Why I Locked in Profits in AudioCodes Ltd. This Week

I know I may sound like a broken record, but earnings season really is my favorite time of year. The reality is it helps separate the wheat from the chaff. Every company must open its books and show Wall Street how it fared during the most-recent quarter.

This first-quarter earnings season has been particularly stunning. According to FactSet, more than 60% of S&P 500 companies have released results from the latest quarter, and 86% of these companies have exceeded analysts’ earnings estimates. What’s even more impressive is that the first-quarter earnings growth rate is now running at 45.8%, up from the estimated growth rate of 23.8% at the end of March. That’s the best earnings growth rate in 11 years!

As you know, I’m a numbers guy, so I take these earnings reports very, very seriously. The reports give me the opportunity to see which companies are truly fundamentally superior, i.e., continue to boast strong sales and earnings growth and offer positive future guidance. These are the companies that I recommend across all my services, not the stocks Wall Street is hyping up that are really just the flavor of the week.

Now, on the flip side, should a company show signs of slowing earnings momentum or dwindling buying pressure, then I know it’s time to sell, even if the stock is showing big returns.

Case in point: AudioCodes Ltd. (AUDC).

I added AUDC to my Platinum Growth Club Model Portfolio back in January 2019. At the time of my original recommendation, AudioCodes was experiencing strong demand for its products, as evidenced by strong top- and bottom-line growth. Over the past few years, the company continued to post strong quarterly results and exceed analysts’ expectations, especially as the work-from-home trend heated up in the past year.

Take the most-recent quarterly report, as an example. On April 27, AudioCodes reported first-quarter earnings of $12.7 million, or $0.37 per share, on revenue of $58.8 million. That represents 62.8% year-over-year earnings growth and 13.1% year-over-year revenue growth. Analysts were expecting earnings of $0.33 per share and revenue of $57.98 million, so AudioCodes posted a 12.1% earnings surprise and a slight revenue surprise.

While AudioCodes still expects demand to remain robust in the years to come, there has been a significant drop off in institutional buying pressure recently. As you can see in AUDC’s Report Card below, it earns a lowly F-rating for its Quantitative Grade.

This drove the overall stock to a D-rating, which makes it an automatic sell. So, I recommended that my Platinum Growth Club subscribers sell the stock on Monday and lock in their nearly 200% gains in about two years.

The Quantitative Grade is something I follow very closely. It is based on a stock’s Alpha (return uncorrelated to the overall market) divided by its standard deviation (volatility). Many high relative strength, high Beta (return correlated to the overall stock market) stocks often beat the overall market. They also have lower Alphas, as their return uncorrelated to the overall market has diminished. When the stocks become more correlated to the overall stock market, their quantitative grades tend to fall.

The whole point of the quantitative analysis in Portfolio Grader is to identify high Alpha stocks that are moving independent of the overall stock market with lower volatility. Typically, high Alpha, low standard deviation stocks are benefitting from persistent buying pressure. Because AUDC’s buying pressure had become more erratic recently, its Quantitative rating fell. So, it was time to sell and move on to more high-quality stocks.

The reality is I only want to be invested in the crème de la crème, so I have no problem cutting the cord on a stock whose fundamentals are no longer up to snuff. And that was exactly the case with AUDC.

I am pleased to say that my Platinum Growth Club Model Portfolio is filled with the crème de la crème. I handpick all of my Model Portfolio recommendations from my different services – Growth Investor, Breakthrough Stocks and Accelerated Profits – so you can rest assured that you’re always invested in the best of the best.

Across all of my services I have more than 100 stocks (plus 31 LEAPS call options, or Long-term Equity Anticipation Securities, in my Power Options trading service), and each and every one boasts strong earnings and sales growth.

Of course, you don’t have to invest in all 100+ stocks. That’s what the Model Portfolio is for, which currently houses 54 fundamentally superior stocks. So, if you want to stock up on fundamentally superior stocks, I encourage you to give Platinum Growth Club a try.

As a Platinum Growth Club subscriber, you’ll have full access to all of my services, including every Weekly Update, Monthly Issue and Flash Alert, as well as exclusive Platinum Growth Club Live Chat Events (my next one is scheduled for May 17) and more!

And you really couldn’t be joining at a better time, as I am releasing two brand-new buys in the Breakthrough Stocks May Monthly Issue today. Both stocks are characterized by accelerating earnings momentum, positive analyst revisions and persistent institutional buying pressure, which makes them great additions to Breakthrough Stocks this month.

For full details, click here.

Sincerely,

Louis Navellier

Louis Navellier

Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

AudioCodes Ltd. (AUDC)

Why the Second Quarter Could Be Even Better

There’s been a lot of volatility in the market lately.

Last Friday, the Dow dropped, then rose on Monday, then dropped on Tuesday, then rose on Wednesday.

While the recent gyrations might have some investors reaching for their antacids, let me reassure you — everything is fine.

Let’s start with earnings.

With over 75% of S&P 500 companies reporting, 87% so far have beat consensus earnings expectations, with an average 23% surprise, according to FactSet.

Folks, I’ve been in this business for decades, and I don’t think I can ever remember an earnings season this strong. It is absolutely stunning.

Now, there is definitely inflation brewing, and it’s worrying a lot of investors. Lumber prices, for instance, are up 67% this year, and they’re 340% higher than a year ago. The price rise is adding about $35,000 to the cost of the average newly built home in the U.S., according to the National Association of Home Builders.

Or take cobalt, the element that has a variety of industrial purposes, including as an oxide in the cathodes of lithium-ion batteries – the type of batteries used in high-end electric vehicles. Prices for the metal climbed 40% in the first quarter.

There’s a lot of concern that we’re not going to be able to produce as much as we want to produce because of all these acute supply shortages. But that’s due to soaring demand in the U.S and abroad.

The World Trade Organization expects North American merchandise exports will grow 7.7% this year, after falling over 8% in 2020. Meanwhile China’s imports from the U.S. set a new record in the first quarter, particularly products for the construction sector.

Now, traditionally, stocks are a great hedge against inflation because if we do have inflation, it makes earnings go even higher. Certainly, putting your money in the bank doesn’t protect you against inflation. It’s why I believe the stock market remains the best game in town.

But here’s the most shocking statistic I’ve seen lately, and it comes from the Atlanta Fed. The organization’s GDPNow estimate for second-quarter growth rose to 13.6% on Tuesday, up from 10.4% last Friday.

