Small Stocks Clearly Outperformed

Small Stocks Clearly Outperformed the Blue Chips Last Quarter

by Louis Navellier

April 6, 2015

The first quarter turned out to be the “revenge of the small stocks,” a scenario I have written about here in recent weeks. Specifically, I’ve been expecting a “seismic shift” in stock market leadership due in large part to a strong U.S. dollar limiting the earnings of many large-cap multinational stocks in the S&P 500.  In the quarter just past, the blue chip indexes were basically flat – with the Dow down 0.3% and the S&P 500 up 0.4% – but the small-stock Russell 2000 rose 4.0% last quarter and the tech-heavy NASDAQ rose 3.5%.

Labor Department Estimate ImageThe biggest news last week came on Friday, when the market was closed and the Labor Department announced that only 126,000 new payroll jobs were created in March, substantially below the consensus estimate of 243,000 and the first time in 12 months that the economy failed to create at least 200,000 new payroll jobs in a single month. After the downward revisions to January and February, the economy created 591,000 payroll jobs in the first quarter, down from the 973,000 payroll jobs created in the fourth quarter.

My bottom line is that the March payroll report and the downward revisions in January and February will give the Fed plenty of excuses not to increase key interest rates.  I expect that the stock market will rally this week on the expectation that the Fed will delay rate increases for the foreseeable future. (The fed funds futures market is now predicting that there will be no Fed interest rate hike during all of 2015.)

In This Issue

I’ll have more details about the reasons for March’s job declines in my Stat of the Week column below, but first Ivan Martchev will cover the advance indicators (the dying canaries) of China’s slowdown and his latest views on Master Limited Partnerships (MLPs). Gary Alexander’s Growth Mail covers the tech sector and the likelihood that Moore’s Law can continue delivering growth and wealth in the next decade.

Income Mail:
Another Dying Chinese Canary
by Ivan Martchev
Intriguing MLP Insights
Bill Gross’ Trade of the Day

Growth Mail:
Tech Breakthroughs Should Continue to Fuel Global Growth
by Gary Alexander
Moore’s Law Explains it All
Publishing Has Been Revolutionized

Stat of the Week:
Only 126,000 New Jobs (or Fewer) Were Added in March
by Louis Navellier
Most Other Economic Statistics Seem “Flat”
Global Economies May Surpass U.S. Growth Soon

Income Mail:

Another Dying Chinese Canary

by Ivan Martchev

Back in the day before there were electronic sensors, miners would carry caged canaries down into the mine tunnels with them. If methane or carbon monoxide leaked into the mine – both of which have no odor and are undetectable by humans – the gases would kill the canaries before killing the miners, signaling that the miners should exit the mine immediately.

Inspired by the poetic cruelty of this ancient practice, I wrote a piece here on April 14, 2014 called “Two Canaries for a Chinese Coal Mine.” The two canary stocks were Soufun Holdings (SFUN) and Noah Holdings (NOAH). The first is a real estate listing portal that makes money on the high turnover of real estate in China – typical for a real estate market in bubble mode, which China had just begun to experience in its third downturn in seven years. The latter is a specialty finance company that repackages shadow banking loans – a dubious practice in China’s shady financial markets – and sells them to wealthy customers. These loans carry much higher yields than regulated deposit rates. While not quite like AAA-rated subprime mortgage CDOs that wiped out so many naive institutions in the U.S. market back in 2007 and 2008, such shady financing practices are directly leveraged to the problematic use of credit in China.

In my January 2015 article, I included a third canary stock – car-marketing website Bitauto Holdings (BITA) – as a second derivative of the Chinese overdue economic slowdown brought on by an unravelling real estate market at a time of record leverage in the Chinese financial system.

We need such canary indicators since most of China’s economic data is not particularly reliable and there is a lot of meddling in the economy by the Chinese government, which misguidedly believes that it can arrest any downturn with its interventionist policies. It cannot. It can only postpone the adjustment process brought on by mal-investment and years of unproductive policies.

