The 3 Catalysts Lighting a Fire Under the Market’s Belly

The stock market has been almost unstoppable recently. Until today, the S&P 500 had notched eight record closes in a row. And yesterday, the Dow, NASDAQ and even the Russell 2000 all broke through to new all-time highs.

The reality is there are three catalysts lighting a fire under the market’s belly. First, we have the Federal Reserve. As I discussed last week, the Fed decided it will start this month to reduce, or “taper,” its recent quantitative easing policy, with a plan to bring it to a full stop by June. Now, Wall Street was anticipating the Fed to curtail its quantitative easing by up to $30 billion a month. Instead, they only decided to do $15 billion per month. That’s nothing. So, that was a huge surprise. And during Fed Chair Jerome Powell’s press conference following the FOMC statement, he refused to say whether the central bank is going to raise interest rates. So, the Fed is still dovish and willing to prime the pump.

It’s clear to me that the Fed remains obsessed with trying to create more jobs. I should note that there are four million jobs missing since the pandemic. But the labor force participation rate is down because some folks chose to retire. And yet, the Fed wants to replace these four million jobs because that’s its mandate.

But the fact of the matter is the economy became more productive as a result of the pandemic. Technological change was also accelerated. It’s one of the reasons for the earnings explosion. You may recall that in the second quarter, S&P 500 earnings grew more than 90% year-over-year and revenue rose more than 25% year-over-year. According to FactSet, for the third quarter, S&P 500 earnings are estimated to increase 39.1% year-over-year and revenue is expected to climb 17.3% year-over-year. So, while earnings growth is decelerating a bit, the third-quarter earnings season is nothing to sneeze at.

Wall Street Refocuses on Earnings

Let me add that investors are growing more fundamentally focused, which is why I’ve been so “gung-ho” on fundamentally superior companies. Yes, investors can become distracted at times and get hooked on weird little themes every now and then, but they are absolutely refocusing on earnings right now. It’s why we’ve seen the stocks I discussed last week – Atlassian Corporation Plc (TEAM), InMode Ltd. (INMD) and Enphase Energy, Inc. (ENPH) – surge on their quarterly results.

On the other hand, just today meme stock AMC Entertainment Holdings, Inc. (AMC) fell more than 9% in the wake of its third-quarter earnings results yesterday afternoon. For the third quarter, the company reported an earnings loss of $0.44 per share on revenue of $763.2 million. Analysts were expecting an earnings loss of $0.53 per share on revenue of $708.3 million, so AMC beat on the top and bottom lines. However, global movie attendance was lower than expected. AMC saw global attendance of 40 million, which was below analysts’ expectations for 42.8 million.

In addition, company management was a little pessimistic during the earnings call, stating: “We wish to emphasize that no one should have any illusions that there is not more challenge ahead of us still to be met. The virus continues to be with us. We need to sell more tickets in future quarters than we did in the most recent quarter, and adjusted EBITDA is still well below pandemic levels.” So, AMC is still bleeding cash and it will take a long time for the company to get back to its pre-pandemic levels.

The fact of the matter is that at the end of the day, longer-term investors want security, i.e., high-quality stocks that are growing their sales and earnings. They don’t want to be invested in stocks with uncertain futures.

The third reason behind the broader market strength is the decline in the 10-year Treasury yield, which fell below 1.5%. As a result, money is pouring into the stock market. Keep in mind that while China has higher yields, the country has devalued its currency in the past and its economy is a mess. Japan has zero interest rates, Europe has negative interest rates, and Britain is fighting a negative interest rate trend. So, that leaves the U.S. We have higher interest rates than the rest of the world and a better economic system.

With all that said, the stock market is overbought now. Through last Friday, the S&P 500 had been up 16 times in the prior 18 trading days. According to Bespoke, it’s been 30 years since the S&P 500 has climbed so consistently. If you look back to 1952, this trading action has only occurred eight other times. Suffice it to say, this is a rare occurrence. Bespoke also found that the S&P 500’s performance isn’t quite as strong, but, overall, the S&P 500 was still up in the next year. So, the stock market is likely to stay overbought for the foreseeable future, which means further gains are still to come.

