by Louis Navellier

January 5, 2021

One of the keys to China’s rapid growth in the last 40 years is the establishment of Free Enterprise Zones near the coastal cities under the enlightened leadership of Deng Xiaoping, who emerged as China’s new leader in 1979 after the death of Mao Zedong in 1976. While China still paid lip service to the tenets of Marxism, Deng first allowed farmers to plant some portion of their acreage for themselves, and then he allowed some port cities to create private business zones geared toward marketing exports to the world.  This turned around China’s economy, while allowing hundreds of millions of Chinese to escape poverty.

While many in the far-left wing of the Democratic Party are calling for more socialism and a Green New Deal, one key to American prosperity would be to retain the federalism in our Constitution by allowing all 50 states to be competitive laboratories for luring corporations to their state, effectively turning several states into massive economic “free enterprise” zones. This has already been going on, since some states, like Florida and Texas, are very pro-business, while other states, like California and New York, continue to punish businesses, so they often suffer from an exodus of their businesses to more pro-business states.

Companies like Goldman Sachs, Hewlett-Packard, Oracle, and Tesla are leading the flight to more pro-business states, with Texas being the clear winner in recent years. No matter who is president, what “makes America great” is that many of our 50 states strive to lure businesses from other states with tax incentives, more educated workforces, and other incentives. Also, during the Covid attack, some states shut down most businesses, instead of working with those businesses to remain safely open for business.

Due to the precarious nature of the U.S. economy as we recover from Covid-19, the Biden Administration is not expected to significantly increase income taxes for the first two years. Furthermore, the eventual outcome of the Georgia senate races today will also impact tax policy. I do not expect that the Biden Administration will significantly increase the favorable tax rates on qualified dividends or capital gains either, especially if the Republicans retain their majority control in the Senate, even with a slender lead.

So essentially, 2021 is shaping up to be a positive year – at least at the start of the year. As millions more get vaccinated each month, states are expected to slowly but steadily lift their coronavirus restrictions. Due to favorable year-over-year comparisons, as well as higher trading volume due to new pension funding and other seasonal factors, I expect that the stock market will have a strong first quarter and steadily appreciate through May. There could be some consolidation in mid-February as the fourth-quarter announcement season winds down, but otherwise, 2021 is shaping up to be a very strong year.

Navellier & Associates does not own Goldman Sachs (GS), Hewlett-Packard (HWP), or Oracle (ORCL) in managed accounts, 1 account only owns Tesla per client request. Louis Navellier and his family do not own Goldman Sachs (GS), Hewlett-Packard (HWP), Oracle (ORCL) or Tesla (TSLA) personally.

Last Week’s Very Few Economic Indicators Were Mostly Positive

There was not a lot of economic news released last week. On Tuesday, it was announced that the S&P Case-Shiller 10-city index rose at an 8.4% annual pace in October, while its 20-city index rose at a 7.9% annual pace. These gains are now running at the fastest pace in 14 years and are up from September’s annual pace of 7.0% and 6.6%, respectively. The Phoenix region had the fastest annual appreciation rate of 12.7%, followed by the Seattle region with an 11.7% annual pace. As long as mortgage rates remain low and inventories remain tight, median home prices should keep rising.

Global trade volume is picking back up. The Commerce Department reported on Wednesday that U.S. exports rose 0.8% in November and imports rose a whopping 2.6%, resulting in a rising U.S. trade deficit (imports rising faster than exports). In the past 12 months, exports have declined 6.6%, but imports have risen 5.5%. Clearly, China and other major exporters are winning the “trade war,” although I should add that U.S. exports have been hindered by lower energy prices. The growing trade deficit is one reason the U.S. dollar remains weak and will likely cause economists to cut their fourth-quarter GDP estimate.

We closed the year with more good news on Thursday as the Labor Department reported that jobless claims in the latest week declined to 787,000 (vs. a revised 806,000 in the previous week). Continuing unemployment claims were revised down to 5.219 million compared to a revised 5.337 million in the previous week. It appears that unemployment claims have plateaued near 800,000 per week, which is approximately four times higher than pre-pandemic levels, but continuing unemployment claims should keep declining due to the expiration of unemployment benefits for many workers.

An Update on QuantumScape and the Competition for Electric Vehicles

As I predicted last week, solid-state battery manufacturer QuantumScape (QS) has retreated from its too-rapid surge, as its market capitalization has fallen from over $47 billion to approximately $32 billion.

