by Louis Navellier

June 8, 2021

I was happy to see that Zoom Communications (ZM) announced on Tuesday that its fiscal first-quarter revenue surged 191.3% to $956.2 million compared with the $328.2 million it reported in the same quarter a year ago. During the same period, the company’s earnings soared 722.2% to $227.4 million, or 74 cents per share, compared with $27 million or 9 cents per share last year. Excluding extraordinary items, Zoom’s operating earnings were $1.32 per share. The analyst community was expecting revenue of $910 million and operating earnings of 99 cents per share, so the company posted a 5.1% revenue surprise and a 33.3% earnings surprise. For the fiscal second quarter, Zoom provided both revenue and earnings guidance that was higher than analyst estimates. The company is a market leader, and its positive fiscal first-quarter surprise and bullish second-quarter guidance bode well for the overall stock market environment.

I should add that the Reddit crowd resurfaced last week, squeezing short sellers in AMC Entertainment and other “meme” stocks. These dramatic short squeezes just demonstrate how illiquid the stock market can be and how Citadel’s algorithms cannot handle any significant surge in trading volume. This bodes well for June’s Russell realignment, since it should push trading volume up for many good growth stocks.

Navellier & Associates owns Zoom Communications (ZM). We do not own AMC Entertainment (AMC). Louis Navellier and his family own Zoom Communications (ZM) personally via Navellier managed accounts.

How Will the Global Monetary Inflationists Handle REAL Inflation?

Due to ongoing supply chain bottlenecks and surging global demand, inflation is now a global problem. The Organization for Economic Cooperation & Development on Wednesday announced that consumer prices in its 36 nation members rose at an annual pace of 3.3% in April, the largest increase since October 2008. In the Group of 20 (G20) countries, inflation is even hotter, running at a 3.8% pace through April.

Last Tuesday, a group of us at Navellier had a conference call with our favorite economist, Ed Yardeni – appropriately using ZOOM technology. It seemed to Ed, as well as to us, that most modern economies – most of Europe, Japan, and now the U.S. – are using Modern Monetary Theory (MMT), which includes almost unlimited money creation while pushing interest rates down to zero to minimize the cost of debt service. It will be interesting to see how these countries  practicing MMT will respond to rising inflation. Even China now seems ready to jump on the MMT bandwagon to keep its economy growing.

China’s official purchasing managers’ index (PMI) slowed a bit to 51 in May, down from 51.1 in April. Some Chinese manufacturers have a unique way of dealing with surging raw material prices, namely refusing to accept new orders, and considering shutting down operations. According to The Wall Street Journal, the hope among many Chinese manufacturers is that if they delay orders or slow production, they will be able to ride out the price rise without major losses until commodity prices normalize or global demand ebbs. Naturally, this is a dangerous strategy, since customers can look for other suppliers, which will likely help boost business in emerging rivals like Indonesia, Malaysia, South Korea, and Vietnam.

A strong Chinese yuan is also starting to impact China’s competitiveness. The People’s Bank of China is now forcing Chinese banks to boost their level of foreign currency reserves from 5% to 7%, effective June 15th in the first reserve rate hike since 2007. In the past year, the yuan has risen approximately 13% against the U.S. dollar. There is no threat that China will devalue its yuan soon, but by boosting reserves of foreign currencies, China hopes the yuan will naturally weaken, relative to its major trading partners.

The Friday Jobs Report Was Anemic Once Again, But it is a Woefully Incomplete Estimate

On Friday, the Labor Department announced that 559,000 payroll jobs were created in May, which was substantially below the economists’ consensus expectation of 675,000 jobs. This is the second month in a row that the Labor Department has been substantially below the ADP private payroll report, which is raising some eyebrows, since ADP does actual payroll processing and is historically more accurate.

The Labor Department revised its April payroll figure up to 278,000 from the 266,000 previous estimated last month. Frankly, I expected a larger revision than that, but the good news is that the unemployment rate declined to 5.8% in May, down from 6.1% in April. Average hourly earnings rose 0.5% in May to $30.33 per hour and hourly earnings have risen 2% in the past 12 months. The economy still has almost eight million fewer workers than pre-pandemic, so filling that gap is obviously one of the Fed’s top goals.

In February 2020, the labor force participation rate was 63.3%, but in May 2021 it was only 61.6%, so it will be interesting to see if all the jobs lost since the pandemic will eventually return. Due to massive productivity gains since the pandemic, it is possible that some jobs will never return. It is also possible that some older workers have decided to retire, which would naturally lower the labor participation rate. For younger workers, as soon as the supplemental unemployment benefits are lifted in all states, I suspect that many more idle workers, now collecting unemployment insurance, will return to the workforce.

In sharp contrast to the Labor Department totals, ADP announced on Thursday that 978,000 new private payroll jobs were created in May, which was substantially higher than economists’ consensus expectation of 680,000 jobs. ADP also revised April’s private payrolls down to 654,000, down sharply from 742,000 initially reported. Leisure and hospitality posted the largest sector gains with 440,000 private payroll jobs. Overall, the service sector gained 850,000 jobs in May, while manufacturing created 128,000 private payroll jobs. Naturally, the strong May ADP report makes one question the much weaker Friday report.

The Labor Department also announced on Thursday that weekly jobless claims declined to 385,000 in the latest week, down from a revised 405,000 in the previous week. Unfortunately, continuing claims rose to 3.771 million compared with a revised 3.602 million in the previous week. Interestingly, California, Illinois, Kentucky, and Pennsylvania all reported higher initial unemployment claims, so even though weekly unemployment claims have fallen for five straight weeks and are now at a 14-month low, there are still some structural unemployment issues causing continuing unemployment claims to keep rising.

Turning to the ISM activity reports, the Institute of Supply Management (ISM) on Tuesday announced that its manufacturing index rose to 61.2 in May, up from 60.7 in April. The new orders component improved to 67.6 in May (up from 64.3 in April). Clearly, current production bottlenecks persist, so new orders are piling up, due to ongoing supply shortages. Overall, the manufacturing report was positive.

On Wednesday, ISM announced that its non-manufacturing (service) index slipped to 62.7 in May, down from its all-time high of 63.7 in April. Since any reading over 50 signals an expansion, the May reading is very strong. The supplier deliveries component surged to 66.1 in May (up from 61 in April), while the prices component rose to 76.8 in May (up from 74 in April). This is signaling that higher service costs are likely forthcoming. Fully 16 of the 17 service industries that ISM surveyed expanded in May.

Finally, the Fed’s Beige Book survey was released last Wednesday in preparation for its next Federal Open Market Committee (FOMC) meeting on June 15. The survey noted that economic growth increased at a “moderate pace” and that vaccination rates, as well as states lifting restrictions, helped to spur more economic growth. The Beige Book survey also cited brewing inflation from wage pressure as well as higher prices for goods. Specifically, the survey said, “Strengthening demand…allowed some businesses, particularly manufacturers, builders, and transportation companies, to pass through much of the cost increases to their customers.” On labor costs, it said: “Overall, wage growth was moderate, and a growing number of firms offered signing bonuses and increased starting wages to attract and retain workers.”

I should add that the Atlanta Fed revised its second-quarter GDP estimate up to a 10.3% annual pace, up from a 9.3% annual pace previously. The Atlanta Fed will next revise its GDP estimate today (June 8th).

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
What Would Happen if the Fed Tapers?

Sector Spotlight by Jason Bodner
A “Summer of Love” Likely Awaits Unloved Growth Stocks

View Full Archive
Read Past Issues Here

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.