With the market expected to continue climbing higher, now is the time to invest if you haven’t already. Keep in mind that we’re in the midst of an “early January effect,” which tends to get underway in November. Many of my Accelerated Profits small- and mid-cap stocks are already benefitting from this early January effect. This isn’t too surprising as my Accelerated Profits stocks have superior forecasted sales of 35.6%, earnings growth of 289.2% and a strong earnings surprise history of 51.2%. So, I expect these fundamentally superior stocks to become go-to names for investors as we move deeper into the seasonally strong time of year.

To further take advantage of the coming strength, I will be releasing a brand-new small-cap stock in Accelerated Profits on Thursday, after the market close. It recently reported record quarterly sales and rallied nicely on the results. I see plenty of upside potential for this stock, so sign up now so you’re ready to pull the trigger after my recommendation is out on Thursday.

Sincerely,

Signed:
Louis Navellier

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:

Enphase Energy Inc. (ENPH), InMode Ltd. (INMD), Atlassian Corporation Plc (TEAM)

Why These Two Tech Stocks Are Outperforming the Stock Market

We’re coming into a historically strong month for the stock market, and part of the reason has to do with the fact that Americans typically perk up this time of year as we gather with family and friends to celebrate Thanksgiving.

This feeling of “goodwill” tends to rub off on Wall Street as well, boosting the stock market, as we’ve seen in recent weeks.

The S&P 500 closed Thursday at a new record high and was up for the seventh consecutive positive day, providing an excellent start to November. The NASDAQ also closed at a new record and is up for the tenth trading day in a row.

In October, the S&P 500 soared nearly 7% and the Dow rose about 5.8%.

Consider this: With the S&P 500’s impressive performance in October, the index was up 22.6% in the first 10 months of 2021. According to our friends at Bespoke, this is only the tenth time the S&P 500 has climbed more than 20% year-to-date through October since 1928. In the previous nine instances, the S&P 500 continued to climb higher in November, posting a median gain of 3.24%.

That’s the good news. The great news: November, December and January are historically the three best months for the stock market. In fact, the Dow Jones Market Group reports that the S&P 500 and Dow both gain about 3.4% during this three-month span, while the NASDAQ tends to rally 6.3%. So, we have three months of seasonal strength in front of us!

Essentially, we’re in the midst of a renaissance era for powerful growth stocks, which are increasingly emerging as market leaders in the wake of their positive quarterly results. The smart money is now chasing fewer stocks and focusing primarily on those able to maintain accelerating earnings and sales momentum in the current environment.

The reality is that the third-quarter earnings announcement season has revealed which companies achieved spectacular results in the most recent quarter, which will be able to maintain this strong earnings momentum going forward—and which won’t. The companies backed by superior fundamentals are stealing the show, and institutional and individual investors alike are loading up prior to yearend.

We’ve seen this play out in several of our Accelerated Profits positions, as they have rallied strongly in the wake of better-than-expected results.

That’s the beauty of my Project Mastermind system in a nutshell. It’s essentially a cutting-edge artificial intelligence (AI) stock research system that relies on mathematics and computers to pinpoint stocks that are poised to go explosive runs.

Let me show you a couple of recent examples that illustrate my point.

Take Atlassian Corporation Plc (TEAM).

The company, whose name was inspired by the Greek Titan, is a global software company focused on providing tools and resources that promote teamwork and collaboration. The company’s business really took off in 2002 when it introduced Jira 1.0.

A few of its products include Jira Software, a software development tool used to prioritize and assign tasks; Atlassian Access, an identity and security tool for Atlassian cloud infrastructure; Statuspage, a tool to track incidents and the process to rectify any issues; Confluence and Trello, software that allows teams to create and share projects in one space; and Bitbucket, Bamboo, Crucible, Fisheye and Sourcetree, products used to build software and improve coding.

