Global Markets Bounce — and an Update on my $25,000 Bet Against Buffett

Nicholas Vardy

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

Stock markets across the globe bounced strongly over the past week. The Dow Jones was up 1.34%, the S&P 500 rose 1.33% and the NASDAQ jumped 2.07%. The MCSI Emerging Markets Index recovered a strong 3.16%.

Big gainers in your Alpha Investor Letter portfolio included the Market Vectors Biotech ETF (BBH), jumping 4.94%; Allergan, Inc. (AGN) (formerly Actavis), up 4.80%; iShares Currency Hedged MSCI Germany (HEWG), rising 4.64%; Skyworks Solutions Inc. (SWKS), leaping 3.71%; and Google Inc. (GOOGL), gaining 3.40%.

Several of your positions rose back above their 50-day moving averages (MA) and moved to a BUY. These include the Guggenheim Spin-Off (CSD), the iShares Currency Hedged MSCI Germany (HEWG), Google Inc. (GOOGL) and the Guggenheim S&P 500 Equal Weight ETF (RSP).

A large group of your Alpha Investor Letter positions also hit new 52-week highs, including the Vanguard Russell 2000 Index ETF (VTWO), Markel Corp. (MKL), Skyworks Solutions Inc. (SWKS), Market Vectors Biotech ETF (BBH), Illumina Inc. (ILMN), First Trust US IPO ETF (FPX) and the PureFunds ISE Cyber Security ETF (HACK).

After this past week’s rally, the S&P 500 is back near the top of its trading range.

The question remains whether the U.S. stock market can break out to the upside. With all major market sentiment indicators right at the cusp of neutral, it remains hard to say.

That said, as your Alpha Investor Letter portfolio confirms, certain sectors — biotechnology, U.S. small caps and cybersecurity stocks — are trouncing the broader market (i.e. U.S. large-cap stocks) in terms of performance.

A comparison of the S&P 500, Berkshire Hathaway and the Russell 2000 small-cap stock index is revealing in this way.


As you can see, large-cap-weighted Berkshire Hathaway (BRK-B) is suffering mightily compared to the U.S. Russell 2000 small cap index so far in 2015. Of course, the situation was the reverse last year, when it was Warren Buffett’s investment vehicle that outperformed. You may recall that I made a $25,000 bet last year that U.S. small caps would outperform Berkshire over the next 10 years. As it stands now, Berkshire is still ahead. But I expect that to change in the next few months as U.S. small caps continue to regain momentum.

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Portfolio Update

Berkshire Hathaway (BRK-B) rose 1.16% over the last five trading days. Berkshire Hathaway bought an additional 5.4% stake in Heinz recently, making Warren Buffett’s firm the majority shareholder. Berkshire Hathaway now owns 52.5% of Heinz. Trading below its 50-day moving average, BRK-B is a HOLD.

Guggenheim Spin-Off (CSD) added 2.50%. CSD tracks the Beacon Spin-off Index, an index that focuses on about 40 companies spun off within the past 30 months and six months prior to their rebalance date. This gives CSD almost unique exposure to this investment theme, and only one similar exchange-traded fund (ETF) competes with it. CSD rose above the 50-day moving average (MA) last week to become a BUY.

Vanguard Global ex-US Real Estate ETF (VNQI) gained 1.39% last week. This global real estate ETF gives you exposure to the positive effects of the European Central Bank’s (ECB) huge bond-buying stimulus program. The ECB’s objective is to stimulate both the economy and real estate market through lower interest rates. VNQI’s current 3.85% dividend yield also adds to these gains. VNQI is currently a HOLD.

Global X Guru Index ETF (GURU) added 1.51%. GURU’s trading pattern has been very positive as of late, respecting the 50-day MA as a support level and making a recent third attempt to break up past the 52-week high. Currently just pennies under this level, GURU appears ready to break out to a new high. GURU is a BUY.

Vanguard Russell 2000 Index ETF (VTWO) jumped 2.18% last week. One look at a one-year chart of this ETF says it all. VTWO spiked higher last week, breaking briskly above its recent trading range to make a solid new 52-week high. VTWO appears to be firmly on a run higher. VTWO is a BUY.

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Market Vectors Biotech ETF (BBH) gained a strong 4.94% last week. Betting on the strength in the biotech sector has been a terrific bet so far, and I expect it to continue for some time. BBH broke swiftly and significantly higher to pass a 4x-tested resistance level and is making higher highs in a comfortable fashion. The biotech bull is on the run once again. BBH is a BUY.

iShares Currency Hedged MSCI Germany (HEWG) gained 4.64%. HEWG remains a positive play on the European recovery, the German economy (one of Europe’s strongest) and the dollar’s rally. HEWG moved up through the 50-day MA yesterday after trading beneath it since late April. If HEWG can hold this line, HEWG will likely continue gains. HEWG changed to a BUY.

Google Inc. (GOOGL) rose 3.40%. Many of us use Google’s free email service, and this is but one of the primary reasons its advertising activities are so successful and lucrative. Google just recently gave us one more fantastic reason to use its email — the magic of an “Undo Send” feature. Turning this new feature on allows you to pull back a sent email within a certain time frame after you’ve pressed that “Send” button-of-no-return. GOOGL moved upwards to become a BUY.

iShares MSCI Philippines (EPHE) added 1.26% last week. This play on the Philippines has struggled over recent weeks. However, since bottoming very near your stop price two weeks ago, EPHE has taken a sharp and convincing turn higher. EPHE is making an excellent comeback but is a HOLD at the moment.

AdvisorShares TrimTabs Float Shrink ETF (TTFS) climbed 1.45%. This ETF has seen total inflows of $241 million in assets under management since opening in October 2011, and its Russell 3000-beating performance speaks loudly as to why. TTFS is up 15% since last June as compared to a 9% gain for the Russell 3000. A recent remark by TrimTabs CEO Charles Biderman gives some interesting insight as to his thinking on this fund: “What I tell people is that we are a hedge fund disguised as an ETF and with ETF fees,” said Biderman. “The FCFI fee is 69 basis points and TTFS is 99 basis points. It’s a lot cheaper than a hedge fund, and so far with TTFS the results have been much better than most hedge funds.” TTFS is a BUY.

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Latest Special Reports

As a courtesy, I want to bring to the new special report, The Top 15 Stocks for 2015, which features three of my top investment recommendations, as well as bonus picks from each of my fellow investment newsletter editors at Eagle. Also check out new and updated versions of other reports, including My #1 Investment for the Next 17 Years: Where I am Investing 100% of My Son’s College Education Fund and 300% Greater Returns on my #1 Investment: Turning that Extra $108,849 into $325,000 or More. These reports and others are available FREE on my website to you.

Nicholas Vardy

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