In other words, the Atlanta Fed expects economic growth will continue to accelerate in the second quarter, not decelerate.

So, it looks like I stand corrected. I’d predicted earnings growth would peak in the first quarter of this year. But now it looks like that will happen in the second quarter!

I think it’s time to realize that we may never ever have an earnings announcement sales environment quite like this. All I can tell you folks is that this is as good as it will ever get.

So, you shouldn’t let the daily gyrations in the market distract you, especially when you’re invested in fundamentally superior stocks – like my Platinum Growth Club subscribers are.

Case in point: My Breakthrough Stocks are forecasted to post 176.4% average annual sales growth and 758.2% average annual earnings growth. Although some large flagship stocks have issued more cautious guidance, my Breakthrough Stocks are not showing any signs of slowing down.

Furthermore, the analyst community has revised their consensus earnings estimate up 7.3% in the past month, which is indicative of accelerating earnings growth and more big earnings surprises ahead.

Given the strength in small-cap stocks, I am adding two new exciting stocks to my Breakthrough Stocks Buy List, which I will release in tomorrow’s Breakthrough Stocks May Monthly Issue. One posted a double-digit earnings surprise in the most recent quarter, while analysts expect the other to have triple-digit earnings growth and double-digit sales growth in the first quarter. I lay out all the details on these stocks in the issue.

Now, I still think that the overall stock market will narrow in the upcoming weeks as the bumpy summer months approach. Fortunately, my Portfolio Grader measures the underlying buying pressure and volatility on a given stock. Just as it can help guide me when to buy a stock with explosive potential, it also allows me to tell subscribers when to sell if buying pressure ebbs and the stocks become too volatile.

Profiting from the Crème de la Crème

The bottom line is that the current economic and earnings environments are as good as it can possibly get, so I foresee continued strong appreciation for at least through July.

And I’m pleased to say that my Platinum Growth Club subscribers are perfectly positioned to benefit from these trends and much more.

You see, I have more than 100 stocks across all of my services (plus 31 LEAPS call options, or Long-term Equity Anticipation Securities in my Power Options trading service), and each and every one boasts strong earnings and sales growth.

Of course, you don’t have to invest in all 100+ stocks. If you’d rather start small, I’ve got you covered there, too. My Platinum Growth Club service comes with my exclusive Model Portfolio.

I handpick all of my Model Portfolio recommendations from my different stock services – Growth InvestorBreakthrough Stocks and Accelerated Profits – so you can rest assured that you’re always invested in the crème de la crème.

So, if you want to make sure your portfolio is “locked and loaded” with fundamentally superior stocks for the long term, I encourage you to sign up for Platinum Growth Club today.

For full details, click here.

Sincerely,

Louis Navellier

Louis Navellier

Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

How the FAANG Stocks Stack Up

Corporate earnings are having a moment right now.

About 60% of S&P 500 companies have now released results from the most-recent quarter, and 86% of these companies have exceeded analysts’ earnings estimates. FactSet also reports that the average earnings surprise is nearly 23%, which is well above the five-year average of 6.9%. The average earnings growth rate is equally impressive, currently at 33.8%.

The large tech companies known as the FAANG stocks – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL) — also recently reported earnings and hit it out of the ballpark. These companies continue to thrive in the “new normal” and offer customers an economic lifeline through e-commerce, cloud computing, digital advertising and artificial intelligence.

And despite the recent market jitters, it’s an exciting time for these major tech leaders, and for my own fundamentally superior stocks, so let’s get right to it…

Facebook (FB)

Facebook reported year-over-year sales growth of 48% to $26.1 billion, with advertising revenue up 46%, thanks in part to a 30% increase in the company’s average price for an ad. Total revenue beat Wall Street consensus estimates by 10.4%.

Earnings climbed 93% from a year prior to $3.30 per share, which crushed analysts’ expectations by 41%.

Average monthly active users climbed 4.5%, year-over-year, though the company’s users were flat in the U.S. and Canada for the second straight quarter.

The stock surged on the strong earnings report and is up over 2% over the past 5 days.

Looking ahead, Facebook expects total revenue will continue to accelerate in the second quarter, though year-over-year growth should begin to decelerate in the last two quarters of the year as the company laps periods of increasingly strong growth.

Wall Street is anticipating revenue will rise 5.9% in the coming quarter, and earnings should fall about 12%.

Amazon (AMZN)

Amazon’s first quarter net sales jumped 44%, year-over-year, to $108.5 billion and topped analysts’ estimates of $104.6 billion by 3.7%.

The company now has over a third more Prime members, or 200 million members, than it did in January 2020. Online store net sales of $52.9 billion and Amazon Web Services net sales of $13.5 billion bested analysts’ estimates.

Earnings of $15.79 per share more than tripled, year-over-year, and demolished analysts’ expectations of $9.64 per share by 64%.

The company expects second-quarter sales from $110 billion to $116 billion, which would represent from 24% to 30% growth from the second quarter of 2020. Operating income is expected to be between $4.5 billion and $8.0 billion, compared with $5.8 billion in the second quarter of 2020.

Shares soared over 2% after Amazon reported last Friday, but the stock is down nearly 4% over the past five days.

Analysts anticipate revenue will increase in the upcoming quarter to $108.9 billion, while earnings should dip to $10.99 per share.

Apple (AAPL)

Apple notched record second fiscal quarter revenue of $89.6 billion, up 54% from a year ago and 15.8% higher than analysts’ expectations.

Earnings of $1.40 per share rose 119%, year-over-year, and beat analysts’ expectations by $0.41 cents per share.

The company saw double-digit growth in all of its product categories, with iPhone sales up 65.5% from a year ago, Mac sales up 70.1% and iPad sales up 79%.

The company said it will increase its dividend by 7% to $0.22 per share and will carry out $90 billion in share buybacks.

The company didn’t provide guidance for the quarter ending in June, the CFO Luca Maestri said Apple expects to see a double-digit rise in revenue.

Wall Street is looking for Apple earnings to fall to $1.00 per share in the coming quarter, while revenue is expected to decrease to $72.4 billion.

Shares are down more than 5% over the past five days.

Alphabet (GOOGL)

Alphabet (“Google’s” corporate parent) saw revenue climb 34% year-over-year to $55.3 billion, which beat Wall Street’s consensus estimate by $3.6 billion. Earnings of $26.29 per share rose 166% from a year prior and crushed analysts’ expectations for $15.66 per share by 68%.

