Dear Savio, After the market’s strong run last week, which saw the Dow reach its 30,000 milestone, stocks are pulling back today. The reality is stocks were a bit overbought last week, so we were due for a breather. Value stocks, in particular, have done amazingly well. But, as I’ve discussed before, they also don’t have earnings to support their recent climb higher. Those investing in the cruise ship or airline companies have to take a “brave pill,” in my opinion. Essentially, value investors are betting that the coronavirus vaccine will be out quickly, and the world will get back to normal soon. I’m not willing to make that bet yet. I believe that it will take a long time to distribute the vaccine to everybody. I also expect the work-from-home trend to continue, as productivity has actually improved with more folks working remotely. This is good for our stocks, like Zoom Video Communications (ZM) and DocuSign, Inc. (DOCU), which I look to trek nicely higher following their earnings results this week. In addition, many places have reinstated restrictions, and some have even locked down again. This, in turn, will impact economic growth. For example, new home sales dipped 0.3% in October to an annual pace of 999,000. However, this still topped economists’ estimates for 970,000. While new home sales are still up over 20% year-over-year, affordability is now a big issue. Now, outside of economic trends and value stocks, there’s another big trend in the market right now. I’m talking about Environmental, Social and Corporate Governance (ESG) investing. Simply put, this is when investors chase after disruptive companies that are expected to be better for the environment; i.e., Nikola Corporation (NKLA) and QuantumScape Corporation (QS). As you may recall, I am not a fan of Nikola. In fact, earlier this year, I called it the biggest scam nowadays. It was set to do a deal with General Motors (GM), but that fell apart after it was announced that the company’s breakthrough fuel cell technology didn’t exist and the company’s founder and CEO was accused of fraud. Nikola will not be building its Badger electric pickup truck and it will also be refunding folks’ deposits. This is an example of a stock that had a whopping $28 billion market cap, despite having no sales and earnings to show for it—and it is now collapsing. The stock plummeted more than 20% today, and its market cap sits around $8 billion. I know there’s also been a lot of talk around QuantumScape, which will be the first to market with solid-state lithium metal batteries. The stock surged more than 60% after going public last Friday and is up more than 15% today. This is certainly exciting, but the issue here is that the first batteries won’t be installed until 2025, and the company won’t be profitable until 2027. So, folks jumping in now are taking a very big leap of faith. The bottom line: There’s a lot of ESG money chasing stocks right now. And when the market chases something without fundamentals, it has to correct. That’s exactly what we’re seeing today. For us, though, that’s not a problem. We only invest in fundamentally superior stocks—stocks with growing sales and earnings. So, I am very comfortable because this means that we’re going into the next earnings season locked and loaded, and I expect our stocks to continue to lead the market higher. The truth of the matter is investors always turn back to quality, and that’s exactly what we’re invested in. It’s why I view these pullbacks as excellent buying opportunities. Looking forward, we will continue adding more fundamentally superior stocks to our Buy Lists. In fact, I’m seeing more opportunities in international stocks; specifically, in China, Taiwan and Israel. With the U.S. dollar at a two-and-a-half year low, international stocks are set to benefit. If this is where we can find great sales and earnings growth, then this is where we’ll invest. So, I know that today’s gyrations might be a little disconcerting, but the reality is that we’re in a washing machine market. As such, we’ll likely continue to see a lot of up-and-down trading action. And that’s perfectly okay. The value shift is fizzling, dividend growth stocks are rebounding, and our high-quality stocks will rebound once the dust settles. To further discuss today’s market gyrations, as well as my latest thoughts on the lithium battery push, electric vehicles (EV), earnings season and the low interest rate environment, I recorded a Special Market Podcast. You can listen now by clicking here. And, if you encounter any technical issues with playing the recording, please contact my customer service team, and they'd be happy to get you squared away. Sincerely, 
Louis Navellier
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