Louis Navellier | Hello. Louis Navellier here again. In the letter I sent you yesterday, I told you that I’d tell you more about how my proprietary, market-crushing stock system works. This system has helped my readers make 1,125% in fast-growing beverage maker Hansen Natural… 457% in fast-growing energy firm Holly Corp… 430% gains in fast-growing computer chip maker NVIDIA… 307% in fast-growing computer maker… and 477% in fast-growing computer storage firm EMC Corp… and the list goes on and on. Getting into big stock growth winners likes these has helped my readers double and triple the markets returns over the past 20 years. And it’s all thanks to putting the “iron law” of the stock market to work. As I mentioned yesterday, when you buy a stock, you buy a partial ownership stake in a real business. You own a slice of that company’s equipment, inventory, patents, real estate, and brands. You become financially exposed to both the company’s upside and downside. The major drivers of a stock’s prices are earnings (or the anticipation of them). The more a company grows its earnings, the more its shares will be worth. Stock price trends can diverge from earnings trends for a while, but over the long-term, if a company grows and grows the amount of cash it takes in, its share price is sure to head higher. That’s how the market works. It’s the “iron law” of the stock market. And that’s why if you’re looking for stocks with massive upside potential, you should focus on the companies with massive revenue and earnings growth. This is why my computer programs are constantly scanning the market for companies with outstanding business growth and quality. Here are the eight fundamental factors that we study when selecting stocks: - Positive Earnings Revisions. I like to see stocks that have had their earnings estimates increased by Wall Street analysts. This usually tips us off to a stock that’s about to "beat earnings."
- Positive Earnings Surprises. Speaking of beating earnings, I also look to see if a stock has been able to beat its earnings estimates, and by how much. This is an important number to watch, because it often tells me about a stock that Wall Street isn’t paying much attention to or doesn’t yet "get."
- Increasing Sales. I also like to see a company that can consistently grow its sales over time. Why? Because it’s one number that is hard to fake. My background is in accounting, and I’ve always made sure to steer away from companies that use questionable accounting practices. Sales growth is a solid indicator.
- Expanding Operating Margins. This simply tells me if earnings are growing faster than sales. A company that’s able to expand its operating margins is usually a company that has a dominant position—such as a monopoly—in its industry. This company can raise prices without seeing a drop-off in sales. And that’s a nice place to be.
- Free Cash Flow. This tells me how much money a company has leftover after paying the costs of its business. A strong cash flow is important because it allows a company to invest more resources in growing its business.
- Earnings Growth. This is the heart of all good financial analysis. As long as any company is able to grow its earnings consistently, its stock will do well.
- Positive Earnings Momentum. It’s not enough to see a company’s earnings grow—I also want to see it growing rapidly.
- Return on Equity, or ROE. This is the gold standard. ROE tells me how efficiently a company is managing its resources. I can’t interview every senior manager at a company, so I like to think of ROE as a report card for management.
Because of how closely we watch these fundamentals, we look forward to each and every "earnings season" on Wall Street. Earnings seasons cover the end of a quarter, typically in January, April, July and October. These are the four most pivotal times of the year when companies report their quarterly results. Our companies typically post impressive numbers, and subsequently see a jump in stock value as a result. You’ll hear me talk a lot about "earnings" and "fundamentals" when we talk, so pay close attention to these numbers—they’re the secret to our success. As I mentioned yesterday, my system analyses over 4,000 stocks every day, grades them according to the individual qualities listed above, and also combines the individual metrics to create an overall composite grade for any stock. Remember, stocks with the highest ratings get an “A” and the worst stocks get an “F.” Just following that simple advice can make you a much richer investor. By now, you have a good idea of how our stock market system works. I hope you find our research interesting and very profitable. Regards, 
Louis Navellier
PS. I just uncovered an exciting tech company that's showing strong numbers for all eight of the fundamental factors I described above. In other words, it has the potential for massive growth. And with earnings season right around the corner, it could absolutely explode in the next few months. Click here for the full details. | 
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