CEO Sundar Pichai said “Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained. We’ve continued our focus on delivering trusted services to help people around the world. Our Cloud services are helping businesses, big and small, accelerate their digital transformations.”

Google Search brought in $31.9 billion in the quarter, a 30% gain from a year ago, YouTube ad revenue increased 49% from a year ago to $6 billion, and Cloud revenue soared 46% to $4.05 billion.

Shares are down more than 5% over the past five days.

Looking forward, analysts estimate revenue will climb to $55.98 billion in the following quarter, while earnings should come in at $19.05 per share.

Looking ahead to the second quarter, analysts in April also increased their earnings estimates for S&P 500 companies by 4.2% — the second highest increase during the first month of the quarter since 2002, FactSet said.

Netflix (NFLX)

Netflix saw revenue climb 24%, year-over-year, to $7.16 billion, beating estimates by $42 million, while earnings of $3.75 climbed 138% from a year ago and beat estimates by 25%.

However, the company gained 3.98 million subscribers, missing the consensus estimate for 6.2 million. Netflix blamed the miss on the pandemic as it faces increased competition in the content streaming space.

The company said production delays due to COVID-19 in 2020 will lead to a “…2021 slate that is more heavily second half weighted with a large number of returning franchises.”

The stock is down more than 1% over the past five days.

A Super Strong Earnings Season

Overall, the quarter has been outstanding for the FAANG stocks, with outstanding earnings and revenue surprises.

Looking forward, I expect that whichever stock can sustain the good sales and earnings and profit from the inflationary bubble that’s rolling through our economy will outperform.

However, I also expect to see a more narrowly focused market as the year rolls on.

But if you’re looking for fundamentally superior stocks to invest in, my Growth Investor Buy List is chock full of high-quality stocks dominating their respective industries. This is important, especially now that the first-quarter earnings season is now in full swing.

In the past three months, my average Growth Investor stock had its consensus earnings estimate revised 31.2% higher. Naturally, these positive earnings revisions are expected to precede massive first quarter earnings surprises.

If you’re interested in my Growth Investor service, now is the perfect time to join. I released my Growth Investor May Monthly Issue on Friday with seven new buys, my latest Top 5 Stocks list, earnings reviews and earnings previews for the 19 Growth Investor stocks that report this week.

There will be a lot to talk about, so click here now to get started!

Sincerely,

Louis Navellier

Louis Navellier

P.S. There’s a great divide opening up in America and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.

It doesn’t matter if you have $500 in savings or $5 million. You can benefit from the information in this video.

It’s free to watch and by doing so I know you’ll be ahead of everyone else struggling to understand what is really going on.

Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Facebook (FB), Amazon (AMZN), Alphabet (GOOG)

Weekly Upgrades and Downgrades

During these busy times, it pays to stay on top of the latest profit opportunities. And today’s blog post should be a great place to start. After taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for 135 big blue chips. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.

This Week’s Ratings Changes:

Upgraded: From Hold to Buy
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
ABBV AbbVie, Inc. B C B
ABT Abbott Laboratories B B B
ADM Archer-Daniels-Midland Company B B B
AMD Advanced Micro Devices, Inc. C B B
AMH American Homes 4 Rent Class A B C B
ATVI Activision Blizzard, Inc. B C B
BHC Bausch Health Companies Inc. B C B
CF CF Industries Holdings, Inc. B B B
CINF Cincinnati Financial Corporation B C B
CMG Chipotle Mexican Grill, Inc. B C B
CPT Camden Property Trust B C B
CVNA Carvana Co. Class A A C B
DISH DISH Network Corporation Class A C B B
DTE DTE Energy Company B C B
DUK Duke Energy Corporation B D B
EA Electronic Arts Inc. B C B
FNF Fidelity National Financial, Inc. C B B
GPC Genuine Parts Company B B B
HBAN Huntington Bancshares Incorporated B B B
IPG Interpublic Group of Companies, Inc. B B B
JBHT J.B. Hunt Transport Services, Inc. B C B
JD JD.com, Inc. Sponsored ADR Class A B B B
KHC Kraft Heinz Company B B B
KLAC KLA Corporation B B B
LII Lennox International Inc. B B B
LRCX Lam Research Corporation B B B
MNST Monster Beverage Corporation B B B
NTES NetEase, Inc. Sponsored ADR B D B
NTR Nutrien Ltd. B B B
OKE ONEOK, Inc. B B B
OKTA Okta, Inc. Class A B C B
ORLY O’Reilly Automotive, Inc. B C B
OTIS Otis Worldwide Corporation B C B
PGR Progressive Corporation B C B
PNC PNC Financial Services Group, Inc. B B B
QCOM Qualcomm Inc B B B
SCHW Charles Schwab Corporation B C B
SMFG Sumitomo Mitsui Financial Group, Inc. B C B
STE STERIS Plc B C B
TEAM Atlassian Corp. Plc Class A B C B
TW Tradeweb Markets, Inc. Class A B C B
TXT Textron Inc. B B B
VEEV Veeva Systems Inc Class A B C B
WAT Waters Corporation B C B
WDC Western Digital Corporation B B B
WLK Westlake Chemical Corporation B C B
Upgraded: From Sell to Hold
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
ACGL Arch Capital Group Ltd. D B C
ADSK Autodesk, Inc. D B C
AEE Ameren Corporation C C C
AFL Aflac Incorporated D B C
AWK American Water Works Company, Inc. C C C
AXP American Express Company D B C
BRK.A Berkshire Hathaway Inc. Class A C C C
CCEP Coca-Cola European Partners Plc C C C
CL Colgate-Palmolive Company C C C
CLVT Clarivate PLC D C C
CNP CenterPoint Energy, Inc. C C C
COLD Americold Realty Trust C D C
COO Cooper Companies, Inc. D B C
DG Dollar General Corporation C C C
DPZ Domino’s Pizza, Inc. C D C
DRE Duke Realty Corporation D B C
EVRG Evergy, Inc. C C C
HAS Hasbro, Inc. C C C
HSY Hershey Company D C C
INTU Intuit Inc. C D C
KMI Kinder Morgan Inc Class P D B C
LNT Alliant Energy Corp C D C
MCD McDonald’s Corporation C C C
MCO Moody’s Corporation D B C
NFLX Netflix, Inc. D B C
NGG National Grid plc Sponsored ADR D C C
PEG Public Service Enterprise Group Inc C C C
RE Everest Re Group, Ltd. C B C
RPM RPM International Inc. D B C
SAN Banco Santander S.A. Sponsored ADR C B C
SUI Sun Communities, Inc. D C C
TRV Travelers Companies, Inc. C C C
UHS Universal Health Services, Inc. Class B D C C
UL Unilever PLC Sponsored ADR D C C
VOD Vodafone Group Plc Sponsored ADR D C C
WCN Waste Connections, Inc. C C C
WEC WEC Energy Group Inc C C C
WLTW Willis Towers Watson Public Limited C C C
YUM Yum! Brands, Inc. C B C
Downgraded: From Buy to Hold
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
ABMD ABIOMED, Inc. C C C
APTV Aptiv PLC B C C
ATH Athene Holding Ltd. Class A C B C
BCS Barclays PLC Sponsored ADR C B C
CGNX Cognex Corporation C C C
CREE Cree, Inc. B C C
CTLT Catalent Inc C B C
FFIV F5 Networks, Inc. C C C
GE General Electric Company B C C
HOLX Hologic, Inc. C B C
HWM Howmet Aerospace Inc. B C C
KB KB Financial Group Inc. Sponsored ADR C C C
LKQ LKQ Corporation C B C
LYB LyondellBasell Industries NV C C C
NOW ServiceNow, Inc. C C C
PCTY Paylocity Holding Corp. C B C
PKI PerkinElmer, Inc. C B C
PTC PTC Inc. C B C
RMD ResMed Inc. C D C
TROW T. Rowe Price Group C C C
TTD Trade Desk, Inc. Class A C B C
UBS UBS Group AG C C C
VMC Vulcan Materials Company B C C
ZBRA Zebra Technologies Corporation Class A C C C
Downgraded: From Hold to Sell
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
APD Air Products and Chemicals, Inc. D D D
BCH Banco de Chile Sponsored ADR D C D
BEN Franklin Resources, Inc. D C D
BSAC Banco Santander-Chile Sponsored ADR D B D
BSBR Banco Santander (Brasil) S.A. Sponsored ADR D C D
CAG Conagra Brands, Inc. D C D
CDW CDW Corp. D C D
COUP Coupa Software, Inc. D C D
CRM salesforce.com, inc. D C D
EBAY eBay Inc. D C D
EDU New Oriental Education & Technology D C D
FICO Fair Isaac Corporation D C D
FWONK Liberty Media Corp. D D D
GIS General Mills, Inc. D C D
ICE Intercontinental Exchange, Inc. D C D
ILMN Illumina, Inc. D C D
IT Gartner, Inc. D B D
LBTYB Liberty Global Plc Class B F C D
LSXMB Liberty Media Corp. Series B D D D
MKTX MarketAxess Holdings Inc. D C D
NMR Nomura Holdings, Inc. Sponsored ADR D C D
O Realty Income Corporation D D D
PEGA Pegasystems Inc. D B D
PFG Principal Financial Group, Inc. D C D
PHG Koninklijke Philips N.V. Sponsored D C D
UAL United Airlines Holdings, Inc. C D D

