Being Thankful for 2021 and the Decade Ahead

The big indexes are up, up, up... All signs indicate a good December, too... Powell's renomination creating stability in the market... Being thankful for 2021 and the decade ahead... When Kodak went crypto... And a swimwear company went EV... Riding megatrends into the Roaring 2020s...

Stock investors have a lot to be thankful for this year...

In today's Digest, I (Kim Iskyan) will look at why investors should be grateful, why there are more good things ahead, and how to ensure a decade of gratitude by finding some real hypergrowth stocks...

At the top of my list is the approximate 25% return in the S&P 500 Index and the Nasdaq Composite Index so far this year... Since market lows in March 2020, these indexes have both more than doubled.

And the S&P 500 is flirting with another all-time record. The number of times this year that it closed the end of a trading day at an all-time high was 66 (with the latest last Thursday). That's second only to 1995, when the index recorded 77 all-time-high closes.

According to Dow Jones data, since 1928, the S&P 500 has closed at a new high 50 times or more during a calendar year in only seven years (including this year). The most recent were in 2014 (53 new highs) and 2017 (62).

During those six years of 50-plus trading days that closed at all-time highs, the index on average moved up 23%.

History suggests that chances are good 2021 will finish strong...

According to data compiled by Yardeni Research, the S&P 500 increases 1.3% on average during the month of December. From 1928 through 2020, shares moved up in December 73% of the time.

And that's despite the fact that December is the tax-loss selling season. That's when investors sell shares at a loss with an eye toward offsetting the gains on the sale of other positions, reducing the overall amount of gains in a portfolio... thereby shrinking the tax bill due to Uncle Sam.

When many investors are sitting on big gains, stocks that are candidates for tax-loss selling may take a particularly tough beating... which means that perfectly good companies whose stocks have taken a hit may fall even further than their valuations call for – creating opportunities for eagle-eyed investors.

Another good sign for stocks in December is the renomination of Federal Reserve Chair Jerome Powell...

On Monday, President Joe Biden ended months of speculation by announcing that the current head of the Fed will be put forward for a second term. Current Fed board member Lael Brainard, who was considered Powell's main competition for the top job, will be nominated to be vice chair of the U.S. central bank.

Stansberry NewsWire editor C. Scott Garliss described the decision as "the ideal scenario from Wall Street's perspective." While many, including writers for the Digest, have been critical of Powell being slow to move against inflation, a change at the head of the Fed might have created uncertainty for investors... The stability caused by Powell's renominations is likely a good thing for stocks.

His renomination means that the Fed will continue to unwind its $120-billion-per-month purchases of U.S. Treasury bonds and mortgage bond securities on its previously announced timetable, as we explained earlier this month... It'll also remain clear about its view on possible hikes in interest rates.

Another positive sign is that global supply-chain challenges may be easing...

On November 10, we pointed to the decline in the Baltic Dry Index, which measures demand for capacity to ship dry goods, as an early sign of supply-chain problems easing up. The fraying of the global supply chain has been an important driver of rising prices... as well as concerns that holiday gifts may not arrive on time.

And as we wrote then, the automotive sector – one of the first industries to feel the pain from supply-chain issues – was seeing signs of improvement...

Several global automakers have indicated that they expect semiconductor supplies to increase... the shortage of which has been a big bottleneck for cars, as well as everything else – from cellphones to cars to football helmets – that uses microchips.

And now... it looks like that's coming to pass. "Supply-Chain Problems Show Signs of Easing" was a Wall Street Journal headline over the weekend. Though something resembling normal in supply chains won't return until at least next year – fingers crossed – challenges are "beginning to recede," the Journal reported.

What that means is that the production stymied by a lack of inputs will soon resume... allowing continued strong consumer demand to be met and resulting in a decline in logistics and transportation costs.

In the end, inflation – at the top of the Fed's agenda and a central concern for investors – could start to drop. That, in turn, may take some of the pressure off the Fed to raise interest rates sooner rather than later.

On another front, companies latching on to the 'latest hot thing' is a recurring sign of bubbly markets...

As share prices rise, some companies will go to extraordinary lengths to ride the coattails of the skyrocketing stock market. As Stansberry NewsWire analyst Nick Koziol explained...

Just look at the dot-com bubble, where just about any company that slapped a "dot-com" to the end of its name saw its shares rise in the market's run-up in the late 1990s.

And that ended badly, of course, with the burst of the dot-com bubble. The share prices of many companies, for example, focused mainly on "eyeballs" as a valuation parameter – rather than old-fashioned revenues and profits – death spiraled to zero.

We've seen this phenomenon more recently with the blockchain. Nick explains...

