| flash alert Your Growth Investor VIP Quarterly Special Market Podcast Dear Savio, I am pleased to send you your exclusive quarterly Growth Investor VIP podcast! As a Growth Investor VIP member, you will receive an exclusive podcast from me once a quarter. Now, the first quarter of 2022 was a tough quarter for Wall Street to stomach. The broader market fell off a cliff about a month-and-a-half into the first quarter. By early March, the S&P 500 and Dow had corrected, and the NASDAQ officially entered a bear market. The good news is that the broader market did bounce back in the second half of March, but the major indices ultimately ended the quarter on a lower note. The reality is there was a lot of anxiety and uncertainty swirling around Wall Street. Namely, the Russia-Ukraine conflict, what the Federal Reserve’s plans were in regard to raising key interest rates, and the hideous inflation. As a result, economic growth slowed worldwide; Russia fell into a depression and Europe fell into a recession. The good news for the U.S. is that despite the fact that GDP growth has stalled a bit here, we are still growing. So, we don’t need to worry about recession in the U.S. just yet, though this is something I am keeping a very close eye on. As a result of the aforementioned issues, investors are looking for safe investments to essentially “hide” in until the dust settles. In other words, they’re investing in companies that can profit in an inflationary environment. We’re well ahead of the curve here, as we’ve spent the last few months loading up on “inflation-proof” stocks. In this exclusive Growth Investor VIP podcast, I’ll review the Growth Investor companies that are best positioned to profit in this environment. I’ll also recap the events that took place in the first quarter and how they impacted the broader market. To listen to your exclusive Growth Investor podcast, please click here. You can also read the full transcript below. *************** This is Louis Navellier, and welcome to our exclusive Growth Investor VIP Quarterly podcast. Well, let me just review how the quarter went. Obviously, the market did not get up on the right side of the bed in January, and we had a lot of anxieties and uncertainties. And that was unfortunate because the earnings were phenomenal. The fourth-quarter results were phenomenal, and if there’s been any surprise, I expected earnings to decelerate going into the second quarter. But because we made this transition to more energy, more fertilizer stocks, more commodity-related stocks, actual sales and earnings momentum are still accelerating right now. So, right now we’re looking at 1.3% GDP growth for the first quarter, according to the Atlanta Fed; and we grew at 6.9% in the fourth quarter. That’s the official estimate. So, we have decelerated here quite a bit, but the stock market it traditionally a great, great inflation hedge. And we have this hideous stagflation now. And the key is to find companies that are profiting from inflation and raising their prices. Now, obviously we can go out and buy a lot of residential real estate, but as interest rates go up, the real estate appreciation is going to be, for lack of a better word, kind of neutered by the Fed’s rate increases. So, I think the market has changed its character quite a bit. It’s gone from a very optimistic market to a market that wants to be an oasis in the middle of this hideous inflation that we have around the world. And, obviously, energy is an oasis, fertilizer is an oasis, the semiconductors are an oasis, any of the shipping companies are an oasis. So, there’s a lot of good places to, for a lack of a better word, hide, and profit from the inflationary environment we’re in. Now, as far as the market is concerned, you know, a lot of people have been speculating ETFs, it was reported by the Wall Street Journal. And we had a very strong finish to the end of the quarter the second half of March, and it really looks like a lot of those people that were trying to short the market had to run for cover because we had a broad-based rally that was outstanding. Of course, I enjoy the last two weeks of every quarter because that is what they call quarter-end window dressing season, where our stocks naturally prosper. Professional managers want to add “pretty” stocks to their portfolios for their quarter-end reports for their clients and, of course, lock and load for the next quarterly announcement season. So, I think we’re okay, but it is every stock for itself, and it is a more narrow market. And there are still a lot of uncertainties out there. Obviously, the biggest uncertainty has been the yield curve inversion. And this has happened before, but usually the stock market goes up when there’s a yield curve inversion, and I think the main reason is bond investors don’t like to lose money. So, if you’re a bond investor, the first quarter was horrible for you. So, you have two choices: You can run to the immediate securities, like the two-year Treasury yield, which is almost the same as the 10-year – it has been higher before it inverted, or you can try stocks, and especially the stocks that profit from inflation. So that’s kind of where you go. But longer term, an inverted yield curve will cut off credit to businesses. It will squeeze the profits of the financials. As you know I don’t have financial stocks, I’m an ex-banking analyst. The bottom line is an inverted yield curve will cause the Fed to catch up with market rates. But they don’t want to invert the curve too much because if they do, they’re going to trigger a recession. Right now, again, we don’t have the risk of recession, but we are watching it very, very carefully. Now, what I like to watch is retail sales. And I’ve noticed, even though January retail sales were spectacular, February retail sales, believe it or not, didn’t grow as fast as inflation. So that means we’re losing purchasing power because of higher food and energy prices. So, we have to watch this. There’s something called the “Present Situation” component of consumer confidence. That’s very high right now. But consumers are not that optimistic looking forward. And obviously it has something to do with inflation, and people start to change their