by Louis Navellier

December 28, 2921

This is a good time to remind everyone why I am so obsessed with only selecting stocks with strong sales and earnings growth plus positive analyst revisions – especially near market tops. Because of these superior fundamentals, every three months I count on quarterly earnings to drive these stocks higher.

After each earnings season, institutional buying pressure becomes the primary component propelling my stocks higher, but whenever this buying pressure ebbs, stocks typically become more volatile and fall in rank in my quantitative grading system, so then we often sell these “good” stocks to buy better stocks.

I expect a higher market in January because virtually all the current stock market fears are expected to diminish in January. First, growth is returning and will be reported in late January. The Atlanta Fed is currently estimating 7.2% fourth-quarter GDP growth. Also, crude oil prices are now moderating, and Treasury bond yields have meandered lower. On top of that, Omicron virus fears should abate soon.

President Joe Biden will be addressing the nation tonight, and naturally I expect him to tell Americans to stay safe, as well as vaccinated, but it will be interesting to see if he also addresses the failure of his “Build Back Better” (BBB) bill in the Senate or makes a new proposal. There was an editorial in The Wall Street Journal that said that Senator Joe Manchin (D-WV) may have saved the Biden Administration by killing the BBB bill, and thereby forcing them to regroup and tack back to the center by proposing a new, more moderate and popular infrastructure bill. The only glitch they will face is that 2022 is a mid-term election year, so passing any bill will become more difficult as we get closer to the November elections.

Regarding the port bottlenecks, major European ports, like Hamburg and Rotterdam, are “roughly flat or lag behind 2019 levels,” according to The Wall Street Journal, while the major U.S. ports are processing almost 20% more container volume than they did in 2019. The bottom line is that U.S. consumers continue to boost their spending on goods, while European consumers remain much more cautious.

According to the Bank of England, the U.S. accounts for almost 90% of a 22% worldwide surge in durable goods orders since the end of 2019. Overall U.S. GDP growth is forecasted to grow at a nearly 6% annual pace in 2021 and 4% in 2022. The primary reason that the U.S. dollar is strong is due to this higher GDP growth as well as higher absolute interest rates than anything offered in Europe or Japan.

A strong U.S. dollar will eventually help suppress inflationary pressure, since almost all commodities are priced in U.S. dollars. Furthermore, since approximately half of the sales in the S&P 500 are outside of the U.S., many multinational companies will be posting better-than-expected sales due to a “currency tailwind.” As a result, it is hard to not be optimistic about 2022, since the U.S. is driving global growth.

The Economic News is Mostly Encouraging Going into 2022

The economic news released last week was mostly very encouraging. First, the Conference Board announced on Wednesday that its consumer confidence index surged to 115.8 in December, up sharply from a revised 111.9 in November. Most notably, the Expectations component surged to 96.9 in December, up from 90.2 in November. Obviously, this bodes well for the outlook for the New Year.

Also on Wednesday, the National Association of Realtors reported that existing home sales rose 1.9% in November to an annual pace of 6.46 million. Although absolute home sales were down 2% compared to October, year-to-date existing home sales have risen 10%. The inventory of existing homes for sale in November declined 9.8% from October to only 1.11 million, which represents a 2.1-month supply at the current sales pace. In the past 12 months, median home prices have risen 13.9% to $353,900.

The National Association of Realtors also noted that in the past 12 months, the more expensive home sales have risen even faster. Those between $500,000 to $750,000 have risen 31%, while homes between $750,000 and $1 million rose 37% and homes above $1 million have surged 50%!  Median home prices are expected to continue to rise due to tight inventory as well as strong sales for more expensive homes.

The Commerce Department on Thursday announced that new home sales rose 12.4% in November to an annual pace of 744,000, which is the fastest pace in seven months. In the same report, October new home sales were revised down to an annual pace of 662,000, down from the 745,000 rate previously reported.

The inventory of new homes for sale rose to 402,000 in November, up from 392,000 in October. The average median new home price is now $416,900, 18.8% above a year ago. New home sales in November surged 53.2% in the West, 15.6% in the Northeast and 2.7% in the South, but declined 25.4% in the Midwest. (This time of year, weather can impact new home sales, especially in colder regions.)

Turning to the weekly labor news, the Labor Department reported on Thursday that unemployment claims in the latest week were 205,000, which was identical to a revised 205,000 in the previous week. Continuing unemployment claims in the latest week declined to 1.859 million compared to a revised 1.867 million in the latest week. Overall, the four-week average of unemployment claims remains near the lowest level in 52 years, so in my opinion, the Fed has fulfilled its unemployment mandate.