In late 2017, bitcoin was making its first run at $20,000, and cryptocurrencies were making headlines left and right. Some underperforming companies looking to take advantage of the hype sought out ways to tie their failing businesses to the crypto industry...

One of the most prominent – and egregious – examples was iced-tea and bottled-beverage maker Long Island Iced Tea. In 2017, with nothing more to show than a press release, the company announced that it would change its name to Long Blockchain... and supposedly pivot its business to the crypto world. The shares moved up more than 400% after the announcement.

That didn't work out so well... The stock was eventually kicked out of the Nasdaq because of volatile price swings, and then in February, it was delisted altogether because it hadn't filed its financial reports since 2018.

Similarly, in early 2018, Eastman Kodak (KODK) – the corporate titan that for 74 years, until 2004, held a position as one of 30 blue-chip companies in the Dow Jones Industrial Average – announced that it would also pivot to blockchain and launch its own cryptocurrency... Kodak's shares tripled on the news.

But that didn't pan out for Kodak either. In mid-2020, the company announced yet another change of direction – into pharmaceuticals – and more than tripled on the news. KODK has since fallen more than 80%.

And the current hot thing, it appears, is electric vehicles (EVs)...

EV poster child Tesla (TSLA), up nearly 1,600% over the past two years, reflects the enthusiasm for the growing industry. With a market capitalization of $1.1 trillion, it's worth as much as the market cap of the next 10 most valuable automakers... combined.

Investor eagerness for EVs is also highlighted by Rivian Automotive (RIVN), an electric SUV and pickup-truck producer that raised nearly $12 billion in an initial public offering ("IPO") earlier this month. It was the biggest IPO of the year – and the largest in the U.S. since that of Facebook (FB) – now called Meta Platforms – in 2012.

Rivian is now valued at about $100 billion. That's more than General Motors (GM), which last year sold 7 million vehicles... by comparison, Rivian aims to produce around 1,200 (that's not a typo) by the end of this year, and as of now, it has zero revenue.

And other companies are eager to catch some of the EV gold dust, as Nick explained...

[A few weeks ago], swimwear company Naked Brand (NAKD) announced a surprising acquisition. It said that it had agreed to acquire privately held EV startup Cenntro Automotive in an all-stock deal. Shares of Naked Brand popped 40% in after-hours trading after the announcement. That's right – a swimwear and underwear company's stock surged because it bought an EV firm.

That doesn't mean that the EV bubble is about to burst ‒ though it already has for some companies in the sector, including Workhorse (WKHS), Nikola (NKLA), and Lordstown Motors (RIDE) ‒ but it's another sign of the sense of speculation that's continuing to sweep through markets.

But that doesn't invalidate the trend...

Of course, bubbles burst because investor overenthusiasm sends stock prices artificially high. The subsequent mass sell-off quite often takes good stocks down with the bad... The difference is that the good stocks come back ‒ and the bad ones do not.

Just look at companies like Amazon (AMZN), Apple (AAPL), and eBay (EBAY) as a few of many examples whose stock prices dropped significantly in the early 2000 dot-com bubble explosion... Today, EBAY is up 20-fold, AAPL up 150-fold, and AMZN even more.

The same will be true of the EV sector. EV sales will no doubt increase dramatically over this decade.

As Stansberry Research senior analyst Matt McCall wrote in a recent issue of MegaTrend Investor...

Global EV sales could reach 40 million by 2025, up from 2.2 million in 2020 – a compound annual growth rate of 82%!

That's going to help the stock price of many EV makers, but it will also create other high-growth winners... companies that produce things like parts, semiconductors, batteries, and battery chargers that are critical to the operation of EVs.

In fact, the three stocks that Matt has in the Transportation 2.0 basket of his MegaTrend Investor portfolio are up 18%, 21%, and 41% in the month or so since he announced them... Not one is specifically an EV maker.

Matt refers to this next decade as the "Roaring 2020s" – what he says will be the greatest 10 years in the stock market's history. Matt's approach is to find the hypergrowth trends that will explode over the next few years... and then identify the stocks in those sectors that will lead the charge.

These are the companies that will create real value... not the ones that will slap EV to their names and go along for a free stock ride. And if there is a bursting bubble, these are the stocks that are likely the first to rebound.

The next issue of Matt McCall's MegaTrend Investor will publish December 20.

To learn more about what Matt has to say and to make the most of the Roaring 2020s, click here now... It's something you will look back 10 Thanksgivings from now and be grateful for.

Meanwhile, have a Happy Thanksgiving.