To stay on top of my latest stock ratings, plug your holdings into Portfolio Grader, my proprietary stock screening tool. You may get started here.

Sincerely,
Louis Navellier

Louis Navellier

My Pick for the Cryptocurrency Market (And it’s Not Even Crypto)

As you probably already know, the crypto market has been on fire in 2021. This week alone, Dogecoin surged over 20% on largely due to Tesla CEO Elon Musk and Mark Cuban tweeted about the popular cryptocurrency. It wasn’t the first time Musk Tweeted about Dogecoin either, though he’s admitted he sees it more as a joke.

In addition to Dogecoin, Ethereum, the world’s second-largest cryptocurrency in terms of market cap, hit a new high this Thursday. Bitcoin is also approaching a new all-time high this week after hitting a new all-time high just earlier this month.

As you can see, cryptocurrency is seemingly everywhere you look. Now, before I get ahead of myself, I’m not going to say you should run out and buy crypto. Personally, I find cryptocurrency too volatile. However, there is a way to play it with a fundamentally superior stock without  taking on the risks and volatility associated with investing directly in crypto or crypto derivatives.

I’m talking about PayPal Holdings (PYPL).

PayPal is a financial technology company that was spun off of eBay in 2015 and allows users to make purchases from online vendors with ease. The company is also a major player in peer-to-peer payments through Venmo. As of the end of 2020, Venmo had 65 Million users!

Now, PayPal is ramping up its exposure to crypto assets. PayPal allows users to buy and sell crypto straight from their app and also allows customers to use crypto to buy products from millions of vendors.

This is a feature that is not available through the elephant of the crypto trading space, Coinbase Global, Inc. (COIN). Coinbase went public on April 14 at a nearly $100 billion valuation. Both companies generate revenues from crypto transactions, but PayPal collects a 1.5% to 2.3% transaction fee when customers buy and sell crypto.

While this is a small fraction of PayPal’s current revenue stream, continued adoption of crypto should drive significant growth. Coinbase, on the other hand, generates almost all of its revenues through crypto trading fees and is thus far more susceptible to swings in crypto prices and activity.

Last year, Coinbase generated about $1.3 billion in sales and $108 million in net income. To put that in perspective, PayPal had over $21 billion in sales and $4.2 billion in net income last year.

With almost 20 times more sales and 40 times more profits it is truly baffling that PayPal only trades at five times the valuation on Coinbase. Coinbase grew sales 140% from 2019 to 2020 and PayPal grew sales 22% over the same time period. While Coinbase is growing faster, they have a long way to go and a lot of potential competition to beat out before they come anywhere close to the numbers consistently posted by PayPal.

Speaking of numbers, PayPal is set to report first-quarter earnings next Wednesday, May 5. The company is expected to post earnings per share  of $1.01, which is a 5# year-over-year increase. Revenue is expected to come in at $5.9 billion, which is up 27.7% from the same quarter a year ago.

Furthermore, PayPal has posted year-over-year sales growth every single quarter since it was spun off of eBay in 2015. That growth accelerated from the mid-teens to over 20% annual growth each of the last three quarters thanks to sped up adoption of e-commerce triggered by COVID-19.

I expect this new growth standard to persist well into the future as the company turns to crypto for its next level of growth. It is this proven track record and a far more reasonable valuation that make PayPal a much safer way to play crypto. PayPal currently has a B grade (Buy) on Portfolio Grader.