Overall, Atlassian’s products are utilized by 83% of Fortune 500 companies, and it has 180,000 customers in more than 190 countries around the world. The company also boasts 10 million monthly active users for its Atlassian cloud products. So, it’s not too surprising that Atlassian’s business is thriving.

Indeed, shares of this fundamentally superior company jumped recently after it reported a better-than-expected earnings announcement on October 28.

For its first quarter in fiscal year 2022, TEAM achieved earnings of $118.3 million, or $0.46 per share, up from $76.8 million, or $0.30 per share, in the same quarter a year ago. First-quarter revenue rose 34% year-over-year to $614 million. The analyst community was expecting earnings of $0.40 per share on $582.32 million in revenue.

TEAM also noted that it ended the first quarter with 216,500 customers, after adding 11,746 new customers during the quarter.

Looking ahead to the second quarter in fiscal year 2022, TEAM expects total revenue between $630 million and $645 million and earnings per share between $0.35 and $0.38. That compares to earnings of $0.37 in the second quarter of 2021.

My Project Mastermind system flagged the stock and I recommended it to my Accelerated Profits subscribers back on September 28.

Following the company’s outstanding earnings announcements, the stock is up almost 8% in the Accelerated Profits portfolio. Compare that to the 3% gain for the NASDAQ and the 2% gain for the S&P 500 over the same timeframe.

Another example: InMode Ltd. (INMD).

More than 20 years ago, the company was founded by a group of doctors and scientists who developed light, laser and radiofrequency devices for several minimally invasive procedures, including body and face contouring, hair removal, liposuction, skin tightening, facial skin rejuvenation, wrinkle reduction, muscle stimulation and fat reduction.

On October 26, InMode reported record third-quarter results.

The Israeli company’s third-quarter revenue soared 58% year-over-year to $94.2 million, with surgical technology platforms accounting for 73% of quarterly revenue. Analysts were expecting third-quarter revenue of $89.26 million.

Third-quarter earnings surged 77.4% year-over-year to $0.55 per share, up from $0.31 per share in the same quarter a year ago. Analysts were looking for earnings of $0.50 per share, so InMode posted a 10% earnings surprise.

Looking forward, InMode expects full-year revenue between $343 million and $347 million and earnings per share between $1.91 and $1.93. That’s up from earnings of $1.05 per share and revenue of $206.11 million in fiscal year 2021. This forecast is also nicely higher than analysts’ current expectations for full-year earnings of $1.86 per share and revenue of $341.03 million.

The company’s stock has soared nearly 10% since reporting its third-quarter results, handily topping the 5% gain for the NADAQ and the 2% gain for the S&P 500.

Project Mastermind spotted INMD and I recommended it to my Accelerated Profits subscribers back on April 27. Since then, the stock has soared over 113%, compared to the NASDAQ’s 14% gain and the S&P 500’s 13% climb over the same timeframe.

Of course, with expected revenue and earnings gains going forward, I’m anticipating these stocks will continue to trek higher.

As you can see above, they also both earn an “A” for the Total Grade in my Portfolio Grader, as well as an “A” for their Quantitative Grades, which represents institutional buying pressure under the stocks.

The bottom line: Investors are now putting fundamentals front and center, and my Accelerated Profits stocks are perfectly positioned to benefit from this shift.

Sincerely,

Signed:
Louis Navellier

P.S. Of course, Atlassian and InMode aren’t the only stocks I like right now.

In fact, my Project Mastermind system recently spotted another fundamentally superior stock that’s been firing on all cylinders.

Its latest earnings announcements were a stunner. The company reported double-digit earnings and sales growth from the year prior and beat Wall Street’s expectations for the top- and bottom-line.

The stock has risen by triple digits this year and I expect its superior fundamentals will help keep shares trekking higher.

Click here for full details now.

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:

Atlassian Corporation Plc (TEAM), InMode Ltd. (INMD)

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