patterns. So, fascinating time we’re in, folks. All I can tell you is that I’ve been here before. You know, I’ve been around a long time. The last time we had this kind of environment in the late ’70s, early ’80s, that’s really when I was trained. I also worked for the Fed when rates went – one year, this was when Paul Volcker was running the Federal Reserve – rates went from 20% to 10% to 20%, in one year, which was just wild. Absolutely wild. And we’re not going to have anything like that now but we might have half a point Fed rate increase because rates have gone up so much. So, let’s talk about some of our new stocks. I hope you’re excited about CF Industries Holdings (CF). This is a fertilizer company. Obviously, Ukraine and Russia provide a lot of fertilizer, too. You know, they’re big breadbaskets. Between Ukraine and Russia, they are 30% of the world’s wheat production. But they also provide a lot of fertilizer. So, when the war started, CF Industries stepped up to the plate and provided a lot of fertilizer, so that was excellent. And their sales are expected to grow at 141.4%. Their earnings are expected to grow 510%. Analysts in the last 90 days revised their estimates higher. CF Industries doesn’t always have a nice earnings surprise, but if it’s ever going to surprise it should be now. Another safe energy stock you can look at is ConocoPhillips (COP). It has very good sales growth. Earnings are supposed to be up 104%. Analysts have revised their estimates dramatically higher in the last 90 days. So, ConocoPhillips is a big integrative energy company that I expect to prosper. It’s one of our good additions. Now, we’ve had Devon Energy Corporation (DVN) for a while on our Elite Dividend Payer list. And it also passes our growth criteria, just so you know. But their sales are supposed to be up 99.6%. Their earnings are supposed to be up 262.2%. And, again, the analysts have revised their estimates higher. So, Devon Energy is one of the better ones, and big fat juicy dividend yield there, too. And anther one we have is Nutrien Ltd. (NTR), which is a fertilizer company up in Saskatoon, Canada. I think that’s the town it’s in. Saskatchewan, I believe. That’s the Province. Their earnings are supposed to be spectacular. Analysts have revised their estimates higher. Yet another pure fertilizer play. And then one of the stocks that’s confusing a lot of people is ZIM Integrated Shipping Service Ltd. (ZIM). ZIM is an Israeli shipping company. And their sales are supposed to be up 114.8%. Their earnings are supposed to be up 142.4%. The analysts have aggressively revised their estimates over 50% higher in the last 90 days, actually more like 60% higher. And they do a lot of agricultural shipping. They’re booming amidst all the chaos in the world, and they also do a lot of freight forwarding, and they also ship a lot of fertilizer as well. They’re based in Israel. Busy company, well managed. A lot of you have been getting excited about its dividend because people see that it’s paid a 26.77% annual dividend. The problem is those are extraordinary dividends. They are not sustainable. This is common with all the shipping stocks. They’re taking their extraordinary dividends. And, of course, being Israeli-based, you can have some foreign withholding taxes on that as well. So, I hope you get a feel for why earnings are accelerating versus decelerating. They’re decelerating for the overall market. The other thing you’ve got to keep an eye on for the overall market is that some of the big multinationals have to have some extraordinary items because of the Russian deal. So, McDonald’s: 9% of their sales are in Russia. Well, that’s going to disappear now. So, the big multinationals that do a lot of business in Russia are going to have some negative surprises here. But our stocks are locked and loaded for another great earnings announcement season. I have to say, I’m shocked that earnings momentum and sales momentum are still accelerating, but the big change in the portfolio – we made a lot of changes here – was to load up on all the inflation hedges. We already had some, like the semiconductors and things like that, like NVIDIA Corporation (NVDA) that has pricing power and all that good stuff. But we really loaded up on the companies that are going to prosper in this inflationary environment. As far as how long inflation is going to last: It’s going to last to the next year. The Fed’s official inflation indicator, Personal Consumption Expense (PCE) index, is running at 6.4%. Core rate is a bit lower. But the Fed is going to be raising rates for a while, and we’ll see how long it lasts. And the reason I say that: Market rates went up. But the Fed does not want to invert the curve. So, a flat yield curve we can tolerate, and an inverted yield curve we can’t. So that’s the big thing to keep an eye on. And we do have a healthy consumer. We have a lot of companies with record order backlogs. We have all the supply chain glitches out there. But overall, I feel very, very good, and I think things are going to be fine. So, hang on, folks. Enjoy the ride. Sometimes in early April, it’s kind of the pause that refreshes, and then by the third week of April our earnings will really start coming out. Second week is more financials. And we’ll just count on those earnings one by one to dropkick and drive our stocks higher. So, I hope you appreciate all the changes we made to Growth Investor. We certainly locked in on the hot spots of the market, and we’re certainly poised to prosper from inflation. And the stagflation environment we’re in is definitely going to persist much of this year. The earliest relief I see is September. And what will happen in September is worldwide energy demand will start to moderate and maybe, maybe energy starts to settle back down then. But right now when you have higher energy prices, it forces all business to raise their prices across the board because all the shipping costs are so much higher. So, that’s it. It’s Louis Navellier. I’ll do these special podcasts for Growth Investor every quarter, but in the meantime keep your good questions coming. We like to answer all your great questions. Take care, everybody. Sincerely, |
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