The bottom line is PYPL is the best “picks and shovels” play in the cryptocurrency market.

If you’re looking for other stocks to invest in, then look no further than my Growth Investor Buy List, which is chock full of high-quality stocks dominating their respective industries. This is important, especially now that the first-quarter earnings season is now in full swing.

According to FactSet, 25% of the S&P 500 companies have released results from the most-recent quarter, and 84% of these companies have exceeded analysts’ earnings expectations. If earnings stay on this track, it could be the highest percentage of S&P 500 companies reporting a positive earnings surprises since 2008, when FactSet began tracking the metric!

I expect companies that post strong earnings and positive guidance will emerge as the market leaders. This fits my Growth Investor stocks to the “T,” as out average stock is characterized by 62.2% annual sales growth and 257.7% annual earnings growth.

In the past three months, my average Growth Investor stock had its consensus earnings estimate revised 31.2% higher. Naturally, these positive earnings revisions are expected to precede massive first quarter earnings surprises.

If you’re interested in my Growth Investor service, now is the perfect time to join. I just released my Growth Investor May Monthly Issue yesterday with seven new buys, my latest Top 5 Stocks list, earnings reviews and earnings previews for the 19 Growth Investor stocks that report next week.

There will be a lot to talk about, so click here now to get started!

P.S. There’s a great divide opening up in America, and investing in my Growth Investor stocks will help get you on the right side of it. You see, on one side is a new aristocracy that’s amassing more wealth, more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.

It doesn’t matter if you have $500 in savings or $5 million. You can benefit from the information in this video.

It’s free to watch and by doing so I know you’ll be ahead of everyone else struggling to understand what is really going on.

Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

PayPal Holdings, Inc. (PYPL)

Two Ways to Invest in the “Tiny Engines” that Power the Economy

What ranks fourth on the list of the world’s most-traded products, behind crude oil, refined oil and cars?

I’ll give you a hint — these products are the tiny “engines” that help run everything from home appliances and personal computers to 5G-enabled smart phones, cloud internet servers and autonomous vehicles.

If you guessed semiconductors, you’d be correct!

They are the lifeblood of the modern, electronics-driven economy. And they’re in serious short supply at the moment.

Over a year ago, the pandemic and resulting economic downturn derailed global supply chains and caught the semiconductor industry off guard. It had been focusing on producing the more profitable, advanced chips that go in 5G technologies. As consumer demand suddenly rocketed for electronics that needed the older chips, the shortage began to take hold.

The trade dispute between China and the U.S. that flared up last year caused Chinese chip makers to hoard supplies, exacerbating the shortage. Then bad weather in the southern U.S. and Taiwan, one of the world’s biggest chip producers, disrupted supplies further.

Interestingly, even hi-tech gadgets like 5G smartphones also rely on these less advanced chips — especially power-management chips — to operate.

Some customers are reporting they have to wait six months or longer to get their normal shipments. Here are a few examples…

Microsoft Corporation (MSFT) reported in its earnings announcements on Tuesday that its hardware sales were impacted by the chip shortages.

The chip supply crunch has hit the auto industry hard, particularly for the older, less sophisticated chips that are used in cars, computer monitors, speakers and appliances.

General Motors (GM) has had to reduce production of almost all of its car and SUV models to prioritize chip supply for its more profitable full-size trucks, and has even built some pickup models without the chips and is storing them until the supply returns and chips can be incorporated.

Volkswagen AG (VWAGY) has about 100,000 fewer vehicles on hand in 2021 because the shortage has hampered production, and is expecting the trend to worsen in the second quarter.

Tesla, Inc.’s (TSLA) CEO Elon Musk said on Monday during the company’s earnings call that the shortage is a “huge problem,” despite measures the company is taking to use new microcontrollers and firmware.

The consulting firm AlixPartners has estimated the global auto industry will produce from 1.5 million to 5 million fewer automobiles this year than expected.

Now even the government is stepping in to help. President Biden recently met with industry executives about the issue and has called for $50 billion of his proposed $2.3 trillion infrastructure plan to support the chip industry in the U.S.

Meanwhile, some of the best chipmakers in the industry are scheduling massive capital expenditures to help meet the growing demand in the coming years.

I’m talking about the kind of fundamentally superior stocks I look for to grow earnings and sales.

Case in point: The world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Co. (TSM). I recommended the stock to my Growth Investor subscribers back in November 2020.

The company said this month it would set aside a whopping $100 billion over the next three years to increase capacity. That represents the largest sum ever invested in the industry.

The strong demand for semiconductors has certainly lifted the company’s top and bottom lines during the first quarter of fiscal year 2021.

In U.S. dollar terms, first-quarter earnings were $4.93 billion, and revenue was $12.92 billion. First-quarter earnings per ADR jumped 28% year-over-year to $0.96. The consensus estimate called for earnings of $0.95 per ADR and revenue of $12.86 billion, so TSM posted a 1.05% earnings surprise and a slight revenue surprise.

Looking ahead to the second quarter, TSM expects total revenue between $12.9 billion and $13.2 billion. That represents 24.3% to 27.2% year-over-year revenue growth—and the forecast is in line with analysts’ current estimates for $13.15 billion.

The stock earns an “A” in my Portfolio Grader for its Total Grade and is currently a “Strong Buy.”

Or take another leading semiconductor stock I recommended to my Growth Investor subscribers in October 2020.

This company recently reported a huge, triple-digit first-quarter earnings surprise, while its sales growth also beat out analysts’ estimates for the quarter.

This chip leader noted it experienced “robust wafer demand” during the first quarter, particularly for products like digital TVs, set top boxes and connectivity chips for smartphones.

Looking ahead, the company expects demand will continue to outpace supply for its products and has decided to invest about $5 billion over the next three years in expanding its fabrication capacity in a partnership model with several leading global customers.

The stock has gained about 18% year-to-date, more than double the NASDAQ’s 8.7% gain.

The company is also a “Strong Buy” in my Portfolio Grader, with a Total Grade and Quantitative Grade of “A.”

For full details, click here to join Growth Investor today.

The reality is you really couldn’t pick a better time. First, I’m releasing my Growth Investor May Monthly Issue today, which will include seven new recommendations – five new High-Growth Investments and two Elite Dividend Payers. They are all leaders in their respective industries and have plenty of upside potential.

Second, there’s a great divide opening up in America, and investing in my Growth Investor stocks will help get you on the right side of it. You see, on one side is a new aristocracy that’s amassing more wealth, more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.