The Commerce Department reported on Thursday that durable goods orders surged 2.5% in November, which was substantially higher than the economists’ consensus estimate of a 0.7% increase. A 34% surge in commercial aircraft orders was the primary cause of the big increase. Also encouraging was the fact that orders for vehicles rose 1% last month. Excluding transportation, durable goods orders rose 0.8%.

The only “glitch” in the durable goods report was that business orders declined 0.1% after rising 0.9% in October. Perhaps businesses were more cautious since inventories rose 0.6% in November. However, unfilled orders for manufactured goods rose 0.7%, which bodes well for continued strong durable goods orders in future months. As a result, I expect economists to upgrade their fourth quarter GDP estimates.

The Ongoing Economic Struggles of EV Makers and Battery Production

The Wall Street Journal recently featured a very good article on the demand for batteries as California and other states strive to store growing solar energy during off peak hours. In fact, the demand for large battery storage packs, which resemble shipping containers, for electric grid storage is further complicating the automotive industry’s transition to electric vehicles (EVs). For example, Volkswagen Group recently had to halt the production of its EVs at two plants in Germany due to supply shortages. LG Chem primarily supplies Volkswagen Group with lithium-ion batteries from its massive battery plant in Poland, but VW Group is investing in six new European giga factories, while its manufacturing plant in Chattanooga, Tennessee will be supplied by SK Innovation’s new battery plant in Georgia.

Interestingly, Ford’s F-150 Lightening has almost 200,000 orders and new reservations have been temporally suspended due to 200,000 vehicles representing an almost a three-year order backlog. Although Ford has pledged to double the production of the F-150 Lightening and reopen its order books, you might be wondering why its takes Ford three years to produce 200,000 F-150 Lightening trucks, when Tesla is making over 200,000 EVs per quarter. The answer is the shortage of lithium-ion batteries for all EV manufacturers. Tesla has wisely shifted to less efficient, but safer (from fires) iron-phosphate batteries at its Shanghai plant, or it would also be impeded by the shortage of lithium-ion batteries.

General Motors has announced that its new EVs by Cadillac and GMC will be using 75% less cobalt than other lithium-ion batteries. The fact of the matter is that due to a shortage of raw materials to make lithium-ion batteries (like cobalt), new battery technologies and formulas will be necessary, otherwise the EV revolution is expected to stall. Even Tesla has not yet formally revealed its new larger 4680 batteries that it is supposed to use at its new manufacturing plants at Austin and Berlin.

As well as Tesla has done in boosting its EV production with multiple battery suppliers and technologies, I am starting to worry that complications with its 4680 batteries, including the supply of raw materials, may impede Tesla’s ambitious sales growth. As a result, I expect that the EV battery shortage will become big news in 2022, just like the semiconductor shortage has been big news this year.

Overall, the Green Energy Revolution is going to take decades and it will likely depend on new battery technologies that do not excessively rely on cobalt and other rare earth minerals. One reason that fossil fuel prices remain high is a lack of investment in new production as governments try to break away from fossil fuels, which caused acute shortages to emerge, so it will be interesting if any governments try to slow down their transition to EVs and greener energy. For example, the Biden Administration has pledged the federal government to buy 600,000 EVs, but between Ford, GM and Stellantis (formally Chrysler), the Big 3 are not expected to make 600,000 EVs by the end of President Biden’s first term!

Right now, NASDAQ is the primary market barometer in my opinion. Since Lucid was added to the NASDAQ 100, despite the SEC investigation into its SPAC deal, the NASDAQ 100 index is expected to remain volatile. Even though Lucid is getting rave reviews for its electric vehicle (EV), the Air, Lucid is not expected to make money, which means a significant component of the NASDAQ 100 will be volatile.

Navellier & Associates does own Tesla (TSLA), for one client, per client request, General Motors Company (GM) in a few accounts, Inc., Ford Motor Co (F), and Volkswagen Ag. (VWAGY), in managed accounts.  We do not own Stellantis (STLA), SK Innovations, or Lucid Group (LCID). Louis Navellier and his family do not own Tesla (TSLA), General Motors (GM), Stellantis (STLA), Lucid Group (LCID), or SK Innovations personally. They do however own Ford Motor Co (F), and Volkswagen Ag. (VWAGY), via a Navellier managed account.

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

Please see important disclosures below.

About The Author

Louis Navellier
CHIEF INVESTMENT OFFICER

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 www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. 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.