Markets Steady — Even if It Doesn’t Feel Like It

Nicholas Vardy

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

U.S. stock markets ended the week higher with the Dow Jones up 0.89%, the S&P 500 rising 0.88% and the NASDAQ eking out a 0.21% gain.

In contrast, global markets were hit hard, with the MCSI Emerging Markets Index tumbling 3.86% as both the Russian and Chinese markets slid.

There were a handful of big gainers in your Alpha Investor Letter portfolio, including Markel Corp. (MKL), which jumped 6.55%; Google Inc. (GOOGL), which rose 1.85%; and Berkshire Hathaway (BRK-B), which climbed 1.71%. Biotech play Illumina Inc. (ILMN) advanced 1.56%.

Markel Corp. (MKL) and Illumina Inc. (ILMN) each hit a new 52-week high. Google Inc. (GOOGL) and First Trust US IPO ETF (FPX) rose back above their 50-day moving averages to a BUY.

A handful of your positions dropped below their 50-day moving averages and moved to a HOLD. These include the Vanguard Russell 2000 Index ETF (VTWO), Skyworks Solutions Inc. (SWKS) and the PureFunds ISE Cyber Security ETF (HACK).

With all the turmoil on Europe, you were stopped out of the iShares Currency Hedged MSCI Germany (HEWG).

Reasons to be pessimistic about the market abound. The Greek debt crisis has hit European stocks hard, and there is no immediate deal on the horizon. The Chinese stock market is in a freefall. Market sentiment has not been this weak since last October. We are in a traditionally weak time of the year for the markets. And for the first time in history, the S&P 500 closed below its opening price for the day for 10 days in a row. And U.S. stock futures are down 1% as I write this update.

Yet there are reasons to be bullish. Such extremes in market sentiment are often the best opportunities to enter the market. There are strong technical signs that the U.S. market may have bottomed at a crucial level (near the 200-day moving average) and in a crucial manner (for fans of Japanese candlestick charts).

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That said, it takes guts and gumption to add to any positions here until the market settles down.

So my recommendation remains to “Keep calm and carry on.”

Portfolio Update

Berkshire Hathaway (BRK-B) gained 1.71% over the holiday-shortened week. For the past nine years, Warren Buffett has donated shares of Berkshire Hathaway to five separate foundations. The most recent represents over $2.8 billion worth of donated stock. The shares were doled out to the following foundations: Bill and Melinda Gates, Susan Thompson Buffett, Sherwood, Howard G. Buffett and NoVo. Interestingly, Mr. Buffett has this money earmarked for use in actual operation of the foundations, not to just add growth capital to the existing endowment funds. BRK-B is a HOLD.

Vanguard Global ex-US Real Estate ETF (VNQI) lost 2.43% over the four-day trading week. Taking a technical look at VNQI, the future could be bright for this bet on global non-U.S. real estate. VNQI has made a fairly swift move lower to a strong support level at the $54.00 mark. VNQI has taken off higher from this level three times since October 2014 and made strong moves higher. Once the Greek debt situation stabilizes, this position should be bought near its current levels. VNQI is a HOLD.

Markel Corp. (MKL) jumped 6.55%. Markel didn’t get the memo about the recent broad market correction happening due to the over-spending habits of the Greek government. MKL shot to a new 52-week high last week on strong volume as it defied the anxiety in broader markets. MKL is now up over 32% in your portfolio. MKL is a BUY.

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Skyworks Solutions Inc. (SWKS) gave back 3.47%. This rock star position in your portfolio fell slightly last week as Oppenheimer released positive commentary for the company on Monday. SWKS is one of Oppenheimer’s top picks in the semiconductor sector, calling it “the best diversified play on increased RF complexity/content.” This positivity is largely based upon the coming production needs of the upcoming iPhone 6s. SWKS dipped below its 50-day moving average (MA) last week to become a HOLD.

Allergan plc (AGN) rose 1.17%. This firm has been growing by leaps and bounds, and it is due to its well-placed acquisitions that things continue to move in a positive direction. AGN just announced a deal to purchase the rights to two of biotech giant Merck & Co.’s migraine drugs for $250 million. AGN believes these experimental drugs have tremendous earnings potential and is moving them into phase 2 and phase 3 testing in 2016. AGN is a BUY.

Google Inc. (GOOGL) gained 1.85%. Search engine giant Yahoo recently ended a 10-year contract to work with Microsoft search technology, allowing them to shop freely for new search partnerships. Yahoo and search engine behemoth Google are now in talks about opening a test search partnership between the two corporations. GOOGL will report earnings on July 16 after markets close. GOOGL moved above the 50-day MA to become a BUY.

Illumina Inc. (ILMN) rose 1.56%. ILMN also hit a new 52-week high last week. Cowen raised its Illumina price target to $300 last week, citing its expected 20%+ year-over-year revenue growth. ILMN will report earnings on July 21, after markets close. ILMN is a BUY.

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First Trust US IPO ETF (FPX) gained 0.84%. This bet on initial public offerings (IPOs) in the United States has held up well in the recent market turmoil and has spent the past week trading along its 50-day MA. It is somewhat ironic that Chinese economic leaders are taking steps to bolster their economy by putting a halt to dozens of IPO launches that were scheduled over the coming months. FPX changed to a BUY.

Latest Special Reports

As a courtesy, I want to bring you 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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