings. I just pray that the dividend tax relief goes through. This will be the most bullish event in my lifetime for the stock market. If you’re politically active, tell your Congressmen or Senators to vote for the dividend relief because it will revolutionize the stock market.

Again, pick up Friday’s Wall Street Journal and read about how bond funds are buying high dividend yielding stocks. That just says it all right there. If you’re a yield-hungry investor, it’s better to be in the stock market. So we’re in a great era right now. 40% of the stock market’s returns always occur in January. We’re off to a strong start in January so I think we’re going to have a great year.

The third year of the Presidential Election Cycle is always much better and it’s usually the best time ever for the stock market. I can give you studies going back since the 1930s. It’s just unbelievable how well the stock market does in the third year of the Presidential Election Cycle and it’s always because they need the economy to be strong for them to be re-elected. President Bush is probably more focused on economic relief than anything else right now.

So I think the dividend deal is going to be a dam-break for the stock market and money is going to pour in. Already, bond funds are buying high dividend yielding stocks. I’m not making this up—it came out of the Wall Street Journal.

So that’s it. I think we’re in a great era. I’ll be working on the new newsletter and I’ll have some new buys and sells for you next week. I’ll update the hotline any time the Dow swings more than 200 points per day or the NASDAQ swings more than 100 points per day.