Mixed Messages from the Market

Nicholas Vardy

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

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Stock markets closed a mixed week. The Dow Jones fell 0.74%, the S&P 500 rose 0.49% and the NASDAQ jumped 2.02%. The MCSI Emerging Markets Index pulled back 0.64%.

Big gainers in your Alpha Investor Letter portfolio included Google Inc. (GOOGL), which rocketed 19.03%; Illumina Inc. (ILMN), which rose 3.61%; the Market Vectors Biotech ETF (BBH), which added 2.23%; Skyworks Solutions Inc. (SWKS), which gained 1.90%; and Berkshire Hathaway (BRK-B), which recovered 1.76%. Berkshire also moved back to a BUY.

Markel Corp. (MKL), Market Vectors Biotech ETF (BBH), Allergan plc (AGN), Google Inc. (GOOGL), Illumina Inc. (ILMN) and First Trust US IPO ETF (FPX) all hit new 52-week highs.

Several positions dropped below their 50-day moving averages and moved to a HOLD. These include the Vanguard Russell 2000 Index ETF (VTWO), AdvisorShares TrimTabs Float Shrink ETF (TTFS) and the PureFunds ISE Cyber Security ETF (HACK).

This past week boasted a real mix of performances in your Alpha Investor Letter portfolio. Google (GOOGL) gained $65 billion in market cap in a single day’s trading, which has to be one of the biggest moves by a single company in market history.

Such big moves by some companies reflect the status of the overall market.

Every day for the past week, more than 2% of stocks on the NYSE have reached a 52-week high, and more than 2% have sunk to a 52-week low. It’s rare to see so many stocks at both new highs and new lows. When we see many stocks at both extremes, the S&P’s performance going forward has been less than stellar.

At the same time, market sentiment is still very negative — which is one of my favorite bullish-contrary indicators.

Finally, keep in mind that we are heading into what traditionally is the quietest time of the year in the market. So these indicators carry less weight than they normally do. Throw in the fact that the market has shifted in attention away from both Greece and the collapse of the Chinese stock market, and it’s hard to imagine seeing the market moving much, either up or down, in the coming weeks.

Portfolio Update

Berkshire Hathaway (BRK-B) added 1.76%. Warren Buffett’s best-in-class Berkshire Hathaway spent the past two weeks in recovery mode moving straight upwards back to its 200-day moving average (MA). Although no stock is immune to “Mr. Market’s” mood swings, the best are hard to keep down for long. BRK-B also rose past its 50-day MA to move back to a BUY.

Vanguard Global ex-US Real Estate ETF (VNQI) gained 0.41%. VNQI also spent the past two weeks moving higher and hit its 200-day MA as well. VNQI experienced a steep pullback three weeks ago during the height of the Greek debt drama. However, as markets recovered, VNQI made a steep “V” recovery from a well-tested low support level. Although fickle sellers sell at the first hint of bad news, the steep recovery confirms their belief in the position’s long-term prospects. VNQI is currently a HOLD.

Markel Corp. (MKL) remained flat last week, dipping just 0.54%. MKL began the past five trading days at a new 52-week high, only to fall slightly going into yesterday’s trading session. In fact, looking at MKL’s recent trading history, you’d be hard pressed to a see a sign of any pullback in the broader markets. MKL will report earnings on Aug. 5 after markets close. MKL remains a BUY.

Skyworks Solutions Inc. (SWKS) added 1.90% over the past week. Skyworks Solutions will report earnings tomorrow after markets close. SWKS is a HOLD.

Allergan plc (AGN) fell 1.29%. AGN hit a new 52-week high last week as the biotech bull market continues. RBC Capital Market put a $361 price target on the stock last week, representing a potential gain of nearly 14% above yesterday’s close. AGN will report earnings on Aug. 6 before markets open. AGN is a BUY.

Google Inc. (GOOGL) rocketed 19.03% last week, crossing the $700 price level to mark a new all-time (and 52-week) high. GOOGL’s stellar Thursday earnings report also prompted Argus to reiterate its “Buy” rating and set a new $850 price target — a whopping 24% higher than yesterday’s closing price. Earnings came in at $6.99 per share vs. an analysts’ estimate of $6.70, and revenue was $17.73 billion vs. an estimated $17.75 billion. GOOGL is a BUY.

Illumina Inc. (ILMN) rose 3.61% last week and hit a new 52-week high. ILMN reported what amounted to an “earnings miss” yesterday after markets closed, and the stock tumbled in after market trading. Illumina reported a 21% increase in sales to $539 million year-over-year. However, this missed the estimated $542.12 million analysts were looking for. This was the first sales miss relative to analysts’ expectations since the third quarter of 2011, giving traders some jitters. ILMN is a BUY.

Hedged MSCI Germany (HEWG) dipped 0.77% for its first few days in your portfolio. This recommendation should recover as the drama around Greece ebbs. Keep this position in your portfolio with a stop price of $22.00. HEWG is a BUY.

KraneShares CSI China Internet ETF (KWEB) dipped 0.85%. This position is the latest recommendation to be added to your portfolio. KWEB is a bet on a rebound from the recent Chinese market crash through a bet on one of the market’s strongest sectors. KWEB is a BUY.

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Nicholas Vardy

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