It doesn’t matter if you have $500 in savings or $5 million. You can benefit from the information in this video.

It’s free to watch and by doing so I know you’ll be ahead of everyone else struggling to understand what is really going on.

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Microsoft Corporation (MSFT), Taiwan Semiconductor Manufacturing Co. (TSM)

How to Play This “Goldilocks” Environment for Stocks

Along with the Spring flowers and the stimulus checks in the mail, earnings announcements are in full bloom this week as major tech companies roll out their latest earnings results.

Tech giants like Alphabet Inc. (GOOGL), Microsoft Corp. (MSFT), Apple Inc. (AAPL), Facebook, Inc. (FB) and Tesla, Inc. (TSLA) all reported this week and have been the talk of the town.

My own Growth Investor stocks resurged in recent weeks and are now in the midst of announcing spectacular first-quarter results. The average Growth Investor stock is characterized by 62.6% annual sales growth and 257.7% annual earnings growth. In the past three months, the average Growth Investor stock had its consensus earnings estimate revised 31.2% higher. Naturally, these positive earnings revisions are expected to precede massive first-quarter earnings surprises, so I’m very excited for what’s to come.

The reality is the first quarter sales and earnings reports represent “peak” momentum, thanks to the easy year-over-year comparisons. This also means that some companies’ growth will begin to slow down in future quarters, but I still expect to see plenty of strong results that beat analysts’ expectations.

Speaking of strength, we’re also seeing quite a bit of that in the economy. The Wall Street Journal recently reported that global growth is picking up as the economic rebound in both China and the U.S. is helping to lift other economies. First-quarter GDP in the U.S. popped 6.4% — the second fastest growth rate since the second quarter of 2003.

Furthermore, the pace of COVID-19 vaccinations in the eurozone is advancing. Purchasing manager indices (PMIs) are now positive in Australia, Japan and the eurozone, which bodes well for overall GDP growth. The only major drag on global GDP growth remains India, which is being hindered by a record number of new COVID-19 cases.

From what I can tell, the Federal Reserve is very close to meeting its objectives of fixing unemployment and sparking inflation to stimulate both business and consumer spending. But it remains committed to9 keeping key short-term interest rates at or near zero through 2023. The Fed reaffirmed Wednesday it will keep rates near zero.

The truth of the matter is the Fed can never raise key short-term interest rates much, otherwise it risks blowing up the federal government’s budget deficit, which is expected to cross above $30 trillion soon. So, we will likely remain in an ultralow interest rate environment for the rest of our lifetimes!

Couple this with low interest rates with the strong first-quarter earnings season and robust economic growth and it’s no wonder we’re in “Goldilocks” environment right now.

Profiting in the New Normal

Now, as we enter the “bumpy” summer months, investor anxieties naturally rise. So, if you’re looking for a time to take profits, the third week of May is ideal as the markets will likely get a chance to “burb” and digest the profits following earnings announcements.

June and July are seasonably strong months, but I see the markets narrowing. As I mentioned, second-quarter results will still be very positive, but sales and earnings momentum may slow.

The bottom line is the companies that can sustain good sales and earnings momentum when the overall market is slowing will obviously emerge as market leaders.

This is why if you want to profit in the current economic environment, your defense remains a strong offense of fundamentally superior stocks.

Take the five new stocks I’m recommending on Friday for my Growth Investor subscribers in my May Monthly Issue. They are all leaders in their respective industry and will play a key role in returning the U.S. and the world to a better, brighter, new normal. And Wall Street is predicting that each and every one will post double-digit earnings and sales growth in the coming quarter.

All five are High-Growth Investments, and all earn an A-rating in my Portfolio Grader, making them a “Strong Buy.”

Clearly, my Growth Investor Buy Lists are “locked and loaded” for the coming earnings season. If you want your portfolio to be, too, now is an especially great time to join Growth Investor.

For full details, click here now.

Sincerely,

Louis Navellier

Louis Navellier

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Microsoft Corp. (MSFT), Facebook, Inc. (FB)

Is There a New Opportunity in the Wine Industry?

There’s no denying that retailers were hit hard during the coronavirus pandemic. Many well-known companies, like Neiman Marcus and J.C. Penney, filed for bankruptcy. All told, 21 U.S. retailers were forced to file for bankruptcy, with 17 filing while the coronavirus pandemic raged across the country.

The reality is many companies were significantly impacted by the U.S. lockdowns, lack of foot traffic and store closures, which weighed heavily on revenue.

With most Americans stuck at home and doing their shopping online, we saw a surge in ecommerce. Digital Commerce 360 found that for 2020, ecommerce sales exploded to $861.12 billion, a 44% year-over-year increase from ecommerce sales of $589.02 billion in 2019. 21.3% of those sales came from online.

Interestingly, some alcoholic beverages also benefited from the ecommerce boom. With the shutdown of restaurants, bars, clubs and even sporting venues, off-premise alcohol sales are soaring. Historically, beer and spirits companies thrive in economic downturns, and 2020 was no different. As far as ecommerce sales are concerned, U.S. sales for 2020 are estimated to rise 42% to $24 billion. And by the end of this year, the U.S. is expected to have more alcoholic e-commerce sales than China.

With the U.S. now reopening, my InvestorPlace colleague and friend, Matt McCall, and I look for pent-up demand and the desire to return to normal to trigger a massive amount of spending into another part of the alcoholic beverage sector.

I’m talking about the wine industry.

The wine industry certainly took it on the chin in 2020, with overall wine sales slipping 9.9%. Digging a little deeper into the numbers, on-premise sales fell 45%. However, online sales actually rose 10% year-over-year. This was thanks in part to virtual tastings and buying popular wines in stores. For 2020, the top five wines were cabernet sauvignon ($3.2 billion), chardonnay ($2.8 billion), red blends ($2 billion), pinot grigio ($1.9 billion) and pinot noir ($9.8 million).

Now, the U.S. is the largest wine consuming market in the world, representing 15% of global consumption in 2017, and the number of wineries in the U.S. has nearly doubled over the past decade. U.S. wine sales have grown for 25 consecutive years. That market should continue to grow. According to Mordor Intelligence, the wine market is forecast to rise at a 1.47% compound annual growth rate from 2020 to 2025.

