We’re coming into a historically strong month for the stock market, and part of the reason has to do with the fact that Americans typically perk up this time of year as we gather with family and friends to celebrate Thanksgiving.
This feeling of “goodwill” tends to rub off on Wall Street as well, boosting the stock market, as we’ve seen in recent weeks.
The S&P 500 closed Thursday at a new record high and was up for the seventh consecutive positive day, providing an excellent start to November. The NASDAQ Composite also closed at a new record and is up for the tenth trading day in a row.
In October, the S&P 500 soared nearly 7% and the Dow Jones Industrial Average rose about 5.8%.
Consider this: With the S&P 500’s impressive performance in October, the index was up 22.6% in the first 10 months of 2021. According to our friends at Bespoke, this is only the tenth time the S&P 500 has climbed more than 20% year-to-date through October since 1928. In the previous nine instances, the S&P 500 continued to climb higher in November, posting a median gain of 3.24%.
That’s the good news. The great news: November, December and January are historically the three best months for the stock market. In fact, the Dow Jones Market Group reports that the S&P 500 and Dow both gain about 3.4% during this three-month span, while the NASDAQ tends to rally 6.3%. So, we have three months of seasonal strength in front of us!
Essentially, we’re in the midst of a renaissance era for powerful growth stocks, which are increasingly emerging as market leaders in the wake of their positive quarterly results. The smart money is now chasing fewer stocks and focusing primarily on those able to maintain accelerating earnings and sales momentum in the current environment.
The reality is that the third-quarter earnings announcement season has revealed which companies achieved spectacular results in the most recent quarter, which will be able to maintain this strong earnings momentum going forward—and which won’t. The companies backed by superior fundamentals are stealing the show, and institutional and individual investors alike are loading up prior to yearend.
We’ve seen this play out in several of our Accelerated Profits positions, as they have rallied strongly in the wake of better-than-expected results.
That’s the beauty of my Project Mastermind system in a nutshell. It’s essentially a cutting-edge artificial intelligence (AI) stock research system that relies on mathematics and computers to pinpoint stocks that are poised to go explosive runs.
Let me show you a couple of recent examples that illustrate my point.
Take Atlassian Corporation Plc (NASDAQ:TEAM).
The company, whose name was inspired by the Greek Titan, is a global software company focused on providing tools and resources that promote teamwork and collaboration. The company’s business really took off in 2002 when it introduced Jira 1.0.
A few of its products include Jira Software, a software development tool used to prioritize and assign tasks; Atlassian Access, an identity and security tool for Atlassian cloud infrastructure; Statuspage, a tool to track incidents and the process to rectify any issues; Confluence and Trello, software that allows teams to create and share projects in one space; and Bitbucket, Bamboo, Crucible, Fisheye and Sourcetree, products used to build software and improve coding.
Overall, Atlassian’s products are utilized by 83% of Fortune 500 companies, and it has 180,000 customers in more than 190 countries around the world. The company also boasts 10 million monthly active users for its Atlassian cloud products. So, it’s not too surprising that Atlassian’s business is thriving.
Indeed, shares of this fundamentally superior company jumped recently after it reported a better-than-expected earnings announcement on October 28.
For its first quarter in fiscal year 2022, TEAM achieved earnings of $118.3 million, or $0.46 per share, up from $76.8 million, or $0.30 per share, in the same quarter a year ago. First-quarter revenue rose 34% year-over-year to $614 million. The analyst community was expecting earnings of $0.40 per share on $582.32 million in revenue.
TEAM also noted that it ended the first quarter with 216,500 customers, after adding 11,746 new customers during the quarter.
Looking ahead to the second quarter in fiscal year 2022, TEAM expects total revenue between $630 million and $645 million and earnings per share between $0.35 and $0.38. That compares to earnings of $0.37 in the second quarter of 2021.
Following the company’s outstanding earnings announcements, the stock is up almost 8% in the Accelerated Profits portfolio. Compare that to the 3% gain for the NASDAQ and the 2% gain for the S&P 500 over the same timeframe.
Another example: InMode Ltd. (NASDAQ:INMD).
More than 20 years ago, the company was founded by a group of doctors and scientists who developed light, laser and radiofrequency devices for several minimally invasive procedures, including body and face contouring, hair removal, liposuction, skin tightening, facial skin rejuvenation, wrinkle reduction, muscle stimulation and fat reduction.
On Oct. 26, InMode reported record third-quarter results.
The Israeli company’s third-quarter revenue soared 58% year-over-year to $94.2 million, with surgical technology platforms accounting for 73% of quarterly revenue. Analysts were expecting third-quarter revenue of $89.26 million.
Third-quarter earnings surged 77.4% year-over-year to $0.55 per share, up from $0.31 per share in the same quarter a year ago. Analysts were looking for earnings of $0.50 per share, so InMode posted a 10% earnings surprise.
Looking forward, InMode expects full-year revenue between $343 million and $347 million and earnings per share between $1.91 and $1.93. That’s up from earnings of $1.05 per share and revenue of $206.11 million in fiscal year 2021. This forecast is also nicely higher than analysts’ current expectations for full-year earnings of $1.86 per share and revenue of $341.03 million.
The company’s stock has soared nearly 10% since reporting its third-quarter results, handily topping the 5% gain for the NADAQ and the 2% gain for the S&P 500.
Project Mastermind spotted INMD and I recommended it to my Accelerated Profits subscribers back on April 27. Since then, the stock has soared over 113%, compared to the NASDAQ’s 14% gain and the S&P 500’s 13% climb over the same timeframe.
Of course, with expected revenue and earnings gains going forward, I’m anticipating these stocks will continue to trek higher.
As you can see above, they also both earn an “A” for the Total Grade in my Portfolio Grader, as well as an “A” for their Quantitative Grades, which represents institutional buying pressure under the stocks.
The bottom line: Investors are now putting fundamentals front and center, and my Accelerated Profits stocks are perfectly positioned to benefit from this shift.
P.S. Of course, Atlassian and InMode aren’t the only stocks I like right now.
Its latest earnings announcements were a stunner. The company reported double-digit earnings and sales growth from the year prior and beat Wall Street’s expectations for the top- and bottom-line.
The stock has risen by triple digits this year and I expect its superior fundamentals will help keep shares trekking higher.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Atlassian Corporation Plc (TEAM), InMode Ltd. (INMD)
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