SouFun Holdings Ltd. Chart

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

At the time Soufun became a canary indicator last year, the shares were at $13.50. It closed at $6.18 last week. I am not sure how much lower it can go but I am sure it can go lower. Since the ADRs were listed it had traded under $2 before it went parabolic at the height of the Chinese real estate bubble. Since this time China real estate prices made an all-time high they can deflate for a while longer.

In a way, SFUN reminded me of CondoFlip.com, which was meant to facilitate the same dubious practice in Miami back in 2007. Right now the CondoFlip.com site no longer exists but the URL does redirect to a site for gifted Miami real estate agents who can help you with the re-inflating bubble there.

Canaries ImageMy latest canary indicator is now beginning to give troubling signals. Bitauto managed to rebound into early March and then had a $30 sell-off on margin pressure due to the higher spending needed to stave off competition, along with weak guidance. Combined with a further slowdown in the car market, this decline could have dramatic dimensions. This canary is not dead yet, but it surely is not flying and it may already be kicking on the floor of its cage. If I were a miner without a CO sensor, I would not be taking the fact that the canary is lying on the floor of the cage lightly.

Then we have Noah Holdings which is still in flying mode as a canary indicator. It had a great earnings report recently and it shows a growing platform of wealth management. Noah also looks like it is branching out in internet financing and asset management (from the latest earnings release):

“Total number of active clients for the full year 2014 was 9,010, a 39.8% increase from 2013. The aggregate value of wealth management products distributed by the Company in the full year 2014 was US$10.3 billion (approximately RMB63.4 billion), a 42.4% increase from 2013. Of this aggregate value, fixed income products accounted for 63.5%, private equity fund products accounted for 18.9%, and other products, including mutual fund products, private securities investment funds, equity linked products and insurance products, accounted for 17.6%. The average transaction value per client for the wealth management business for the full year 2014 was US$1.1 million (approximately RMB7.0 million), a 2.0% increase from 2013.

“Coverage network as of December 31, 2014 included 94 branches and sub-branches covering 63 cities, up from 91 branches and sub-branch offices covering 60 cities as of September 30, 2014. The number of relationship managers was 779 as of December 31, 2014, up from 569 as of December 31, 2013 and 775 as of September 30, 2014.”

There seems to be better diversification in asset management and internet finance but upon a closer look it seems like those are still leveraged to real estate and wealth management products. In the end, such channels still distribute a lot of repackaged shadow banking loans. When that canary indicator falls on the floor of the cage, I think the macro data coming out of China will be pretty dismal, which I expect to happen towards the end of 2015.

China is in a weird position. The message of the commodity markets – like oil and iron ore – and the canary indicators listed above is better than that of the Chinese stock market, which has gone parabolic, based on leverage. It appears that the Chinese are leaving the real estate market, which no longer offers opportunities for speculation and are doing this with stocks at a time when economic data is deteriorating.

Shanghai Composite - Monthly Nearest OHLC Chart

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

Due to this speculative surge, which is not based on profit growth but on margin trading, the Chinese “A” share market has almost doubled in a year. I used to say that China has a peculiar stock market because the economy has tripled since 2007 while the stock market (a year ago) traded at a third of its peak. Something is definitely wrong with that picture as rapid GDP growth did not produce rapid profit growth.

Due to the explosion of margin trading brought on by an unraveling real estate market, I can no longer say that. This is truly surreal. Now, because of margin trading, I am convinced the index will crack, like it did in 2008, for reasons elaborated earlier in this writing. The next decline could be worse than in 2008.

I think we have less than 12 months for this play out.

Intriguing MLP Insights

Having attended the Spring 2015 ETP Trading & Investing Forum in the New York Athletic Club last week, I came away with some interesting insights that are highly relevant for investors interested in the MLP asset class.

Here is my take on the energy-related MLP sector.

Alps Alerian MLP ETF - Weekly OHLC Chart

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

Who is to say how low oil can go? It is a factor of supply and demand. If supply gets stronger and demand gets weaker, the price can go lower. Obviously, the oil price (in red) has crashed due to record U.S. output and global overproduction as well as weak global demand; but that does not mean the MLP sector is dead.

