I believe that the current market rally marks the beginning of the final leg of the fourth-quarter rally. I expect that markets will climb higher at least through the first week of January. That means the basic strategy is to stay long on your risky assets in your Global Bull Market Alert portfolio.
This week’s Global Bull Market Alert pick, Spreadtrum Communications, Inc. (SPRD), is a company in one of the hottest sectors, technology, in one of the hottest countries, China. Spreadtrum is the leading Chinese fabless semiconductor provider that develops the advanced technology and software design that drives the inner workings of your cell phone.
Here’s why I think this stock will soar over the coming weeks…
In the 1980s, Silicon Valley was the global leader in the manufacture of semiconductors. That industry has long moved to Taiwan, which today is home to some of the world’s largest semiconductor manufacturers. In 2010, there is yet another shift taking place and that’s toward China. Even as Taiwanese rivals like Mediatek announce that their sales are collapsing, Spreadtrum is growing by leaps and bounds, poised and ready to take its place by competing successfully on both on price and technology.
Spreadtrum also has a secret weapon — one that I believe gives it an unfair advantage vis-à-vis competitors. Since it is involved in a strategic area such as semiconductors, the company is perfectly positioned to benefit from favorable loans and government-brokered deals that are the unwritten rules behind business success in China. In fact, much of Spreadtrum’s current success has been due to the special relationship it has with China Mobile (CHL) in providing the cell phone company with low-end, subsidized TD-SCDMA standard chips.
While this area will continue to be a key growth driver in 2011, Spreadtrum’s future is much more interesting. Spreadtrum has been supplying transceivers to Korean giant Samsung since 2009. So if you have a Samsung cell phone, chances are that you have a Spreadtrum transceiver in it. And just last month, Spreadtrum announced that it will be supplying even more sophisticated transceivers to Samsung. That means that Spreadtrum transceivers soon may be found in many of Samsung’s red-hot new Android products, including the Galaxy S smartphone, which some observers already are calling the “Apple iPhone Killer.”
As with many Chinese small-cap stocks, Spreadtrum’s growth is extraordinary. In Q3, its revenue jumped 151% to $96.2 million. Net income was $19.5 million, or 37 cents per share, compared with only $630,000, or a penny per share, only a year earlier. That beat analysts’ expectations of earning 33 cents per share on revenue of $92.6 million. Spreadtrum also announced that it expects fourth-quarter revenue to be between $118 million and $125 million. That also topped analysts’ consensus forecasts of $102.6 million. Yet, even after its recent run-up, Spreadtrum is trading at about 50% of the valuation of its better-known rivals.
So buy Spreadtrum (SPRD) at market today and place your stop at $14.00. If you want to play the options, I recommend the May $17.50 calls, SPRD110521C00017500.
Portfolio Update
Credicorp Ltd. (BAP) was up a solid 4.7% and now is trading back near its record highs. Peru’s biggest bank remains a BUY.
China MediaExpress Holdings (CCME) is certainly testing our patience. The sharp moves in the stock indicate that shorts are trying to push the stock down, down, down. My contrarian instincts tell me that this would be a great time to add to your positions, but with the stock near its stop price of $13.50, I have no choice but to put it on HOLD.
iShares MSCI Chile Investable Mkt Idx (ECH) rose 1.65% this past week. This is a “steady eddie” exchange-traded fund (ETF) that will continue to do well and it remains a BUY.
ProShares UltraShort Euro (EUO) dropped back this week, as the tensions surrounding the euro settled slightly. This story is not going away anytime soon. I am keeping your bet against the euro as a speculative BUY.
ICICI Bank Ltd. (IBN) bounced 6.13% last week. During the September quarter, net profit grew 20% year-over-year, while net interest income surged by 9%, attributable to a 40% year-over-year decline in provisioning due to lower incremental slippages. With risk in global markets back “on,” India’s top banking giant is now back to a BUY.
Bank of Ireland (IRE) soared 30.6% this past week, as the Irish drama continues to unfold. The basic bet is this: will Ireland default or not? I’m betting that it won’t. We notched great gains this past week — but the drama isn’t over yet… IRE remains a speculative BUY.
Ivanhoe Mines (IVN) jumped 9.4% last week, and your options are now up 56.25%. Hold on for now. This long-term bet on the “Mongolian miracle” is a BUY.
Melco Crown Entertainment Limited (MPEL) stayed flat this week, with negative sentiment surrounding rival Las Vegas Sands weighing on the stock. When this pops, it will pop big. MPEL remains a BUY.
Sina Corporation (SINA) jumped 11.73% last week. You took profits of 180% in the options last week, and your remaining options are now up 243%. “China’s Twitter” remains a BUY.
Silvercorp Metals Inc. (SVM) continues to be another source of embarrassment to Jim Cramer as the stock soared 15.75% last week alone. SVM remains a BUY.
Uranium Energy Corporation (UEC) ended the week 7.9% higher, after a sharp sell-off on Friday. Nevertheless, you managed to book 111% gains in three days in the options — your fastest gains ever in the Global Bull Market Alert trading service. UEC remains a BUY.
P.S. Don’t miss out on The World MoneyShow Orlando, February 9-12, 2011, at The Gaylord Palms Resort. This event will be your one-stop resource for the education, research and advice that you need to make smart investment decisions in 2011 and beyond. Join me there and hear leading experts reveal where they see growth opportunities in stocks, bonds, ETFs, commodities and options. Click on this link to The World MoneyShow Orlando to register or call 800/970-4355. Be sure to provide priority code 020758!
