June 5, 2018

Growth. It’s what everyone strives for. It could be personal or professional growth. It could be creative or intellectual growth. It could be growth of popularity or influence. Since we deal with investing, naturally we discuss the growth of our wealth. Preservation of capital is often cited as a main aim of investors and investment managers, but I bet pretty much every investor is more interested in seeing their wealth grow.

While we are on the subject, smooth consistent growth makes people happier than choppy ups and downs. What could be better than sitting back and watching your portfolio grow 1% a month, 12% a year? Who wouldn’t be happy with returns like that? But what if you had to withstand daily volatility of a plus or minus 3% every day? Some might opt out of that roller-coaster in favor of a tiny return of 0.02% a day – two basis points. Those daily baby steps would deliver a compounded return of about 5.5% a year.

I think by now, we all know that the growth of most portfolios really happens in spurts and pops. There are no such portfolios with smooth and consistent daily growth. Everything ebbs and flows. That’s just how things work. Let’s take this past week’s market performance as an example. Even in a four-day holiday-shortened week, it was a typically rocky ride, with significant up and down days. But when all was said and done, the week was just an average one. The S&P 500 Index rose about 0.5% for the week.

This points out an important concept to keep in mind – which I harp on all the time. The daily din of financial media and performance numbers is just that – a daily din. It’s noise. When all is said and done, people generally measure their portfolios over longer time frames, like 12 months, or five years, or more.

The important thing is that market leadership and weakness tends to unfold from little “disruptions” that can turn into “landslides” or shockwaves that can cause avalanches. Small sector shifts can turn into big sweeping trends. Those investors who wish to be at the forefront of superior portfolio performance will pay attention to the smaller moves and how they fit into the bigger picture.

Small Signals Often “Echo” Longer-Term Trends

This past week saw some nice movement in the sectors that echoes a much longer trend. First off, Real Estate powered up +2.13% last week. We haven’t seen a surge like that in Real Estate in quite a while. It’s worth taking note of this sector, to see if a larger trend develops. What caught my eye, however, is that Information Technology also shot higher, posting a +2.05% performance for the week. Infotech has been neck-and-neck in competition with the Energy sector for months now. This past week saw a continued competition with Energy. Recent high-flying stocks were hit with a wave of profit-taking amid the continued volatility of crude oil. While Energy recovered some, Infotech took the lead once again.

The “echoes” I refer to can be seen in the charts below. It should be no surprise that Information Technology is the clear winner for 1-year performance at +29%. But look at the 5-year figure. The S&P 500 Infotech Index is up +145.6%! It makes looking at the sector’s day-to-day variance seem almost silly.

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

Further echoing strength of the past, look at the top 10 industry performers. Four out of the 10 reside in the Information Technology sector, but that’s not what interests me most. Look at the 5-year performance figures. Internet & Catalog Retail grew +432% in 5 years and an astounding +1,774% in 10 years.

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

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

If I tell you that daily performance swings seem like a waste of time, why do I spend so much time each week chronicling the weekly performances of the sectors? The truth is that the big (long-term) trends generate the most money. And the most money is made when people get in early. By looking at each week to see what sectors could develop into those monstrous sweeping trends, we have a better chance of being in on the ground floor when things get ready to blast off. Hats off to you if you were one of those lucky few who paid attention when Internet & Catalog Retail was the breakout industry 10 years ago.

Of course, we can look back now and say, “Well, of course, the big growth of the market was in Internet stocks! Look at the FAANG stocks!” But paying attention early, when a trend reveals itself, is why I scour the sectors each week. This could be the week that signals the next 10-year boom for a sector. It may even be Real Estate, even though I would say that’s unlikely, as the worst performing industry of all was Real Estate Management & Development (along with Energy Equipment & Services). Who really knows? No one does, but it pays to take heed. The next massive trend may just have gotten underway.

About The Author

Jason Bodner

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*


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