by Bryan Perry
April 2, 2024
The bullish narrative remains intact following Friday’s release of the Personal Consumption Expenditures (PCE) index, showing a gradual slowing in the Fed’s preferred inflation gauge, coupled with a short-term rebound in household spending. It was kind of a “best of expectations” report, but one that probably will hit some market resistance with oil prices trading above $83 per barrel, implying a spike in gas prices.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The S&P finished the first quarter up 10%, its best quarterly performance in five years, despite shares of Apple Inc. (AAPL) losing 11% YTD. Formerly, the world’s most valuable company, Apple is beset with a fresh antitrust lawsuit by the DOJ that could extend for quite some time, given the endless resources of that department. That, and the fact that Apple abandoned its autonomous driving project and has not yet developed a robust AI feature, exposes some internal weaknesses. Toss in a contracting economy in China that accounts for 40% of iPhone sales and there is risk of the company entering its own lost decade.
In contrast with Apple, there is a clear changing of the guard within the mega-cap tech sector with NVIDIA Corp. (NVDA) being the new king. Normally, we don’t single out stocks, but in the case of Apple, there is real downside risk to the shares if the price breaks $170 on volume. The next support level is $150. The chart of Apple shows a technical death cross where the 20-day and 50-day moving averages move down through the 200-day moving average that almost always portend of further downside risk.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Just ask the perma-bull Pied Pipers leading the pro-EV mice over the cliff of late. Tesla shares were trading at $300 back in July and today trade at $180, a full 40% pullback as it becomes quite clear that the consumer isn’t buying into the EV revolution nearly as fast as their utopian business model was laid out.
I think one of the big differences between Apple or Tesla vs. NVIDIA is that the first two put out consumer products (iPhones and EVs), while NVIDIA produces chips that consumers never see and thus don’t create that personal bond. Apple and Tesla are Business-To-Consumer companies whereas NVIDIA is a Business-To-Business (B2B) company, whose technology is hard to grasp by most. It’s not like the experience of holding the iPhone in your hand or getting behind the wheel of a Model S.
When is the last time anyone told you, “Man, have you seen that latest H200 chip?”
As long as the market makes the necessary adjustments to replace some former All-Pro stocks with those that will become the new crème-de-la-crème mega caps, then all will be fine with the overall bullish uptrend. The remaking of the Magnificent Seven was bound to happen, but not with the speed with which investors should consider repositioning their portfolios to accommodate the tsunami of the AI revolution.
According to UBS, the global demand for AI is projected to surge by over 10-fold in five years, from $28 billion in 2022 to a staggering $300 billion by 2027. This exponential growth underscores the significance of AI in shaping the future. And here’s the best part, most investors are still trying to figure out AI.
It is vitally important that investors don’t camp out on the original Magnificent Seven but look to a new Magnificent Seven mixture. It was bound to happen. Just look at the poster child of the dot com era, Cisco Systems Inc. (CSCO). Even NVIDIA has yet to achieve the lofty returns of Cisco, which rose from $5 to $80 from mid-1998 to mid-2000, a 16-bagger, only to crash back to $10. While the stock has made its way back to $50 during the past 24 years, for those investors who never sold it, it’s been a painful ride.
Over the past week, some $4 billion in cash has left money markets, but they still total over $6 trillion in cash. Imagine when a portion of that money gets religion on the AI rollout and begins gobbling up shares of companies that are dominating that space. It is becoming crystal clear that in addition to NVIDIA Inc., other big-cap tech companies are at the front end of the wealth building AI trend, offering investors opportunities to cast a big cap net over the AI revolution. It takes copious amounts of capital to lead in the AI space, therefore a blue-chip list of companies with rich balance sheets makes sense.
While there are large numbers of what are considered small cap “pure plays” on AI, this is a capital-intensive transformational technology. Stick with the winners that the market has identified and truly believes in. It’s all in the charts. Stick with leading AI stocks trading in an upside breakout pattern.
Don’t fight the tape. Don’t try to be too “clever.” Just get in the flow of the market, the analyst community, and the fund flows. Professional managers will continue to bid-up these and others just as blue-chip in nature AI stocks because the capital investment in this space is legit and accelerating.
Consider using periods of selling pressure to acquire these names and others that fit the profile of market-blessed big cap AI stocks. We’re in another golden age of technological revolution that can have a major positive impact on investors’ lives by being in the right stocks. We still live in the time of Moore’s law, where advancements have an exponential impact on industry, and because the implementation of AI is so capital intensive, the risk/reward profile for committing portfolio capital falls squarely on market leaders.
Navellier & Associates owns Nvidia Corp (NVDA), and some accounts own Tesla (TSLA), and Apple Computer (AAPL), in managed accounts but does not own Cisco (CSCO). Bryan Perry owns Nvidia Corp (NVDA), personally but does not own Apple Computer (AAPL), Cisco (CSCO), or Tesla (TSLA) personally.
All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Food and Energy – The Overlooked Inflation Drivers
Income Mail by Bryan Perry
A Changing of the Market’s Guard
Growth Mail by Gary Alexander
Is the Economy Really Growing at a Robust 3.4%?
Global Mail by Ivan Martchev
Stocks Are Partying Like It is 1995
Sector Spotlight by Jason Bodner
Raiders of the Lost Art of Investing
View Full Archive
Read Past Issues Here
Bryan Perry
SENIOR DIRECTOR
Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.
Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry
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.