Our Portfolio Shines in Sideways-Trading Market

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

The past week was mixed for U.S. markets, with the Dow Jones down 0.16%, the S&P 500 up 0.26% and the NASDAQ climbing 0.87%. Global stock markets continued to retreat, with MCSI Emerging Markets Index down 2.23%.

Big gainers in your Alpha Investor Letter portfolio included Skyworks Solutions Inc. (SWKS), which added 4.24%; Actavis plc (ACT), which rose 1.88%; and Markel Corp. (MKL), which gained 1.58%. Both Skyworks Solutions Inc. (SWKS) and WisdomTree Japan Hedged Equity ETF (DXJ) also hit new 52-week highs.

Several positions pulled back below their 50-day moving averages and changed to a HOLD. These include the Guggenheim Spin-Off (CSD), the iShares S&P Global Timber & Forestry ETF (WOOD) and the Vanguard Global ex-US Real Estate ETF (VNQI).

Three positions moved back above their 50-day moving average and changed to a BUY. They are the Vanguard Russell 2000 Index ETF (VTWO), Markel Corp. (MKL) and Google Inc. (GOOGL).

As of yesterday’s close, 15 out of 20 positions are recording gains in your Alpha Investor Letter portfolio. And you are enjoying a strong start to the year. While the S&P 500 is up 3.29% in 2015, Skyworks is up 49.06%, Actavis is up 21.33%, the Market Vectors Biotech ETF (BBH) is up 15.57% and Markel Corp. (MKL) is up 14.28%. An additional 11 positions have beaten the S&P 500 so far in 2015.

One market we haven’t been exposed to this year is China, which is in the midst of a classic stock market mania. There is little doubt in my mind that this will all end in tears. And as such, I believe it is a market to be played by short-term traders. Indeed, I am doing just that with a leveraged bet on China for my Triple Digit Trader subscribers. You can read about my assessment of the Chinese market mania in yesterday’s edition of The Global Guru.

Finally, it was good to connect with many of you last week on our quarterly subscriber conference call. As you heard, I continue to be bullish on the biotechnology sector. And with plenty of biotech plays in the Alpha Investor Letter portfolio, Actavis plc (ACT), Market Vectors Biotech ETF (BBH) and Illumina Inc. (ILMN), I expect to see strong gains in the months ahead. If you want to hear a recording of the call, you can click here.

Portfolio Update

Guggenheim Spin-Off (CSD) added 0.23%. CSD allows you to profit from corporate spin-offs, and 2014 was a record year for this activity. Sixty divestitures occurred last year, setting a new 10-year high. As of the end of last quarter, 46 more divestitures have been announced for 2015. CSD dipped below the 50-day moving average (MA) to become a HOLD.

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Global X Guru Index ETF (GURU) gained 0.56% over the previous week. Despite the weakness in markets, GURU has held up well. Picking winners in this market now requires the hard work and insight of good old-fashioned “stock-picking.” As GURU’s name suggests, this is where the market wizards should be able to excel and continue churning out gains. GURU remains a BUY.

Vanguard Russell 2000 Index ETF (VTWO) gained 0.96%. Despite the Dow Jones Industrial Average ending the week with a slight loss and with the S&P 500 up only minimally, small caps managed nearly a 1% gain last week. Small-cap companies typically carry more debt than larger corporations, making them more sensitive to interest rates. However, with the Fed clouding the waters on the future of expected interest rate hikes, VTWO has managed an excellent recovery from its late April correction. VTWO rose above the 50-day MA to become a BUY.

Skyworks Solutions Inc. (SWKS) added 4.24% last week and hit yet another new 52-week high. Analyst firm Canaccord Genuity reiterated its “Buy” rating on SWKS last week and increased its price target to $130. This new price target represents a potential 20% gain from yesterday’s closing stock price. SWKS is a BUY.

Cambria Global Value ETF (GVAL) fell 0.75%. Despite correcting over the past two weeks, GVAL’s simple investment case remains intact — buy the cheapest markets. Slow stochastics, one of my favorite technical indicators, is indicating a buy point for GVAL at the moment. As well, the 50-day and 200-day MAs touched together yesterday, right at the fund’s current price, making for a strong foundation upon which GVAL could gain. GVAL is a BUY.

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Actavis plc (ACT) rose 1.88%. This drug maker received Food and Drug Administration (FDA) approval recently to begin selling its own generic form of popular cold medication Mucinex D. Although non-prescription, this medication is only available directly from pharmacy retailers and has also enjoyed limited competition. The excellent timing on this approval also gives ACT a few months to get this medicine on shelves in time for the upcoming cold season. ACT is a BUY.

Google Inc. (GOOGL) added 1.24% over the past five trading days. Google held its high-profile Google I/O annual conference last week and unveiled several new initiatives that will cement Google’s further technology superiority. Google announced Android Pay, a similar payment system to Apple Pay and Project Brillo, Google’s own foray into the “Internet of Everything” trend. Google also announced the next version of its mobile operating system (OS), named Android M (for the time being). This new OS will greatly minimize battery usage and significantly extend battery life in Android-based devices. GOOGL is a BUY.

WisdomTree Japan Hedged Equity ETF (DXJ) gained 0.47%. DXJ’s strong upward trend continued last week as this fund hit a new 52-week high on Monday. The resurgence of the U.S. dollar and significant weakening of the Japanese yen has been fuel on DXJ’s fire. CurrencyShares Japanese Yen Trust (FXY) has plunged as of late and now sits at 52-week lows. This move will likely have a further positive effect on DXJ. DXJ is a BUY.

Nicholas Vardy

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