It’s hard to believe that the second quarter – and the first half of the year – is now drawing to a close. While we’ve seen our fair share of volatility, the indices are ending the first half of 2023 on a strong note. As I write this, the S&P 500 is up 14.1% and the Dow is up 2.5% year-to-date. The NASDAQ is up a stunning 29.6%.
I should add that the breadth and power of the stock market is suddenly expanding. Case in point: At the end of April, seven Big Tech stocks accounted for most of the S&P 500’s year-to-date gains. Then, at the end of May, 20 stocks accounted for most of the S&P 500’s year-to-date gains.
We can thank the sudden expansion due to “green shoots.” For example, housing starts surged 21.7% in May to a 1.63 million annual pace, which is the strongest monthly surge since 2016. Building permits also rose 5.2% in May to a 1.49 million pace. In the wake of the May housing starts report, the Atlanta Fed revised its second-quarter GDP estimate up slightly to 1.9%, up from previous estimates for 1.8%.
The rest of the world, on the other hand, continues to struggle. The chaos in Russia with the leader of the Wagner Group trying to overthrow the Russian Defense Ministry, before being exiled to Belarus, has thrown more uncertainty on worldwide crude oil supplies. China is experiencing a decline in imports and exports, and the People’s Bank of China is starting to cut key interest rates.
Over in Europe, a recession is now official as France, Germany and Ireland are in the midst of a contraction. Even though the eurozone has had its GDP contract in the past couple of quarters, there was hope that the summer months would stimulate economic activity. However, the June purchasing managers’ index (PMI) showed that economic activity plunged in France. As a result, it appears that the eurozone may not be able to pull out of its recent economic contraction.
The Bank of England (BOE) also voted to raise its key interest rate by 0.5% to 5%. This was a surprise hike and appeared to be an act of desperation to fight the United Kingdom’s hideous inflation, which is running at an 8.7% annual pace.
In the middle of all this chaos, the United States is unquestionably the world leader. The fact that the U.S. is energy and agriculturally independent and has better demographics than China and Europe means that we can have more organic, domestic growth.
What this mean is that the U.S. can have more economic growth. I should also add that the U.S. is trading more with Southeast Asia, India, South Korea and Japan, as businesses seek to shore up their supply chains. As a result, the U.S. dollar should continue to grow stronger as U.S. GDP outpaces most of the world.
The bottom line is that more U.S. companies are prospering, and I look for investors to flock to fundamentally superior stocks that can steadily grow their top and bottom lines. So, to be successful in the current environment, it’s important to stay away from companies with weak fundamentals.
This Week’s Ratings Changes
One way to do that is to follow my Portfolio Grader ratings. And over the weekend, my Portfolio Grader made quite a few revisions. After taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for 90 big blue chips.
22 stocks were downgraded to a “Hold” (C-rating) and 25 stocks were downgraded to a “Sell” (D-rating). I’ve listed the first 10 stocks that were downgraded to a D-rating below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.
| Ticker | Company Name | Total Grade |
|---|---|---|
| ABBV | AbbVie, Inc. | D |
| AEE | Ameren Corporation | D |
| AWK | American Water Works Company, Inc. | D |
| BF.A | Brown-Forman Corporation Class A | D |
| BNTX | BioNTech SE Sponsored ADR | D |
| CHT | Chunghwa Telecom Co., Ltd Sponsored ADR | D |
| CMS | CMS Energy Corporation | D |
| CRWD | CrowdStrike Holdings, Inc. Class A | D |
| DDOG | Datadog Inc Class A | D |
| ELS | Equity LifeStyle Properties, Inc. | D |
My Portfolio Grader is a great tool to check a stock’s grade and determine if it’s a buy or sell on a week-to-week basis. However, if you’re looking to determine a stock’s price a month out, then look to further than the revolutionary artificial intelligence (AI) algorithm InvestorPlace’s partner Tradesmith created.
That AI algorithm is called An-E (pronounced Annie, short for Analytical Engine).
And An-E can make these types of accurate predictions for nearly 3,000 stocks on the market.
Keith Kaplan, Tradesmith’s CEO, and I sat down last week to discuss this breakthrough. During this presentation, he even showed what An-E’s predicting prices of Apple Inc. (AAPL), NVIDIA Corporation (NVDA) and Symbotic Inc. (SYM) will be next month.
Sincerely,
Louis Navellier
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:
NVIDIA Corporation (NVDA)