The Latest Episode of Matt McCall's Podcast Is Live

In the latest episode of his new podcast, Making Money With Matt McCall, Matt addresses the concern of rising inflation and looming recession. Plus, he discusses ways to manage risk while capturing wins. He also talks about bitcoin, electric-vehicle stocks, his "basket approach" to investing, and more...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

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New 52-week highs (as of 11/23/21): Apple (AAPL), Altius Renewable Royalties (ARR.TO), Costco Wholesale (COST), Eagle Materials (EXP), Formula One Group (FWONA), W.W. Grainger (GWW), iShares U.S. Home Construction Fund (ITB), SPDR S&P Regional Banking Fund (KRE), Lynas Rare Earths (LYSDY), McDonald's (MCD), MYR Group (MYRG), NVR (NVR), Procter & Gamble (PG), and W.R. Berkley (WRB).

A housekeeping note before we get into today's mailbag... We won't publish a regular Digest on Friday because our offices will be closed for a long holiday weekend. However, we're happy to say that we've arranged a special three-part Masters Series with valuable insights from the founder of one of our corporate affiliates. Watch your e-mail inbox on Friday around noon Eastern time for Part I.

Perhaps fittingly with Thanksgiving tomorrow, the mailbag is a smorgasbord today. It includes a subscriber's comment about yesterday's Digest from our colleague Dan Ferris... a critique of Monday's Digest from True Wealth analyst Chris Igou... and a couple of other reactions to recent Stansberry Research offerings. As always, tell us what's on your mind at feedback@stansberryresearch.com.

"First off, kudos to Dan Ferris for such an entertaining and truthful article in [Tuesday's] Stansberry Digest. He really hit the nail on the head when he said nobody can predict the future. He also pointed out how valuable it is to have analysts who believe the market will be going up, as well as analysts that believe it will be going down... but to put the emphasis on us, the investor deciding what we believe, and also being prepared for the unexpected.

"It is always a pleasure to read Dan Ferris (but sometimes I have to figure out when he is being sarcastic or serious). He did ask what Stansberry Research publication we are most thankful for and why so I will answer that...

"I am most thankful for the Stansberry's Investment Advisory. The reason is that I like the in-depth analysis, as well as the fact that the advice is clear and easy to understand.

"After reading the analysis for a given recommendation, I can decide if it is a choice for something for me to invest in. And I feel I have a wide range of information (in addition to what I will research on my own) from which to decide.

"Also, over time, I have found I feel more comfortable with the recommendations given there because I feel that I have learned to trust the judgment and opinion of the recommendation. Also, I like the way they tell us when to sell and that they raise the 'buy up to' price as things change.

"Thanks for all that Stansberry Research is doing for investors!" – Paid-up subscriber Francis M.

"Chris Igou's analysis of the impact of interest rate hikes on the market is interesting, but the comment that the market powered through hikes from 2016 to 2018 is woefully misleading... since we know that the market corrected 20% in late 2018 and only recovered after the Fed recanted and lowered rates.

"Who can sit with confidence through an event like that, 'knowing' that our mighty and benevolent coalition of central bankers will come to our rescue and lead us back into the light?

"Buy and hold is nice if you expect to live forever, but sideways markets can last for more than a decade and recur like clockwork after a bull market. The major indices suck erstwhile gains from portfolios that always come back to the mean.

"These are the lost decades that have been happening for the past 100 years." – Paid-up subscriber Mike G.

"Just wanted to drop a quick note to Matt [McCall]...

"I just watched his most recent Making Money With Matt McCall podcast.

"Don't worry about any naysayers out there... I always take away great stock picks from you, Matt.

"I'm a believer in your megatrends approach with its massive potential upside.

"I especially like it when you project sales and earnings estimates out a few years, so we can see the potential for each company. Obviously, there are risks, and estimates are estimates, and stocks don't all go up in a straight line. I do believe that your basket approach is wise.

"You seemed down a bit [in the podcast], and I just wanted to encourage you to keep up the good work. I'm excited that you are with Stansberry Research, and I read everything I can get my hands on that you write. All the best." – Paid-up subscriber David D.

"Ben Morris and Drew McConnell did a great job with their explanation of investor versus trader [for their subscribers in Tuesday's DailyWealth Trader]. I was a flip-flopper for the first 10 years of my trading experience (1986 to 1996).

"It was not until I read William O'Neil's book How to Make Money in Stocks that I knew trading growth stocks would be my strategy of choice. (In the last two years, I have refined that strategy using the tools of Mark Minervini.)

"My issue with your common 25% stop loss is the cost of recovery. It takes 33% gain to recover from a 25% loss.

"That said, I am always careful not to become an 'accidental investor.'" – Paid-up subscriber Brian C.

Happy Thanksgiving,

Kim Iskyan
Ashton, Maryland
November 24, 2021