by Jason Bodner

November 16, 2021

November is half over, but we have much to look forward to. Thanksgiving is a time to love or loathe, depending on your family dynamics. If gathering around a table with extended family and stuffing your face isn’t your thing, don’t worry- November has you covered. There’s a cornucopia of things to celebrate – from doughnuts, sandwiches, and pickles, to Louisiana (yes, even Louisiana deserves a celebration): Holiday TableMy birthday falls on National Lemon Cream Pie Day, which is great, since I’m a sucker for citrus desserts, so I’ll blow out candles on a lemon pie this year. I hope they don’t cause a five-alarm fire.

One day sticks out, though. Last Sunday, November 7, I wrote about fat bears, and it turns out to be “Hug a Bear Day,” so instead of insulting any fat bears preparing for winter, I should have found a plump one to embrace, because November is a bad month to be a bear. Real bears, hopefully quite fat by now, are prepping for a long slumber. But market bears still try to fight history. So here are 10 reasons to hug one:

Reason #1 to put your big bear-paws lovingly around a market bear is: November is historically the strongest month for stocks going back to 1990. Here we see average monthly performance of the four main indexes for the last 31 years, and November is a clear winner: 1990-2020 Main Index Average Monthly Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #2: The Big Money Index also boasts its strongest month in November – since 1990: 1990-2020 BMI Average Monthly Change Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #3: Looking at the strongest months of the year for the last 31 years, all four major indexes rose the most consistently in the 11th month, delivering a rise almost 75% of the time: BMI Months Up Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #4: The Big Money Index was also positive almost 60% of the Novembers going back to 1990.

 Reason #5: The best days are evenly sprinkled throughout the month. In fact, this week (November 15-19) looks especially strong. We can conclude that you have just as good a chance of a strong back-half of November as a good first half. I highlighted in yellow the days that were up over 60% in the last 31 years. BMI 1990-2020 Times Positive Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #6: The BMI is now rocketing higher. The green box in the chart below shows the rise since mid-October. I chose the IWM (Russell 2000 Index tracking ETF) because my data has a higher correlation to smaller cap stocks. You can clearly see the breakout from a flat eight months or so: Big Money Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #7: The Big Money Index is rising because money is plowing into stocks. That’s true, but it’s also because money is not flowing out of stocks as fast as it was. Selling is drying up, indicating rotations are giving way to just overall buying. Look here:

Big Money Stock Buys and Sells Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #8: It’s great that investors are buying stocks, but it also matters what they are buying. Last week saw a flood of buy-signals in the final stages of yet another strong earnings season.

According to FactSet, here are the results for Q3 2021:

  • 92% of S&P 500 companies have now reported actual results.
  • 81% beat EPS estimates.
  • 75% beat sales estimates.
  • The blended earnings growth rate for the S&P 500 is +39.1%.
  • On September 30, the estimated earnings growth rate for Q3 2021 was much lower, at +27.4%.
  • Nine sectors have higher earnings growth rates today (compared to September 30) due to positive EPS surprises and upward revisions to estimates.

Reason #9: Investors are now buying the “right” sectors. Last week saw a swath of buying in the right spots: Tech, Materials, Industrials, and Discretionary stocks as you can see in yellow: MapSignals Sector Rankings Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

As we see below, considering the strong buying in those sectors last week, the money is flowing into fundamental quality as well. Naturally all sectors felt the effects of COVID-19. Tech felt it the least, but clearly Industrials felt it the worst. No one was out building, working, or repairing. But the rush into Industrials stocks as we near an historic infrastructure bill, implies that investors feel the 3-year earnings growth winter is nearing its end: Sector Table 1-3 Year

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Reason #10: Even if all those previous nine reasons temporarily go south over the next few days, there is still no beating outlier stocks. Finding where the Big Money investors place their chips and looking for the fundamentally superior stocks is a winning recipe. To show you what I mean, I went into my MAPsignals.com database and pulled out a list of the top 10 most frequently occurring outlier stocks bought by Big Money from November 2019 to November 2020. I chose those dates because soon after the world got slapped by COVID-19. The chart below plots the returns of those stocks vs. the S&P 500. Map Portfolio SPY Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In May 2021, the outliers were up 6% vs. the SPY up 17%. While that was a frustrating lag, at its peak last week, the portfolio was up 72% vs. the SPY +34%. These were the stocks – a who’s who of juice:

Ticker Name Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

So even if you hug the bear and catch a claw, history is on our side and outliers are the way to go. As for how big of a hug to give? In the words of Winnie the Pooh, “A hug is always the right size.”

Navellier & Associates owns Adobe (ADBE), NVIDIA (NVDA), Advanced Micro Devices (AMD), SolarEdge (SEDG), Fortinet Inc. (FTNT), Alphabet Inc. (GOOGL) Lululemon Atheletics (LULU), and Facebook (FB) in managed accounts but does not own Trade Desk (TTD) or Yandex (YNDX).  Jason Bodner personally owns Alphabet Inc. (GOOGL) and Lululemon Atheletics (LULU) but does not own Adobe (ADBE), Trade Desk (TTD), NVIDIA (NVDA), Advanced Micro Devices (AMD), SolarEdge (SEDG), Fortinet Inc. (FTNT), Yandex (YNDX), or Facebook (FB) personally.

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

Please see important disclosures below.

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Also In This Issue

Global Mail by Ivan Martchev
Mind the Bond Market

Sector Spotlight by Jason Bodner
10 Reasons to Hug a Bear

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Read Past Issues Here

About The Author

Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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