Why now is a “great” time to buy stocks … five reasons for optimism from Louis Navellier … some PE ratios that are “just plain ridiculous” … Louis and Whitney Tilson’s market forecast

Now is a great time to buy stocks.

So says legendary investor Louis Navellier.

Now, I’ll be the first to say that it doesn’t feel like a great time to buy stocks.

The market just posted its worst first-half performance in more than 50 years. Meanwhile, estimates suggest we might already be in a recession.

So, why now?

From Louis:

I understand if you think I’m crazy saying that now is actually a great time to buy stocks.

Look, I’m not a stick-my-head-in-the-sand kind of guy. I know full well what’s going on in the market, and I own stocks that have gotten hit hard. And I know that just because a stock is up today doesn’t mean it won’t be down again tomorrow.

But more importantly, I also know that superior companies with strong fundamentals are selling at deep discounts.

The fact of the matter is investors tend to “knee-jerk” react during times of panic.

In other words, investors sell first and ask questions later. They throw the baby out with the bath water, but astute investors can snap up shares of companies that are going to be much higher in the coming years for pennies on the dollar.

This echoes a similar point we’ve made in past Digests…

If your focus is on “waiting for the market low,” you’re going to live in constant stress and second-guessing. No one can time the bottom except through sheer luck.

But if your goal is to buy at a price that’s discounted heavily enough to offer a high likelihood of great returns, say, three-to-five years from today, it removes the pressure of perfection.

It reorients your perspective, with a reminder that “buying at the low” isn’t required in order to make your portfolio very happy.

Today, Louis is seeing some rare bargains in the market, and he’s been adding select stocks to his various portfolios.

Of course, the skeptic could push back and say: “Buying a stock here or there doesn’t mean the entire market is offering reasons for optimism.”

Fair enough.

Fortunately, in Louis’ recent issue of Market 360, he addressed this, providing five big-picture reasons why today’s market is looking better than you might realize.

I think the details of Louis’ second reason will take you by surprise…

***Five reasons why Louis Navellier thinks now is a good time to put your money to work

If you’re new to the Digest, Louis is a legendary quantitative investor. “Quant” simply means he uses numbers and algorithmic rules to guide his investment decisions. Forbes even named him the “King of Quants.”

It makes sense then that Louis’ list is heavy on the numbers.

On that note, his first reason to view today’s market as a buying opportunity is that we’re not in an earnings recession.

Here’s Louis:

The economy may have contracted in the first quarter, but corporate earnings are not expected to shrink.

According to the latest FactSet data, second-quarter earnings on the S&P 500 are estimated to grow 4.1%. That’s slower growth, to be sure, but it is far from negative. Sales growth is expected to be 10.1%.

As we’ve noted here in the Digest, Q2 earnings season, which starts in earnest on Thursday, will set the tone for the back half of the year.

If earnings remain strong despite inflation, it will be a huge support to the market. And as Louis just pointed out, though estimates are down from past years, they’re still positive, with expectations for double-digit sales growth.

Moving on, Louis’ second reason is also quant-focused – there’s still accelerating sales and earnings momentum out there.

Back to Louis:

You can still find quality companies with accelerating sales and earnings.

And because their stocks have been crushed in many cases, they are available at unusually low price-to-earnings (P/E) ratios that are sure to move back up to historical norms.

***I just did a brief scan to put some names on Louis’ point

What I found genuinely surprised me. The returns and valuations of the broad indexes are masking some truly amazing opportunities.

For example, legendary motorcycle manufacturer Harley-Davidson has a five-year average P/E ratio of 18.

So, where’s that P/E coming in today?

Eight. Less than half of its average.

Over in the banking sector, JPMorgan has a five-year-average P/E of almost 13. Today, it’s also just over 8.

Or what about Warren Buffett and Berkshire Hathaway? The five-year average P/E is 20; today’s P/E is – again – less than eight.

(What is it about 8?)

Finally, what about Ford?

This classic American auto manufacturer is making huge strides toward becoming an electric-vehicle powerhouse in the coming years.

In the past five years, it has averaged a P/E ratio of 34.

Today, that P/E ratio is less than 4.

You think buying Ford at four-times earnings will make you money within a few years?

These numbers help explain why Louis writes:

Valuations now are now just plain ridiculous…

I’ve never seen valuations like this – ever!

***Returning to Louis’ list, for his third reason, he points toward the likelihood that we’re beyond peak core inflation

If we exclude food and energy, known as “core” inflation, there’s a good chance that we peaked back in March.

Louis points out that the figure has decelerated in both April and May and is expected to keep dropping into September.

Moving on, Louis highlights Treasury-bond yields as the next reason why today is a good buying opportunity:

The 10-year Treasury yield more than doubled in the first half of the year, but yields have started to come back down of late, even with rising interest rates.

This would be a good sign for stocks… and especially growth stocks that have taken the brunt of the selling.

As I write Tuesday morning, the 10-year Treasury yield is back below 3%, sitting at 2.92%. Keep in mind, in mid-June, it nearly topped 3.5%.

This is a steep and meaningful pullback. And if it holds, it will be supportive of stock prices.

***Louis’ fifth and final reason why he believes now is a good time to buy quality stocks

The U.S. is attracting global investment dollars, and history suggests coming returns will be strong.

Back to Louis for the details:

Thanks to a strong dollar (in part because of those higher interest rates) and a better ability to tackle both food and energy inflation due to vast natural resources, the U.S. is an oasis in the global market right now, filling it with more opportunities…

Our friends at Bespoke calculated that the S&P 500 has fallen more than 20% in the first half of the year eight times since World War II. It is up both six months and one-year later every single time, with the average six-month gain a solid 21.5%.

Source: Bespoke

But whether the market bottomed in the first half of the year or not doesn’t matter.

Bottoms are identified only in hindsight – and after the market has already bounced off them.

***Viewed through this lens, there’s a lot to like about today’s market

As we pointed out in yesterday’s Digest, waiting to buy until you feel much more confident in the economy is a surefire way to miss major gains.

Remember, there’s a lag-time between when stocks begin to climb after a bear market and when the economy begins to get back on its feet after a contraction.

Stocks tend to lead by a handful of months. So, rather than wait for more confidence, how about following Louis’ approach, which is to focus on what the numbers are revealing:

…We need to focus instead on something much more concrete: great companies that are growing earnings and sales and are selling at unusually steep discounts.

That’s why now is a great time to buy stocks.

These great fundamentally superior growth stocks are likely to be a lot higher in the coming months and years.

Even if they fall from current prices in the short term, the outsized long-term gains should dwarf any early disappointments.

***Louis isn’t the only market veteran who sees today as a buying opportunity

Whitney Tilson is another investing legend, having been named “The Prophet” by CNBC.

It turns out, both Whitney and Louis are viewing the markets similarly today. And while there’s danger out there for certain, they believe investors are staring down an opportunity to make five- to ten-times their money through a massive turning point in the market.

Louis and Whitney are releasing more information on this today.

Here’s more from Louis:

In short, we predict this year’s sell-off is about to hit a major turning point that could make you 5 to 10 times your money through a historic unveiling in downtown Houston, Texas we’re covering in person today.

It could cause some of the best-known companies to crash or go bankrupt, while other companies could go on to rise 10,000%.

But you must get in NOW, while the market’s still being shaken-up… at historically low prices you may never see again in your lifetime.

I don’t know what Louis and Whitney have dug up. But I do know that between the two of them, they’ve recommended 37 different stocks for gains of 1,000% or more. So, if they’re both seeing the same opportunity, it’s something to take seriously.

Click here to learn more details.

Have a good evening,

Jeff Remsburg