There are three types of MLPs: The upstream, midstream, and downstream kinds. The upstream is the closest to the hole in the ground that pumps oil and it is most leveraged to the price of oil. If upstream MLPs have high production costs and record financial leverage, they are in trouble.

That leaves us with midstream and downstream MLPs – the pipelines, storage facilities, refineries, etc. They are all doing great as the price of oil is not what drives their profits; it is the volume (surging) and the product spreads (good). Some of those “volume” and “spread” MLPs have been hit for apparently no reason while they operate on record profits at the moment.  I am keenly aware that high-cost oil volume should decline if the oil price is above the producing asset, but we have yet to see that. The risks now are concentrated in upstream MLPs and railcar volume (which are used to ship high-cost oil due to the lack of full pipeline coverage).

One way to see how this difference between upstream and downstream is playing out is by using the separately traded parts that were formerly part of the same company like Marathon Oil (MRO) and Marathon Petroleum (MPC). While not MLPs, MRO and MPC are examples of pure upstream and downstream companies that used to be part of an integrated oil company before the split. An MLP is just a corporate structure aimed at the avoidance of the double taxation of dividends so that it passes income and depreciation charges directly to the limited partners. The corporate structure might be different, but the underlying business is the same.

Marathon Petroleum Corporation - Marathon Oil Chart

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

I remember this split in 2011. Everybody at the time thought how brilliant MRO was for splitting the remaining business in the face of MPC to increase the leverage to the price of oil. Well, it has turned out to be exactly the opposite situation where MPC has been doing well relative to MRO, which is now a giant exploration and production company. “Downstream” in this case has been much better than “upstream.”

When it comes to MLPs those upstream/downstream dynamics may continue to play out in the same way in 2015. The MLP sector is not dead. It just had a big shakeout.

Bill Gross’ Trade of the Day

“Very bullish on Treasuries and very bearish on German bunds,” said Bond King Bill Gross last week on news of the weak employment report. S&P futures got slammed hard (20 points) even though the stock market was closed for Good Friday and Treasury yields saw a strong push lower in early Friday trading.

Thirty Day Fed Funds - Daily OHLC Chart

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

Being “bearish on bunds” is not that outlandish as they are at 20 basis points in yield (0.20%) while U.S. Treasuries were at 1.90% before the weak March employment report (green line). They have been as low as 1.65% this year. I am on record here in Income Mail (in early March) calling for a fresh all-time low later on in 2015 (below the 2012 low of 1.39%), based on the global deflationary backdrop driven by issues in both Europe and China. When that will happen is the trillion dollar question, but we have backed off quite a bit from the March high of 2.26% in Treasury yields and we should be below 1.75% this week as investors digest the weak employment data.

The December 2015 fed funds futures contract (ZQZ15) is taking away rate hike probabilities as we speak. At 99.62 (the close last week, in black), ZQZ15 calls for a fed funds rate of 38 basis points in December 2015 (i.e., 100 minus 99.62). The fed funds futures contract has been rallying since early March as 10-year note yields have been dropping from a reaction high of 2.26% after the February employment report.  At that time the December fed funds futures were calling for two fed rate hikes.

The economy is clearly slowing, but it has to be mentioned that the economy has been somewhat slower in the first half of the past two years than it was in the second half. Could it be two bad winters in a row? Sure could. But this time around the global economy is weaker so any Fed rate hikes feel wrong.

The Fed is likely to go ahead with one rate hike for the sake of making the point that zero interest rates at the short end are not a permanent thing, but more rate increases are difficult to see at the moment.

Growth Mail:

Tech Breakthroughs Should Continue to Fuel Global Growth

by Gary Alexander

“When a woman in Outer Mongolia answers her smartphone, she’s using a device a million times cheaper and a thousand times more powerful than a supercomputer from the 1970s.”

— From “Bold: How to Go Big, Create Wealth and Impact the World” by Peter Diamandis and Steven Kotler

In 1915, the first transcontinental telephone call was placed by Alexander Graham Bell in New York to his old assistant Thomas A. Watson in San Francisco. The call required five operators and 23 minutes to set up.  When coast-to-coast calls were made available to the public a century ago, a three-minute call cost $20.70, plus $6.75 for each additional minute.  At the time, the median annual household take-home pay was $13 per week, so a week’s pay couldn’t even earn you a three-minute coast-to-coast phone call.