Bear in mind that only 5% of QuantumScape’s fully diluted 447.5 million shares (including unexercised stock options, restricted stock, and additional shares allocated to VW Group) are currently trading, so about 82% of QuantumScape’s current shareholders are subject to lockups. This means that as options are exercised, and restricted stock becomes available for trading, the outstanding float of QuantumScape stock will increase dramatically and likely weigh down the stock price. Also, investors are watching out for what VW Group will do with its sizeable stock position of 71 million shares, plus another 15 million shares that are expected to be issued. These shares will be carefully watched, since VW Group is spending more than any other automaker, including Tesla, on making the transition to electric vehicles (EVs).

What sent QuantumScape soaring recently was the news of the Apple Car and its revolutionary battery technology, which many observers, including myself, thought would most likely be provided by QuantumScape. There are now rumblings that Apple may instead use batteries from Toshiba or even develop them internally. Specifically, the Apple car would use “monocell” batteries, which eliminates the pouch cells that LG Chem and other lithium-ion battery manufactures utilize.

The monocell design is very confusing, even to Tesla’s Elon Musk, who said that “A monocell is electrochemically impossible, as max voltage is ~100X too low. Maybe they (Apple) meant cells bonded together, like our structural battery pack?”  Musk also noted that Apple’s reported plans to utilize lithium iron phosphate (LFP) cells, which are typically less prone to overheating and inherently safer, so the mystery of a possible Apple Car battery supplier continues, which is why QuantumScape consolidated.

Overall, due to VW Group’s investment in QuantumScape, plus its Project Artemis, nicknamed “LandJet,” to build the first truly revolutionary vehicle with solid-state batteries for Audi, Bentley, and Porsche (all owned by VW Group), I think QuantumScape still remains on track to be the most successful manufacturer of solid-state batteries. The best window to buy QuantumScape will likely be in the upcoming years, after most of its restricted stock is unrestricted, plus all significant options are exercised.

Furthermore, QuantumScape has to prove that its initial manufacturing facility (scheduled to open in 2024), will be viable before it scales up to build a much larger manufacturing facility in 2025. Finally, QuantumScape hopes to be profitable in 2027. So if you missed out on buying QuantumScape recently, please do not fret, since there will be a safer buying window in the upcoming years that I will alert you to.

I should add that in Tesla’s race to make 500,000 vehicles in 2020, they offered three free months of “Full Self Driving” on all sales before January 1st. Interestingly, Full Self Driving is not available yet, but it is expected to be released in 2021 as a $10,000 option. Complicating matters further, there seems to be a brewing problem for Tesla in the hottest EV market, namely Europe.

On Tuesday, it was announced that Tesla sold 5,014 Model 3s in November, which placed it fourth overall in Europe after the Renault Zoe (9,953), VW ID.3 (8,496), and Hyundai Kona (5,375). In October, the Tesla Model 3 was not even in the Top 20 in European sales. Traditionally, Tesla does a “quarter end” dump, so it will be interesting to see if Tesla’s sales in Europe significantly improve in December.

The other reason that Europe is important to Tesla is that it is selling lucrative carbon credits to Fiat Chrysler, Honda, and other auto companies, so they can comply with strict EU emission guidelines.

In the meantime, due to eroding EV market share in Europe, China has become much more important to Tesla’s overall EV sales after selling 12,143 Model 3s in October and another 21,606 in November, which makes the Model 3 the second-best seller of EVs in China.

Tesla’s stock remains priced for perfection, so if it sells 500,000 EVs in 2020, its shareholders may ignore its slowing fourth-quarter EV sales in Europe, unless that subsequently messes up its lucrative carbon credit business, which so far has totaled $1.18 billion in the first nine months of 2020.

Navellier & Associates does not own Quantumscape  Kensington Capital Acquisition Corp (QS), Toshiba Corp, LG Chemical , Fiat Chrysler, Honda Motors (HMC) or Volkswagen (VW), in managed accounts, 1 account only owns Tesla per client request. Navellier & Associates does own Apple Computer (AAPL) in managed accounts. Louis Navellier and his family do not own Quantumscape  Kensington Capital Acquisition Corp (QS), Toshiba Corp, LG Chemical, Fiat Chrysler, Honda Motors (HMC), Volkswagen (VW), or Tesla (TSLA) personally but they do own Apple Computer (AAPL) in a personal account.

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
This is “The Fed’s Rally”

Sector Spotlight by Jason Bodner
The Calendars May Change, But Most Things Stay the Same

View Full Archive
Read Past Issues Here

About The Author

Louis Navellier

Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at or by requesting a copy by emailing All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.