The market might be facing turbulence, but Louis Navellier says there are three sectors that should treat investors well regardless
Do you know where the term “dog days of summer” comes from?
I assumed it was some broad reference to the heat and humidity of high-summer that causes dogs to lie around doing nothing in particular.
Not so much …
Apparently, the term is a throwback to early Greek and Roman culture.
It referenced the period in which Sirius, the dog star, rises at the same time as the sun — usually from around July 3rd through August 11th.
According to National Geographic, the Greeks and Romans believed this period “could bring fever, or even catastrophe.”
Given the coronavirus, the February/March stock market plunge, and the mass social unrest in recent weeks, it seems we’ve already had our fair share of “catastrophe” here in 2020.
Turning to the stock market in particular, how should we be thinking about positioning ourselves during these dog days? Is there more potential catastrophe right around the corner?
In yesterday’s Digest, we answered this by highlighting a technical outlook from our Strategic Trader team.
In short, historical data suggest the markets will be higher over the next six months. However, as John and Wade wrote, “we are in uncharted territory as we wait to see how far the nascent recovery can go and whether hiring will drop off again.”
So, given this uncertainty, what sectors appear strongest for investors?
That’s the question Louis Navellier answered in a recent update.
While warning about the recent rise of speculative day traders such as Dave Portnoy, Louis noted …
Smart investors like us are far too busy snapping up the very real opportunities that are out there. I’d like to make the case for the three best investment themes I see today …
Three hot sectors for the bumpy summer months.
Keep in mind, Louis doesn’t make his investments based on broad sectors.
He uses a strict numbers-approach to the markets that analyzes stocks according to a series of financial metrics. This quantitative method helps him identify strength wherever it is.
But that doesn’t mean clusters of strength can’t be found in specific sectors. So, in today’s Digest, let’s identify which three sectors Louis finds attractive during these dog days of summer.
***Sector #1: Biotechnology
In his update, Louis tells us that biotech has stepped back into the spotlight as the coronavirus has been ravaging the world.
For context, below is a chart of IBB, the iShares Nasdaq biotechnology ETF. It holds bio-giants including, Vertex, Amgen, Gilead, Biogen, and Moderna, to name a few.
As you can see, while the S&P is struggling to get back to even on the year, IBB is up 16%.
Louis notes that shares of Big Pharma stocks, in particular, are surging.
Investors are hoping to find a vaccine from the more than 115 treatments and more than 55 vaccines now being developed for COVID-19 and the coronavirus.
But there’s a warning from Louis:
However, many of these companies are living and dying on positive clinical results right now. That makes many of their shares volatile and a bit too hot to handle.
Personally, I don’t recommend blindly scooping up any old biotech shares. Our attention is better focused on companies with established treatments and pipelines that are consistently adding to their top and bottom lines.
In his update, Louis points toward his Portfolio Grader as a way to help distinguish Strong Buy biotechs from average, or even “avoid” biotechs.
If you’re less familiar with Louis’ Portfolio Grader, it’s a free, stock-diagnostic tool.
Louis engineered it to approximate the same numbers-based market approach he uses to find the official recommendations in his newsletters.
It’s a fantastic way to get an instant report card revealing the strength of your specific holdings.
Back to Louis’ dog days list …
***Sector #2: Diagnostic Healthcare
Normally, diagnostic tests are just part of the fabric of modern society. But the coronavirus is shining a brighter spotlight on the industry now.
If you’re running a fever, coughing and having trouble breathing, a diagnostic test will be run to determine if you have the coronavirus. How accurate these tests are is still being determined — but that hasn’t stopped investors from pouring into many diagnostic healthcare stocks.
Believe it or not, that includes animal diagnostics companies, too.
Louis has two such “vet-med” stocks on his Growth Investor Buy List. He notes that they’ve rallied 45% and 75%, respectively, from March lows.
Out of respect for Louis’ subscribers, I can’t reveal them here. But I can share a vet-med stock Luke Lango recently highlighted in our Daily 10X Stock Report.
Luke wrote how the humanization of pets is a rapidly growing trend, which has led to U.S. pet-care spend rising by more than 100% since 2010.
The specific stock Luke likes is Zomedica Pharmaceuticals (ZOM), a $75 million, pre-revenue vet-med company focused on developing novel diagnostics and innovative therapeutics for companion animals, like cats and dogs.
Luke is expecting 20X growth over the next 5+ years. You can read his entire write-up by clicking here.
By the way, Zomedica earns a solid “B” grade when run through Louis’ Portfolio Grader …
Back to Louis’ dog days sectors …
***Sector #3: Video Communications
Louis tells us that no analysis of COVID-19’s impact is complete without discussing work-from-home stocks.
For context, the poster child here is Zoom Video (ZM), the video conferencing service which has been the go-to form of communication for corporate America in recent months.
Investors have piled into Zoom stock, expecting a massive surge in profits.
Below, you can see Zoom topping 300% gains here in 2020, while the S&P is flat.
But with stay-at-home orders lifting in parts of the country, what will that mean for video communication businesses?
Even with stay-at-home orders lifting in some regions, many companies are now considering the long-term benefits of a remote workforce. For example, Facebook (FB) plans to allow nearly half of its employees to work remotely in the next 10 years.
One company that’s already reaping the rewards is Microsoft (MSFT). The company’s Microsoft Teams platform has enabled businesses to work remotely together, with group chats, video meetings, calls and collaborative workspaces.
And thanks to the dramatic increase in demand for its online communication platform, revenue grew 15% and earnings jumped 23% in the first quarter.
Here’s how Microsoft appears through Louis’ Portfolio Grader:
It turns out, just last week Louis added a video communications stock to his Growth Investor portfolio.
Not only is it a “Strong Buy,” the company more than doubled earnings in the first quarter — and is expected to post 462% earnings growth next time!
On the other hand, I’ve been cutting other stocks loose at Growth Investor, too. I only want stocks that are poised to continue leading the market, despite investor anxiety about the upcoming second-quarter announcement season.
Click here to sign up for Growth Investor and learn more about Louis’ latest pick.
As we wrap up, the rest of this summer might get bumpy — especially given earnings season, as Louis noted.
But elite stocks from the three strong sectors we’ve highlighted today should help you continue to grow your portfolio.
Have a good evening,