Today, after you pay a reasonable set-up fee for a smart phone and a service plan, a coast-to-coast phone call of unlimited length is essentially free. You can even send photos, documents, or videos along;, or you can keep your smiling face fully framed via Skype; you can even download an array of cool applications.

Here are three other technological breakthroughs that began on this date in the last century:

  1. On April 7, 1927, Bell Labs created the first televised broadcast – a 2” x 3” image of Secretary of Commerce Herbert Hoover reading a speech in Washington, D.C.  A few dozen reporters witnessed the transmission in New York City. Hoover read the speech into a telephone so his faraway viewers could both see and hear him. The TV signal sent 18 images per second. (By contrast, today’s omnipresent HDTV screens can be several feet wide, with 2.1 megapixels.)
  2. On April 7, 1964, IBM introduced its System 360 computer at the New York World’s Fair (Expo ’64).  IBM ended up installing 25,000 “Space Age” System 360s by1969.  (For more details on the IBM story, I wrote about the 50th anniversary of System 360 last year at this time.) Today, many smart phones can store 64 gigabytes of data – or 1,000,000 times more storage capacity than the Apollo Guidance Computer on Apollo 11, which landed on the moon.
  3. On April 7, 1969 the Internet was conceived (though not yet born) when Steve Crocker of UCLA sent out his famous Request for Comments (RFC) from the “Internet Engineering Task Force” (IETF) and Internet Society, the technical and standard-setting bodies for the Internet.

Telephones, television, computers, and the Internet grew from these humble origins to dominate our lives; and we’re now about to celebrate the 50th anniversary of the Law that explains these electronic miracles.

Moore’s Law Explains it All

Integrated Circuit ImageMoore’s Law was first codified in the April 19, 1965 issue of Electronics Magazine. Gordon Moore, the Director of R&D for Fairchild Semiconductors, tracked the cost and computing power of components per integrated circuit for the previous five years and extrapolated that phenomenal rate of growth to continue from 1965 to 1975. At the 1975 IEEE conference Moore (by then one of the founders of Intel) confirmed that his 1965 prediction had come true in terms of faster, cheaper semiconductor memory; but at that talk in 1975, he altered his prediction to a doubling every two years, rather than every year. (Some observers split the difference and now define Moore’s law as an 18-month doubling of efficiency in terms of price.)

Moore’s prediction – like President Kennedy calling for a man to reach the moon and return by 1969 – drove the industry to turn this Law into a self-fulfilling prophecy. This seemingly-impossible perpetual-growth formula isn’t really a cosmic law – like gravity or “no smoking” signs – it’s more like a prescient observation; but Moore’s Law has proven true for over 50 years: Integrated circuit density has roughly doubled every 18-24 months, while costs are cut in half.  What are the chances this trend can continue?

The “law of big numbers” basically says that large increases are possible, and indeed fairly common, in well-designed small businesses that fill an important market niche; but 41.4% annual growth (which works out to a doubling every two years) becomes increasingly unlikely as corporations grow in size.  For decades, the prophets of doom have said that Moore’s Law will eventually surrender to the law of big numbers; but it hasn’t happened yet.  Forbes Publisher Rich Karlgaard wrote in that magazine’s March 23 edition that “Since 2005, as we race toward 25 billion transistors per chip, the curve has gone almost straight up, heading toward infinity.”  He cites a new book, “Bold: How to Go Big, Create Wealth and Impact the World,” by Peter H. Diamandis and Steven Korder, which examines several “exponential technologies” that will profit from Moore’s Law, including the greatest human challenges – aging, disease, and poverty.

The authors of “Bold” say that “recognizing when a technology is exiting the trough of [overhype] and disillusionment and beginning to rise up the slope of enlightenment is critical for entrepreneurs” and “the telltale factor is the development of a simple and elegant user interface – a gateway of effortless interaction that plucks a technology from the hands of the geeks and deposits it with the entrepreneurs.”

Here’s an example: Blogs and Web magazines (Webzines) – like MarketMail – are replacing newspapers.

