The markets were not so friendly this week … why it’s nothing to worry about … Louis Navellier’s strategy for making money in any market
The markets took a breather last week.
That’s the one-line explanation about what felt like a market pause after a super January and early February. Markets are pointing up as I write Friday morning, but investors this week seemed more concerned than before about a few things.
For example, another 861,000 people filed first time unemployment claims last week, a four-week high. And the severe winter weather was slowing the pace of COVID vaccinations.
“Wall Street loves to climb a wall of worry and there is a lot to be worried about this last week,” said stock-picking legend Louis Navellier.
That’s not to say Louis is ready to move toward a bearish stance. In fact, if you read Louis Navellier this week, he noted that this kind of market pause is completely predictable.
***In a message to his readers, the editor of Accelerated Profits attributed the pause to three factors
First of all, at the end of any earnings announcement season, the market likes to “burp” and digest its gains. The fourth-quarter earnings announcement season has been particularly stunning, as S&P 500 earnings and sales are expected to rise 2.9% and 2.8%, respectively. As you may recall, earnings and sales were initially expected to be down for the quarter.
The second factor is the change in leadership. You may have noticed that some of the big NASDAQ names are growing tired. For example, Tesla (TSLA) hasn’t traded well these past two weeks. The reality is that it’s beginning to lose some of its luster as more competition from auto manufacturers is mounting…
Keep in mind that Tesla is not making money on EVs but instead has been selling carbon credits to other manufacturers. This way they can meet California and European Union (EU) emission standards. So another issue is that as more competitors begin selling EVs, it’s possible that Tesla will receive fewer tax credits, which will weigh on its bottom line…
The third factor is interest rates, as the 10-year Treasury yield is sitting around 1.3%. The problem is that the stock market competes with the bond market. In theory, the bond market could divert some money away from the stock market as yield-hungry investors chase the higher yields in Treasuries. However, the Dow and S&P 500 continue to yield significantly more than the 10-year Treasury, with the Dow’s yield at 2.4%.
Louis explained more in one of his periodic podcasts that go out free to subscribers during fast-moving market conditions.
In a podcast to his Accelerated Profits subscribers, he noted that the selling this week is on light volume, which means there is no panic selling. Plus, he noted that money is zig-zagging to some defensive stocks.
That means money isn’t leaving the market, just “sloshing around.”
Another bit of good news came in the retail sales report. January U.S. retail sales increased 5.3%, the third largest month-over-month increase on record. States easing lockdown restrictions, plus some more government stimulus getting to people led to the increased retail activity.
Louis also highlighted one more stat he characterized as the most amazing this week.
On Wednesday, the Atlanta Fed’s GDPNow tracker on Wednesday predicted the economy will grow at a 9.5% seasonally adjusted annual rate in the first quarter, up from a 4.5% estimate.
“I’m shocked, I’m absolutely shocked, I think they will have to revise that again,” he said.
***In sum, Louis is not worried about the market pause this week.
The continued focus on fundamentally sound stocks means sloshy market conditions don’t concern him.
This consolidation period shouldn’t last more than a couple of weeks, and once the stock market regains momentum, it should grow more narrow and fundamentally focused. This is great for my Accelerated Profits subscribers, as my Buy List is chock full of fundamentally superior companies with growing sales and earnings.
Louis provided an example in Kornit Digital Ltd. (KRNT), which soared 20% Wednesday to a new 52-week high after reporting record earnings this week.
Fourth-quarter revenue soared 49% year-over-year to $72.3 million, topping analysts’ estimates for $62.01 million. Earnings per share increased 41.2% year-over-year to $0.24, up from $0.17 per share in the fourth quarter of 2019. Analysts were expecting earnings of $0.22 per share, so Kornit Digital posted a 9.1% earnings surprise…
KRNT is up about 30% year-to-date, and I’m pleased to say that, thanks to my Project Mastermind system, my Accelerated Profits subscribers have been able to enjoy the stock’s climb higher, as it flagged this stock as a good buying opportunity back on November 23, 2020.
Louis chooses all his stocks based on superior fundamentals. In the past month, his latest effort, dubbed Project Mastermind, has recommended 8 new stocks that meet all his criteria.
Remember, not even the most aggressive bull market goes straight up all the time. Market “breathers” are healthy and actually good for the markets over the long term.
Enjoy your weekend
Editor in Chief, InvestorPlace