Booking a 43.66% Gain… And Betting on an American Stalwart

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
It was a big week for the markets in your Bull Market Alert portfolio. While the S&P 500 gained an eye-popping 7.4%, many of your Bull Market Alert positions rose more than twice that amount. Your option-like positions in Bank of Ireland (IRE) and National Bank of Greece (NBG) gained 20.75% and 18.14%, respectively.
Your option position in MasterCard Inc. (MA) now boasts a gain of 43.66%, with MasterCard reaching an all-time high. I’m recommending that you sell half of your options here to lock in some solid gains. But hold onto the rest of your options for potentially even bigger profits in the weeks ahead.
This week’s Bull Market Alert recommendation, all-American stalwart and success story Ford Motor Co. (F), is another bet on the American consumer and the burgeoning U.S. economic recovery.
Even as Europe struggles with its sovereign debt crisis, the news from the U.S. economy has been steadily improving. The Institute for Supply Management reported Thursday that the U.S. manufacturing index rose to 52.7 in November, and that new orders and production both rose to seven-month highs. On Friday, the unemployment rate dropped down to 8.6%. Consumer confidence has ticked up and U.S consumers went on an automobile spending spree in November — a normally weak month for auto sales.
With the average age of vehicles on U.S. roads hitting almost 11 years, pent-up demand resulted in an impressive 10.6% rise in seasonally adjusted annual sales (SAAS) to 13.6 million units as of last month. That’s up from a SAAS total of 12.28 million in the same month of 2010 and the highest SAAS rate since August 2009, when the U.S. government launched the “Cash for Clunkers” program. November was also the third-straight month when annualized vehicle sales have topped the 13-million mark. 
Ford itself posted double-digit gains of 13.3% in November to 166,865 vehicles, driven by strong sales of trucks and SUVs. Its 16.6% share of U.S. vehicle sales in November was its highest level in five years. Ford’s retail sales actually soared by an even more impressive 20%. Retail sales, as opposed to sales to fleets like rental-car companies and government agencies, rank as the industry’s most profitable segment. Ford itself expects an industry-wide sales rate of around 13.5 million units for all of next year.
Much of Ford’s success has been thanks to its CEO Alan Mulally, who has prioritized profits over market share. Coming to Ford from Boeing just five years ago in September 2006, Mulally eliminated Ford’s dividend and sold Ford’s non-core brands, like Jaguar, Land Rover, Aston Martin and Volvo. He also shut down Mercury, focusing Ford on the mass market and Lincoln on the high-end car buyers. He also raised $20 billion as a cushion against bad times that has served Ford well, while delivering nine straight quarters of pre-tax profits.
Ford was a darling of investors after the market bottomed in March 2009 but has actually underperformed the broader market since hitting a high of $18.71 in January of this year. But with a price-to-earnings ratio (P/E) of 6.56, and a turnaround in the U.S. car market underway, Ford is once again a bargain.
So, bet on a U.S. economic turnaround. Buy Ford Motor Co (F) today and place your stop at $9.00. If you want to play the options, I recommend the March 2012 $12 Calls (F120317C00012000).

Portfolio Update

Alexion Pharmaceuticals (ALXN) jumped 4.87% last week. Alexion remains one of the top four large-cap biotech stocks with the highest earnings-per-share (EPS), with a trailing 12-month EPS of $0.81 and a price/earnings-to-growth (PEG) ratio of 1.34. Having moved up off of the 50-day moving average earlier in the week, ALXN is now a BUY.
Bank of Ireland (IRE) had a fantastic week, skyrocketing 20.75% and offering a terrific example of how it can perform, once market sentiment changes. IRE recently sold EUR590 million of North American and European loans to Sumitomo Mitsui Banking Corp. As a result, IRE began a marked upward movement, climbing off of its all-time low of $3.99 toward its 50-day moving average early last week. IRE is currently a HOLD.
National Bank of Greece SA (NBG) followed in the footsteps of Bank of Ireland and powered 18.14% higher. Take note of NBG’s recent 1:5 reverse stock split, when you view a chart of NBG. NBG has divisions that include retail banking, commercial banking, global investment management, investment banking, insurance, investment activities and securities trading operations. Still trading below its 50-day moving average, NBG remains a HOLD.
iPath DJ-UBS Livestock TR Sub-Idx ETN (COW) was flat with a 0.65% loss. The price of livestock has gone straight up over the past 12 months and COW has outperformed the S&P 500 over the last six months. COW continues a picture-perfect move up along its 50-day moving average, but moved to a HOLD just last Friday.
Companhia de Bebidas Das Americas (ABV) jumped 9.52%. ABV continued its moon-shot last week and appears ready to reach its all-time high of $36.30 once again. Note this move occurred directly off of the 200-day moving average, and this rise is the third time a visit to the 200-day moving average has yielded such a quick ride up. ABV’s chart is as close as you can get to having a fortune teller predict the next move. ABV is a BUY.
ProShares Ultra S&P500 (SSO) shot up 15.08% over the past five trading sessions. SSO is working well to amplify your gains from the market’s current bullish bias. Keep an eye on SSO, as it approaches the 200-day moving average. SSO is a BUY.
MasterCard Inc. (MA) had a great week, adding 9.30%. Right on cue, MA took yet another bounce off of its 50-day moving average to make a healthy gain — and a new 52-week high. Each time it has touched the 50-day moving average (or run slightly below), the stock has managed to make a new 52-week high shortly thereafter. MA is a BUY.
Spreadtrum Communications, Inc. (SPRD), given a reprieve in your portfolio last week, wasted no time in making a hefty move upwards and paying off. Insiders have been buying the stock — and in large lots of 10,000, 30,000 and 2,000,000 shares! Throw in a notable increase in call option activity, and you have a recipe for success. SPRD is a BUY.

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