Transportation, and especially airplanes and cars, took center stage this week as investors pondered some very good news emerging for the sector.
Shares of electric car maker Tesla (TSLA) hit a new high yesterday and have gained over 23% since Monday’s announcement that the stock will now trade on the S&P 500. The move essentially puts a floor under the share price as many investment funds that track the S&P 500 will now include the stock.
Keep in mind that the S&P 500 has more than $11 trillion worth of mutual funds and other investments like index funds that mirror the composition of the S&P 500. In order to correctly mimic the S&P 500 list of companies, these index-tracking funds will also have to sell some $51 billion worth of shares already in the S&P 500 and use the cash to buy Tesla shares.
When it officially lists on the S&P 500 on December 21, Tesla, with its $473 billion market cap, will instantly be larger than 95% of the companies already in the index.
Meanwhile, the FAA on Wednesday announced that The Boeing Company’s (BA) workhorse aircraft, the 737 Max, is again safe to fly passengers.
It’s great news for the airliner that had its plane grounded for nearly two years following two crashes of the 737 Max that killed 346 people. FAA Administrator Steve Dickson said the updates made would make it virtually impossible to repeat the conditions of the plane’s past crashes.
The move frees up Boeing to start releasing the 450, 737 Max aircraft it’s built since March, as well as a backlog of more than 3,000 other 737 Max airplanes going to customers.
The stock has been relatively flat following the FAA’s Wednesday announcement. However, Boeing shares have soared 44% higher since October 30 as many investors likely anticipated the FAA decision and were bullish on the stock’s prospects.
I actually recommended Boeing to my Growth Investor subscribers back in October 2017, and then we locked in our 47% gains in August 2019. But I wouldn’t recommend it as a high-growth play today. A quick look at the stock’s rating on my Portfolio Grader shows why. It has a “C” for fundamentals, a “D” for its quantitative grade representing institutional buying pressure, and an overall grade of “D.”
Airline stocks in general have moved higher since last Monday’s news of a potentially effective coronavirus vaccine candidate from Pfizer (PFE) and BioNTech (BNTX). In fact, the two companies are applying today for approval by the FDA. Moderna (MRNA) announced this Monday it also has an effective vaccine candidate that could soon be approved for use. Investors are betting on a quick return to normal, including a resumption of regular airline bookings.
United Airlines (UAL) is up 18% since the Pfizer vaccine candidate news broke last Monday, Southwest Airlines (LUV) is up over 15%, and American Airlines Group (AAL) is up nearly 12%. An industry bellwether that tracks airline stocks, the U.S. Global Jets ETF (JETS) is up over 66% since its May 6 low.
But as I’ve said before, all that glitters is not gold. The reality is that we’re still living with the pandemic, and it will take some time for life to return to normal. For example, the CDC just advised folks not to travel on Thanksgiving as infections surge across the country. So, it’s not surprising that my Portfolio Grader still gives these three airline stocks a failing grade…
The good news for folks not sure where to invest right now is that I’ve found plenty of fundamentally superior stocks that are in prime position to benefit during the pandemic and beyond.
It’s a strategy that’s worked and paid off for us in 2020—our Growth Investor Buy List has rallied an impressive 30% in 2020 so far.
The truth of the matter is that the events of 2020 have created a new environment that will linger well into the New Year. Here at Growth Investor, we’ve already taken steps to adjust our Buy Lists to align with the new market and economic environment, while staying true to our focus of investing in companies with superior fundamentals.
In fact, our Growth Investor Buy List stocks posted average annual sales growth of 45.3% and average annual earnings growth of 63.7% in the third quarter. Our average Buy List stock also topped analysts’ earnings estimates by 34.4%. So, it’s not too surprising that we weathered the “madness” of 2020, with our High-Growth Investments Buy List rallying 30% and our Elite Dividend Buy List trading relatively flat year-to-date. In comparison, the S&P 500 is up about 10% this year.
Looking ahead to 2021, I think we’ve got a lot to look forward to. It’s why I’m adding three new stocks with stunning forecasted earnings to the Buy List in today’s Growth Investor December Monthly Issue. I’ve also spotted five trends I’m currently monitoring, and my Growth Investor Buy Lists are well-positioned to further benefit from each in the New Year.
What to Do Next
Whatever happens in the coming weeks, over the longer term, I think stocks are set to go much higher. Actually, I’m predicting the Dow will hit 200,000 in the coming years.
Now, that might sound crazy, but history proves otherwise.
During the ‘80s, the Dow went on a 234% tear and by the end of the decade, analysts and the media were calling for an end to the good times and a market crash in the early ‘90s, much like some naysayers are doing today. Instead, the Dow surged almost twice as high in the 90s as it did in the ‘80s.
My special Financial Foreshock Summit has all the details on the factors I believe will drive stocks higher. (You can watch my free briefing here.) I also share where I see the best opportunity to play the growth.
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:
The Boeing Company (BA), Pfizer (PFE)