April 23, 2019

We expect wave after wave of better-than-expected first-quarter announcements that will propel quality stocks significantly higher in the upcoming weeks. One example of positive sales and earnings is UnitedHealth Group (UNH), which reported last Tuesday that its first-quarter sales rose 9.3% and its earnings rose 24% vs. the same quarter a year ago. UNH beat analysts’ consensus sales estimates by 1.1% and operating earnings estimates by 3.6% and also raised its earnings guidance. The stock initially responded positively then corrected, then slowly recovered on Wednesday and Thursday trading.

In my view, UNH didn’t rise far on the good news because there has been a lot of high-volume selling pressure on health insurance companies based on unfounded fears that “Medicare for All” will pass at some point in the long-distant future (after 2020) if Bernie Sanders or any other avowed socialist candidate wins, which would effectively put most health care companies out of business.

Even if Bernie wins in 2020, I doubt this would happen. Essentially, Medicare for All would be a single-payer health care system for everyone. A George Mason University study reported that Senator Bernie Sanders’ “Medicare for All” proposal would cost $32.6 trillion over 10 years, nearly doubling the total federal expenditures for an already-bloated federal government. As soon as that huge increase in cost is revealed, it is expected that Medicare for All would fail to get any serious support in the Senate. As a result, in my opinion, UnitedHealth Group remains a great near-term buy, despite profit taking last week.

This reticence to buy a good stock reminds me of how health care stocks went into the dumpster back in September 2015 when candidate Hillary Clinton promised to stop “price gouging” by pharmaceutical and biotech companies if elected. First of all, she was not elected, and also, if elected, she may not have had the power to pass her plans through Congress, so it’s usually a mistake to anticipate political changes years in advance. The market tends to panic first and think later, giving us a great buying opportunity.

Business Confidence is Picking Up in the Spring

Today’s lower interest rate environment is starting to improve business confidence. For example, the National Association of Home Builders (NAHB) sentiment index rose to 63 in April, up from 62 in March. The NAHB index peaked at an 11-year high of 70 back in May then dropped to 56 in December and has been improving steadily since then. As the weather improves, more potential homebuyers emerge. The fact that homebuilder sentiment is improving bodes well for improving GDP growth.

The Fed announced on Tuesday that manufacturing output was flat in March and declined at a 1.1% annual pace in the first quarter. Wood products and auto parts declined over 2% in March, but as the construction and automotive sectors recover in the spring, manufacturing output should also recover.

On Wednesday, the Fed released its Beige Book survey, in which all 12 Fed districts reported “slight-to-moderate” economic activity in March and early April. All 12 districts also reported sluggish sales at retailers and auto dealers. Agriculture conditions were weak and there were continued concerns about the Midwest flooding, heavy snow, and the likelihood for more flooding as the mountain snows melt.

Home sales and tourism were the bright spots in the Beige Book survey in the “few” Fed districts that reported improving economic conditions. Overall, the Beige Book survey will likely cause the Federal Open Market Committee (FOMC) to remain “patient” and to hold off on any key interest rate increases.

The best news for GDP growth last week was that the Commerce Department reported that the trade deficit continues to shrink. In February, it reached the lowest level in eight months, declining 3.3% to $49.4 billion, vs. a revised $51.1 billion deficit in January. In February, exports rose 1.1% to $209.7 billion (a 4-month high), while imports rose just 0.2% to $259.1 billion. A 60% surge in commercial aircraft shipments and a 16% surge in soybeans were largely responsible for the export surge. The trade deficit in the first two months of 2019 is 7.6% lower than in the same period in 2018. However, Boeing’s 737 Max woes are expected to show up in the March statistics, so the recent trade gains may be fleeting.

The U.S. trade deficit with China declined to $30.1 billion in February, down from $33.2 billion in January, and the trade deficit with the European Union (EU) hit a three-year low in February.

Booming domestic crude oil production and rising U.S. crude oil exports are also helping to reduce the U.S. trade deficit. You may wonder why crude oil prices continue to rise as U.S. crude oil production soars. One reason is seasonal, since worldwide demand rises in the spring. Other reasons include a brewing civil war in Libya, sanctions on Venezuela, and the expiration on U.S. waivers on imports of Iranian crude oil. It now looks like crude prices may remain high through the summer months.

These higher gasoline prices helped boost retail sales in March. The Commerce Department announced on Thursday that retail sales soared 1.6% in March, the biggest gain in 18 months, substantially above expectation of a 1.1% rise. New vehicles sales surged 3.1% and gas station sales soared 3.5%. Excluding vehicles and gas stations, retail sales still rose a robust 0.9%. Overall, there is no doubt that improving spring weather helped to boost March retail sales, which bodes well for first-quarter GDP growth.

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.*


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 intended as an offer or 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.

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 of any offer 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 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 you. 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. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

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 intended or 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. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

Marketmail Archives