by Jason Bodner

May 18, 2021

It’s human to want permanence — something to set and forget. I strive to lock in something permanent with the data when analyzing stocks. I like things in neat little boxes, but sometimes life has other plans.

Clearly, I’m not alone.

When NASA sent humans to the moon, they wanted a permanent reminder, so each moon mission left an American flag. But now, 50 years later, all 6 flags have been bleached bone-white by the sun’s radiation.

It appears that my stock market flags might have been bleached bone-white, too.

When the market data was disintegrating last week, I naturally was ready with a forecast. Then along came Thursday and Friday. The growth bounce…  Toxic since March, growth suddenly caught relief.

Here’s what I think is going on: Earnings season has been stunning, with nearly 90% of companies beating analyst earnings and sales expectations. The average earnings beat was north of 20%. Despite that, growth stocks have been under attack for weeks. It’s agonizing for growth investors like me.

The main culprit was inflation. Fears of vicious inflation intensified the selling of anything with a growth multiple (stocks trading at a premium because of the perception they should maintain growing sales and earnings). Investors pay up to get that growth, because – when humming full swing – it’s hard to beat.

President Biden’s tax plan – basically, to penalize high-earners with higher long-term capital gains rates, and higher corporate tax rates – was a sudden slap for growth. Dividend stocks have been getting scooped up on the assumption that higher dividend taxation is one taboo the administration won’t violate.

Tough tax talk intensified anxiety over peak earnings momentum. The fact that growth had been heavily concentrated in “stay-at-home” and tech stocks was another nail in the coffin. A reopening economy and rapid vaccination fueled demand for beaten down value stocks poised to rise in a post-lockdown world.

Things hit fever-pitch on Wednesday as the April CPI showed a +0.8% rise vs. expectations of +0.3%. That’s what Wall Street feared most. That sent NASDAQ stocks even further down the drain. On Thursday the PPI gained 0.6%, verifying that prices are rising everywhere.

Growth stocks should have kept falling, but on Friday, growth began to bounce. Investors noticed that Lumber prices continued to fall, while Iron Ore and 10-year Treasury yields were dropping too: Lumber Price ChartIron Ore ChartTen Year Treasury Bond

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

These price declines indicate that we might have hit peak inflation fears. Fear is a powerful motivator, but it only goes so far. Eventually, logic prevails. If inflation scares have climaxed, growth stocks are ready to bounce. Friday finally brought relief.

My flags suddenly look bleached out. Data has an awesome but not perfect track record.

The BMI fell hard into Thursday. But selling evaporated on Friday. BIG Money Index Chart

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

Zooming in, you can see Friday the BMI actually popped slightly higher, from 68.6% to 69.3%: BMI Chart

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

Living by data means that anticipation becomes more difficult than investing by “gut feel.” Everything is a trade-off. Keep that in mind when asking if the lows are in for growth stocks. The sudden-turn-on-a-dime of Big Money data tells me that probably yes, the growth lows are in, near-term, but I need to see confirmation from the data to be convinced. Naturally, that means that it’s difficult to time the tops and bottoms when waiting for data confirmation.

Investors looking for growth discounts might find this a great time to dip toes into the market. The highest-quality growth names have been beaten to a pulp, but, as I’ve said many times before, outlier stocks bounce hardest and highest.

I bought some great stocks on sale last week, the week before, and the week before that. Timing is always tough. I may be underwater near-term. But I know companies that grow their sales and earnings with a long history of doing so will be fine in the future. The hard part is waiting to be proven right.

The data is on my side. I looked at the MAPsignals daily stock data on Saturday morning (using Friday’s close): 559 stocks and ETFs saw unusually large trading volumes, what I call “Big Money trading.” Out of those, 107 were ETFs, leaving 452 stocks. I removed 64 stock buys and 11 stock sells. Of the 377 stocks remaining, I wanted to see what was getting bought in Big Money style but not yet high enough in price for a buy signal. I removed stocks not positive on the day, which was roughly 10%, or 37 stocks.

From there, I filtered out stocks with zero or negative sales and earnings growth over the past three years. I was left with 93 stocks. This means 25% of the stocks getting bought “under-the-surface” had excellent sales and earnings growth. In other words, the big bounce on Friday was concentrated in growth stocks.

This is how the best-of-the-best broke down by sector: Sector Table

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

That list screams short covering and bargain hunting in beaten-down growth. One day does not a market make, but it certainly feels better knowing there are data points for a growth bounce.

One final thought: Tax deadline was delayed until May 17th. It’s human nature to procrastinate and leave things until the last minute, especially when your stocks are suddenly falling. It is entirely possible that some of this growth selling was intensified to raise cash for tax bills. In an up-trending market like we’ve seen the last 12 months, it makes sense to sell the best near tax-time. When assets fall, it’s human nature to wait for a comeback. But the clock was still ticking, and this Monday the tax deadline was upon us.

My data indicated more deterioration last week – until Friday, that is. I’m committed to data, even when it changes suddenly…and especially when it changes suddenly. Ripe for the times, I remember when Tony Robbins said: “Stay committed to your decisions but stay flexible in your approach.”

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

Please see important disclosures below.

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

Important Disclosures:

Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

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.