And to Matt and me that spells opportunity. It’s why we’re adding a wine company to our Power Portfolio tomorrow after the market close. If you’re guessing that it’s a big, well-known company like Constellation Brands, Inc. (STZ), you’d be wrong. The truth of the matter is STZ’s fundamentals are poor. For example, while the company posted earnings per share of $1.82 in the most recent quarter, which beat estimates calling for earnings of $1.55 by 17.4%, its earnings are still down 41.1% from the previous quarter.

So, it should be no surprise that STZ receives a measly D-rating in Portfolio Grader. Just take a look below…

As you can see in STZ’s report card above, the stock earns a C-rating for its Fundamental Grade, a D-rating for its Quantitative Grade and a D-rating for its Total Grade, making STZ a “Sell” right now.

The stock Matt and I like is much smaller, but still fundamentally superior. It holds an A-rating for its Total Grade, making it a “Strong Buy.” It’s also seen solid sales growth, including double-digit growth for its direct-to-consumer retail wine sales.

The truth of the matter is this is a fundamentally superior stock that is poised to skyrocket during the “Great Grand Reopening.”

For full details on what the Great Grand Reopening is and the stock, click here now. Matt and I see a lot of great opportunities lining up for 2021, 10 of which are already sitting on our Power Portfolio. But you need to be VERY selective with your money moving forward given everything that’s happened in the world. Tomorrow’s recommendation is just one way to do it.

Sincerely,

Louis Navellier

Louis Navellier

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Weekly Upgrades and Downgrades

During these busy times, it pays to stay on top of the latest profit opportunities. And today’s blog post should be a great place to start. After taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for 128 big blue chips. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.

This Week’s Ratings Changes:

Upgraded: From Hold to Buy
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
AAP Advance Auto Parts, Inc. B C B
AFG American Financial Group, Inc. B B B
ALB Albemarle Corporation B D B
ATH Athene Holding Ltd. Class A C B B
CBRE CBRE Group, Inc. Class A B C B
CMCSA Comcast Corporation Class A B C B
DIS Walt Disney Company B D B
DISCK Discovery, Inc. Class C B C B
EL Estee Lauder Companies Inc. Class A B B B
GE General Electric Company B C B
GGG Graco Inc. B B B
GLPI Gaming and Leisure Properties, Inc. B B B
GRMN Garmin Ltd. B C B
INFO IHS Markit Ltd. B D B
IQV IQVIA Holdings Inc B B B
KB KB Financial Group Inc. Sponsored ADR B C B
KEY KeyCorp C B B
MFC Manulife Financial Corporation B B B
MLM Martin Marietta Materials, Inc. B C B
NDAQ Nasdaq, Inc. B C B
NSC Norfolk Southern Corporation B C B
PPG PPG Industries, Inc. B B B
PRAH PRA Health Sciences, Inc. B C B
PSA Public Storage A D B
PTC PTC Inc. B C B
RJF Raymond James Financial, Inc. B B B
RMD ResMed Inc. B C B
RS Reliance Steel & Aluminum Co. B B B
RY Royal Bank of Canada B C B
SWK Stanley Black & Decker, Inc. B B B
TROW T. Rowe Price Group B B B
TT Trane Technologies plc B C B
VMC Vulcan Materials Company B C B
VTR Ventas, Inc. B C B
ZNGA Zynga Inc. Class A B C B
Upgraded: From Sell to Hold
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
ALL Allstate Corporation D B C
AME AMETEK, Inc. C C C
AON Aon Plc Class A D C C
APD Air Products and Chemicals, Inc. C C C
BLL Ball Corporation D B C
BRO Brown & Brown, Inc. D C C
BSBR Banco Santander (Brasil) S.A. Sponsored ADR C C C
CB Chubb Limited C C C
CBOE Cboe Global Markets Inc C C C
CDW CDW Corp. D C C
CRM salesforce.com, inc. D C C
DAL Delta Air Lines, Inc. C D C
DVA DaVita Inc. C C C
EDU New Oriental Education & Technology Group, Inc. Sponsored ADR D C C
EQNR Equinor ASA Sponsored ADR C C C
FAST Fastenal Company C C C
GDS GDS Holdings Ltd. Sponsored ADR Class A C C C
GIS General Mills, Inc. D C C
HEI.A HEICO Corporation Class A C D C
ICE Intercontinental Exchange, Inc. C C C
ICLR ICON Plc C C C
ILMN Illumina, Inc. C C C
ISRG Intuitive Surgical, Inc. C C C
L Loews Corporation D B C
MAA Mid-America Apartment Communities, Inc. C D C
MMC Marsh & McLennan Companies, Inc. C C C
MOH Molina Healthcare, Inc. C D C
MPW Medical Properties Trust, Inc. C C C
MTB M&T Bank Corporation D C C
NEE NextEra Energy, Inc. D B C
O Realty Income Corporation C D C
PEAK Healthpeak Properties, Inc. D B C
PEGA Pegasystems Inc. D C C
PLD Prologis, Inc. D C C
PM Philip Morris International Inc. C C C
RDY Dr. Reddy’s Laboratories Ltd. Sponsored ADR C C C
ROL Rollins, Inc. D B C
SHG Shinhan Financial Group Co., Ltd. Sponsored ADR C C C
SPGI S&P Global, Inc. C C C
TRI Thomson Reuters Corporation C C C
UAL United Airlines Holdings, Inc. C D C
UNH UnitedHealth Group Incorporated D C C
WELL Welltower, Inc. C C C
WORK Slack Technologies, Inc. Class A C C C
WRB W. R. Berkley Corporation D B C
ZTS Zoetis, Inc. Class A C C C
Downgraded: From Buy to Hold
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
ATVI Activision Blizzard, Inc. C C C
CMG Chipotle Mexican Grill, Inc. C C C
CNQ Canadian Natural Resources Limited C C C
CVNA Carvana Co. Class A B C C
EBAY eBay Inc. C B C
HAL Halliburton Company C C C
HBAN Huntington Bancshares Incorporated C C C
HD Home Depot, Inc. C C C
IMO Imperial Oil Limited B D C
IPG Interpublic Group of Companies, Inc. B C C
KMX CarMax, Inc. C C C
KR Kroger Co. B D C
MPLX MPLX LP B C C
NEM Newmont Corporation C C C
NTAP NetApp, Inc. C C C
OKTA Okta, Inc. Class A B C C
ORLY O’Reilly Automotive, Inc. C C C
PANW Palo Alto Networks, Inc. B C C
ROK Rockwell Automation, Inc. C B C
SHOP Shopify, Inc. Class A C B C
SMFG Sumitomo Mitsui Financial Group, Inc. Sponsored ADR C C C
SUZ Suzano SA Sponsored ADR C B C
TEL TE Connectivity Ltd. C B C
VEEV Veeva Systems Inc Class A C B C
WLK Westlake Chemical Corporation C C C
WPM Wheaton Precious Metals Corp D C C
XPO XPO Logistics, Inc. C B C
Downgraded: From Hold to Sell
Symbol Company Name Quantitative
Grade
Fundamental
Grade
Total
Grade
ADI Analog Devices, Inc. D B D
ADSK Autodesk, Inc. D B D
APH Amphenol Corporation Class A D C D
CNI Canadian National Railway Company D C D
CPB Campbell Soup Company D C D
CPRT Copart, Inc. D C D
DBX Dropbox, Inc. Class A D C D
GIB CGI Inc. Class A D C D
INTU Intuit Inc. D D D
KEP Korea Electric Power Corporation Sponsored ADR D C D
LBTYK Liberty Global Plc Class C D C D
MASI Masimo Corporation D C D
MO Altria Group Inc D C D
NGG National Grid plc Sponsored ADR D C D
SLB Schlumberger NV D C D
STM STMicroelectronics NV ADR RegS D B D
TDOC Teladoc Health, Inc. D D D
TRV Travelers Companies, Inc. D C D
WCN Waste Connections, Inc. D C D
YUM Yum! Brands, Inc. D C D

