History suggests a market rally … how to invest in the Metaverse … the technology that will anchor the Metaverse – and everything else

 

If we go by history, the stock market is about to enjoy a strong year-end rally.

In yesterday’s issue of Accelerated Profits, legendary growth investor, Louis Navellier, provided the details.

He began his issue noting the strong start to November. Specifically, last week the S&P 500 and Dow rallied 2% and 1.4%, respectively. Meanwhile, the NASDAQ popped more than 3%.

Most bullish of all, however, was the surge in small-cap stocks. The Russell 2000 jumped more than 6%.

But this is old news – what about that year-end rally?

Here’s Louis:

November is a seasonally strong month—and our friends at Bespoke recently pointed out that November is an even more impressive month following a strong October.

According to Bespoke, since 1945, there have been nine years where the S&P 500 has gained 20% or more during the first 10 months of the year. The average gain in November in these years is 3.61%, and the average gain for the rest of the year is 6.01%.

Even better: In the previous nine years since 1945, the S&P 500 climbed higher 100% of the time in both November and the rest of the year!

That bodes particularly well for the stock market this November and December, as the S&P 500 was up 22% for the year at the end of October.

While this is good news for stocks, make sure your specific portfolio is anchored in fundamental strength.

As we’ve noted here in the Digest, Wall Street is focused on strong earnings. This makes sense as inflation, supply chain headaches, and the pandemic have been major headwinds to growth.

You can see from this earnings season that Wall Street is punishing stocks that don’t report genuine, organic earnings growth. But they’re rewarding those that are.

In short, it’s all about fundamental strength today.

On this note, a quick congrats to Louis’ Accelerated Profits subscribers. Their portfolio has had 21 Buy List companies release results from the most-recent quarter so far. Of those, 17 have exceeded analysts’ expectations, one posted in-line earnings, and just three missed estimates.

Bottom-line, though we should be ready for some short-term profit-taking (the market has been on a tear over recent sessions), we expect another bullish push as we close out the year.

***Expanding our investment time-frame, you’re in the early stages of one of the most transformative societal and investment trends in history

Right now, you and I are standing on the edge of the creation of an entirely new world. There are lands to explore, fortunes to create, and people to meet…

But there’s a twist.

This world – while very real – is a digital world.

It’s an immersive, alternate reality that, while existing only on the blockchain network, is incredibly real.

This is the Metaverse – a virtual, 3D world where you, through an avatar, socialize, work, play, create, and basically…exist.

Here’s how Forbes describes it:

Today, the metaverse is a shared virtual space where people are represented by digital avatars (think Ready Player One).

The virtual world constantly grows and evolves based on the decisions and actions of the society within it.

Eventually, people will be able to enter the metaverse, completely virtually (i.e. with virtual reality) or interact with parts of it in their physical space with the help of augmented and mixed reality.

The metaverse is going to change our world – how we play, socialize, learn, explore… It will mark a massive “before/after” line in the sand.

Clearly, something this pivotal will create astronomical wealth. So, how do we take part?

***Investing in what will support the Metaverse

Eric Fry is our macro specialist and the editor behind Investment Report. This means he evaluates markets and asset classes from a big-picture perspective to identify attractive opportunities.

Once something is in his crosshairs, he digs down to find the right, specific investments to play the opportunity.

There are going to be many ways to play the Metaverse, but none of them will be as necessary to the Metaverse’s basic existence as blazing-fast, stable internet connections – and that means 5G.

From Eric’s issue of Smart Money last week:

(By the way, if you haven’t signed up, Smart Money is Eric’s free newsletter. Each week, he details the trends, stocks, and strategies that are on his radar. Click here to sign up.)

5G technology drastically improves upload and download speeds, while also improving latency, which is the time it takes devices to communicate with wireless networks.

The current 4G network delivers around 100 megabits per second. But once 5G rolls out, that number jumps to 10,000 megabits per second — or 100 times faster than the current speed.

What does “100 times faster” mean? It means that an entirely new generation of technologies — including the metaverse — will likely become feasible and flourish.

Whereas 4G provided the network speeds necessary to run complex online apps like Uber and mobile streaming like Netflix, 5G represents a monumental leap forward.

It provides the foundation for a whole host of “gee-whiz” technologies, including automated vehicles… remote surgery… and the metaverse.

***Regardless of how massive the Metaverse becomes, it’s still only one of many tailwinds for a 5G investment

The Metaverse isn’t the only technological marvel that will require 5G…resulting in huge swells of capital.

Back to Eric:

I’ve previously estimated that 5G will produce more than $56 trillion in wealth:

• Artificial intelligence is on pace to unlock over $30 trillion in new revenue.
• The Internet of Things is going to add $19 trillion to the economy.
• And driverless cars are predicted to add $7 trillion.

Once you add in the metaverse, that number gets even bigger.

According to Emergen Research, “the global metaverse market size reached $47.69 billion in 2020 and is expected to reach $828.95 billion in 2028.” That’s a hefty compound annual growth rate (CAGR) of 43.3%.

Clearly, the dollars here are massive. So, how can you be a part?

Well, that’s one of the core challenges. Investing in 5G can mean all sorts of things…

You could look at internet operators like Verizon… semiconductor companies like Qualcomm… 5G-related consumer products like Apple… data storage companies like Nutanix… we could go on and on.

One simple option is a 5G-themed ETF. The best ticker for this has to go to the company, Defiance, which locked in “FIVG.”

But you have to be careful…

If you look under the hood of FIVG, you’ll see a heavy concentration in semiconductor companies.

Here are FIVG’s top 10 holdings (from highest weighting to lowest). Note how many are chip companies:

• Advanced Micro Devices
• Qualcomm
• Analog Devices
• Keysight
• NXP Semiconductors
• Xilinx
• Marvell Technology
• Verizon
• American Tower Corp
• Ericsson

Now, there’s nothing wrong with a chip company, but it’s just one corner of the broader 5G market.

Eric recently took a different approach. He created a special report that includes four 5G tech stocks that are building out the 5G networks. You can learn how to get that report by clicking here.

Perhaps the best strategy is simply to begin. You can add exposure to additional sub-sectors over time. After all, this is a multi-year year growth story. And tomorrow’s mega-winners might not even be on the map yet.

I’ll let Eric take us out:

Here’s the thing: The 5G/metaverse opportunity is still in its infancy, which means it will produce a growing list of winners over time.

Investors who understand that 5G is a much bigger story than faster smartphones… and understand that the last few hype-filled years were just the build-out phase and not an empty promise… could make incredible gains as this story plays out.

Have a good evening,

Jeff Remsburg