Publishing Has Been Revolutionized

I’ve been in the publishing business for 50 years now – dating back to setting linotype for my college newspaper. Today, most publications arrive via hand-held device, laptop, or desktop computer. I live on a remote island in the Pacific Northwest. I can click a mouse and send Growth Mail to Navellier analysts on both coasts every Sunday night. After a thorough review, MarketMail is sent out to you early Tuesday morning at basically no cost or time lost for typesetting, printing, paper, ink, mailing, (or bad weather).

Last week, I had reason to look for an article I wrote for Liberty magazine in the mid-1990s. I had no hard copy at home, so I found it online and printed it out at home. That got me to thinking how I wrote and submitted that article some 20 years ago.  The Internet was a rumor at the time, but not yet a fact for most writers like me. I had to research in the local libraries and call some sources – long distance – to verify facts. Then, when I finally finished my article, I had to print it out and fax it to the publisher.

Typewriter ImageThe editor and publisher then made changes, faxed them back, called me for verification, then had a typist re-type the Whole Darn Thing for publication. Then there was a one-month turnaround for copy editing, galley proofs, printing, and mailing (second class) of the magazine. The text was two months old when readers finally picked up the ink-stained copy. I saw reader reactions a month later, in letters to the editor.

Today, an article can go viral in minutes. Thousands will forward YouTube videos (or unsubstantiated allegations) in an instant.  Chat rooms will deliver “letters to the editor” in nanoseconds.  We can argue the validity of these rapid changes, but they have certainly turned publishing into a Brave New World:   Print newspapers are dying right and left, replaced by online editions or pre-digested syndicated content.

Newspaper Advertising Revenue Chart

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

Publishing is just one more victim of “Creative Destruction” (economist Joseph Schumpeter’s term) or the trend toward “Smaller Faster Lighter Denser Cheaper” (the title of Robert Bryce’s fine 2014 book).

Moore’s Law became so popular that it sired a series of corollaries, like Koomey’s Law, which posits that the battery needed for a fixed level of computing will shrink along the order of Moore’s Law, giving us essentially wire-free computing devices in the near future.  There is also a Kryder’s Law for cloud-based capacity, and the Shanon-Hartley Theorem, which posits rising data transmission speeds via fiber optics.

OK, here’s Alexander’s Theorem: Each person’s ability to process data is limited by the capacity of their brain and backside, i.e. as more people start blogging, the readership-per-blog will inevitably decrease.

What are the investment implications here? The tech-heavy NASDAQ index still hasn’t closed above its peak readings from 15 years ago, but NASDAQ is 634% above where it was on this date in 1993 when the Internet was well and truly born. (On April 30, 1993, CERN placed the Worldwide Web software in the public domain.)  That compares with a mere 368% gain in the more sedate S&P 500 in the same time frame.  (This does not mean that every tech stock is a good buy – most aren’t. You have to have more expertise in technology than in most sectors, or else you must listen to tech stock experts you can trust.)

Over the years, the analysts at Navellier have closely followed the technology stock universe. As of last December 31, the largest single stock position in most of the Navellier portfolios that have “Growth” in their title was a tech stock, including Micron Technology (MU) in the Large-Cap Growth portfolio, Skyworks Solutions (SWKS) in Mid-Cap Growth, Biogen (BIIB) in Global Growth, and BT Group (BT) in International Growth.  (Of course, portfolio contents are subject to change during the quarter.)

At Navellier, analysts continue to search for the best growth opportunities in this new Age of the Internet, but the most important fact to remember is that technology will continue to do what it has done for the last two centuries – improve the daily life of most people on earth and improve the productivity of us all.

Stat of the Week:

Only 126,000 New Jobs (or Fewer) Were Added in March

by Louis Navellier

In addition to the disappointing jobs report on Friday, on Wednesday, ADP reported that only 189,000 new private payroll jobs were created in March, the lowest monthly rate of job creation reported by ADP in 14 months.  Since ADP actually does payroll processing, the latest ADP report is a clear signal that private payroll job growth is definitely slowing. Weather will be cited as the primary excuse for the weak household and payroll surveys, but weather alone cannot fully explain the dramatic decline in March.