To stay on top of my latest stock ratings, plug your holdings into Portfolio Grader, my proprietary stock screening tool. You may get started here.

Sincerely,
Louis Navellier

Louis Navellier

Should You Worry About the Biden Administration’s Proposed Tax Increase?

This earnings season has been stunning so far, with many companies beating analysts’ earnings expectations.

Even better, liquidity in the sorts of fundamentally superior stocks I recommend has exploded to the upside.

However, the party fizzled Thursday a bit when the Biden administration proposed to nearly double taxes on long-term capital gains to 39.6% from the 20% current rate.

Now, I want you to know that these tax increases are proposed, nothing more. They won’t go through, and here’s why…

For starters, Senator Joe Manchin of West Virginia. He is the most powerful man in Congress right now and stands in the middle of many contention issues wielding a tie-breaking vote. Senator Manchin has already shot down proposals to increase the corporate tax rate to 28% from 21%, asking for a 25% rate instead. I think Manchin will also knock down this plan to raise capital gains taxes.

See, many on the left are already upset with the Biden administration for not raising the state and local tax (SALT) deduction, which allows taxpayers in high tax states to deduct local tax payments on their federal tax returns.

In other words, there’s already tremendous political infighting in Congress regarding taxes.

Also, it is imperative that dividend and long-term capital gains tax rates remain the same. Currently, the reason dividend income taxes are capped at 20% is because they are also already taxed at the corporate level. What this proposal represents is a second wave of taxation. The increase would bring taxation on capital gains to over 60%, before adding in state taxes.

And if long-term capital gains taxes went to 39.6%, while dividend taxes remained capped at 20%, what would happen is Corporate America would stop selling their stocks and just pay bigger dividends.

The bottom line: this tax proposal isn’t going through, folks.

Money on the Sidelines

In fact, I think the market will rebound quickly for several reasons. One is the stunning earnings announcement season underway.

According to FactSet, as of last Friday 9% of S&P 500 companies have released results from the latest quarter so far and of these companies, 81% have topped analysts’ earnings estimates. The average earnings surprise so far is a whopping 30.3%.

There’s also a lot of great economic news out there. I wrote about some of the highlights on Thursday.

And even though the rollout of COVID-19 vaccines is the strongest economic stimulus you could hope for, another factor that has me incredibly bullish is the sheer amount of money sitting on the sidelines right now.

I think most people are failing to realize just how much money and economic stimulus is just sitting there idling, waiting to be spent.

Specifically, there’s nearly $5 trillion sitting on the sidelines. To put that into perspective, $5 trillion is roughly 25% of the entire annual GDP of the United States.

We’ve never seen anything like this in our lives.

And according to the FDIC, which is responsible for insuring our checking and savings accounts, more than $2 trillion has been stockpiled into individual accounts at U.S. banks.

This stockpile grew in part from people selling stocks last year when the market crashed. But it also came from trillions of dollars in stimulus money getting pumped into the economy.

Most recently, the $1.9 trillion stimulus plan President Biden signed in March.

Another thing worth pointing out is that all this stimulus has sent the money supply to historic levels. Check out this chart showing the current level of money supply in the US.

The money supply is a broad metric used to determine how much money is available at any given point. Checking accounts, savings accounts and the net worth of individuals are at all-time highs.

Personal income surged 10% in January, and this is obviously before President Biden passed an additional round of stimulus checks. In other words, it shows the purchasing power of American businesses and consumers.

Stock prices tend to move higher when the money supply is high, and it’s never been this high before. As you can see in this chart above, there’s a lot of pent-up stimulus and economic activity just waiting to be unleashed.

And without being able to go out and spend all this newfound money at restaurants and on vacations, people have turned to the markets.

Charles Schwab announced in February that the number of new brokerage accounts being opened was three times more than the previous year.

And a recent online survey from Deutsche Bank showed that nearly 50% of respondents said they plan on spending at least half of their stimulus money on stocks.

Best Performers of 2021

Now, if there’s one thing I’ve learned in my investing career, it’s that you can’t go wrong if you stick with companies that “deliver the goods” with regard to earnings.

To help you make sense of everything, my InvestorPlace colleague, Matt McCall, and I have laid out our investing road map we believe will help you navigate the markets moving forward.

Matt and I have done the hard research and run the numbers on key fundamental and quantitative factors to form our view of what’s coming next.

So, these forecasts aren’t based on gut feelings — but rather raw data, logic and probability. It allows us to uncover the truth about any individual stock or even the entire market.

Click here to watch the replay and see why Matt and I both think stocks are a screaming buy now.

Sincerely,

Louis Navellier

Louis Navellier

P.S. Matt and I see a lot of great opportunities lining up for 2021. But you need to be SUPER selective with your money moving forward given everything that’s happened in the world.

And you need to have a proven game plan in place for the moments when the markets get rocked.

We both see big moves coming to the market in 2021, and we’ve created a unique approach to exploit these moves for big gains. We go over it in fine detail at our Roadmap to Recovery eventClick here to watch the replay now.

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

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