The biggest surprise came from the dramatic downward revisions of the January and February payroll figures, which were revised down by a cumulative 69,000 jobs (January declined 31,000 and February declined 38,000).  The main problem is that too many new jobs are temporary, so when ambitious people in need of more household income begin their second temp jobs, they get counted twice. That can throw off the unemployment rate. Then, when statisticians discover that two part-time Social Security Numbers match, the Labor Department is forced to revise the jobless rate and the previous monthly payroll figures lower.

This means that next month’s accounting revision could push the March jobs totals below 100,000.

Most Other Economic Statistics Seem “Flat”

In the other economic news released last week, the Commerce Department announced that consumer spending rose by a scant 0.1% in February, well below economists’ consensus estimates of a 0.3% increase.  In January, consumer spending declined -0.24%, so it looks like the first quarter’s consumer spending may turn negative.  The Atlanta Fed is now forecasting only 0.1% first-quarter GDP growth but they tend to be conservative, so I would say that a 1% annualized first-quarter GDP is more likely.

Train ImageSpeaking of GDP growth, on Thursday the Commerce Department announced that the U.S. trade deficit declined by 17% in February to its lowest level since 2009 as exports declined 1.6% to $186.2 billion and imports declined 4.4% to $221.7 billion.  This represents the biggest drop in imports in almost three years and is largely attributable to declining crude oil imports.  A lower deficit could boost first-quarter GDP growth, but the sharp drop in exports remains a longer-term concern.  Just how much the West Coast port slowdown distorted the trade numbers is a bit uncertain, but clearly the labor slowdown played a role.

On Tuesday, the Conference Board reported that its consumer confidence index rose to 101.3 in March, up from a revised 98.8 in February. This was much better than economists’ consensus expectations of 96.9. In contrast, the Conference Board also reported that consumer’s present situation index declined to 109.1 in March, down from 112.1 in February. The primary reason that consumer confidence improved in March was that consumers were more optimistic about their near-term prospects for both employment and higher income. In addition, consumer confidence sometimes rises in the spring, especially after a harsh winter; so some of this rising confidence level could be seasonal (or psychological) in nature.

On Wednesday, the Institute of Supply Management (ISM) announced that its manufacturing index declined to 51.5 in March, down from 52.9 in February, the fifth straight monthly decline. The ISM new orders index declined to its lowest level in almost two years, partly due to the West coast port slowdown.

Last August, the ISM manufacturing index was at a robust 58.1, a three-year high. Since then, a strong U.S. dollar has made U.S. manufacturers less competitive. Only 10 of the 18 industries that ISM surveyed reported an expansion in March, down from 14 industries in January and 15 industries last August.

Global Economies May Surpass U.S. Growth Soon

While U.S. manufacturing activity is slowing down, some of our major trading partners are growing their manufacturing sector.  On Wednesday, Markit reported that its purchasing managers index (PMI) for the euro-zone rose to 52.2 in March, up from 51 in February.  Although manufacturing in the euro-zone is benefitting from the euro’s 22% decline relative to the U.S. dollar since last June, Austria, France, and Greece all had March PMIs below 50, which signals that their manufacturing sectors are still contracting.

The other good news is that on Tuesday, the China Federation of Logistics and Purchasing reported that its official PMI rose to 50.1 in March, up from 49.9 in February.  China’s official PMI often conflicts with HSBC’s manufacturing PMI, which declined to a revised 49.6 in March.  Since any reading below 50 signals a contraction, China’s official PMI is a welcome sign.  The Chinese New Year is notorious for distorting PMI data early in the calendar year, so the HSBC manufacturing PMI is largely being ignored.

In closing, I expect crude oil prices to remain low in April due to rising crude oil inventories (the highest in 80 years) along with President Obama’s announcement that the “framework” of an Iran nuclear deal has been agreed to and that he would seek Congressional approval.  However, a wild card impacting crude oil prices is the ongoing conflict in Yemen between Saudi Arabia and the Iran-backed Houthi rebels.


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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 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 performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, 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.

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