Pausing for Breath as Global Markets Correct

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Last week was tough for global stock markets. For the week, the Dow slid 1.4%, and the S&P 500  dropped 2.4%. The MSCI Emerging Markets index dropped 2.24%.
 
Nevertheless, there were a few winners in your Bull Market Alert portfolio. Monster Beverage Corp. (MNST) gained 1.85%, and Novo Nordisk A/S (NVO) rose 1.94%. Both last week’s new pick, 3D Systems Corp. (DDD), and Digital Realty Trust Inc. (DLR) hit 52-week highs before ending the week lower on Friday’s sharp pull back. Amazingly, National Bank of Greece (NBG) managed to end the week nearly unscathed, dipping only 1.77% as S&P actually upgraded Greece last week.
 
Alexion Pharmaceuticals (ALXN) stopped out in early trading this morning. And Companhia de Bebidas Das Americas (ABV) fell below its 50-day moving average, so I moved it to a HOLD.
 
This week, I’m holding off on a new Bull Market Alert recommendation until the dust settles. And as always, make sure you stick to your stops.
 
Elections in France, Greece, and Germany this weekend heightened uncertainty in global stock markets as Asian and European markets are trading lower this morning. The election of Socialist Francois Hollande as president in France; the stinging rejection Greek voters delivered to two of the country’s incumbent parties; and Germany’s Angela Merkel’s coalition of Christian Democrats and pro-business Free Democrats defeat in a closely watched state election all suggested that voters in Europe are fed up with the austerity route taken by European politicians.
 
The election results led to a flight to safety by investors in Asia. In early trading, Japanese stocks tumbled and pushed the Nikkei down 2.8% to its lowest level since Feb. 15. Australia fell 1.6%, Hong Kong was down 2.3% and South Korea dipped 1.7%. Both the German and French markets are down close to 2% this morning as I write this.
 
The question is what this all means for you as an investor in the United States.
 
Despite the current hiccup, I believe here are reasons to be optimistic about the U.S. stock market.
 
On the one hand, with over four-fifths of S&P 500 companies reporting earnings, 70% have beaten estimates. No wonder you’ve been getting more bullish about the U.S. market. The latest poll of individual investors from the American Association of Individual Investors (AAII) showed a large jump in bullishness, with the Bull Ratio nearly 30% higher than it was last week.
 
On the other, the S&P 500 is now down slightly since Alcoa Inc. informally kicked off the current reporting season April 10. And even with the recent jump in investors’ bullishness, the AAII Bull Ratio is still below 56%, its long-term average.
 
Bottom line? U.S. earnings are good. And investors are hardly euphoric. And in many ways, the negative election outcomes in Europe make the U.S. market look that much better.
 
Finally, I look forward to seeing you at the The Money Show in Las Vegas on May 14-17. To register, call 1-800/970-4355 and mention priority code 026655 or go to NicholasVardy.lasvegasmoneyshow.com.
 
The Money Show has asked me to do a personal record, seven public presentations.  And that does not even include a private meeting for my subscribers on Wednesday, May 16, 12:15 p.m.-1 p.m., in the Salerno Room. You can sign up for that exclusive meeting by clicking here.
 
In addition, for the first time in three years, I’ll be teaching my highly acclaimed course: “Hedge Fund Secrets Revealed: How to Manage Your Own Money Like a Hedge Fund Manager” on Wednesday, May 16, 2012, 9:00 am – 11:00 am. To register for my hedge fund seminar, click here. Past attendees have told me that this is some of the best information on managing your money they have ever learned. Don’t miss it!

Portfolio Update

Bank of Ireland (IRE) fell 7.48% last week. Although IRE lost some ground last week, Bank of Ireland remains on a short list of government-protected Irish banks and is well capitalized. IRE’s chart is testing the $5.25 support level from which it bounced one month ago. IRE is a HOLD.
 
National Bank of Greece SA (NBG) managed to hang tough during a challenging week, dipping just 1.77%. The Greek government’s April restructuring deal cleared 100 billion euro from the national debt, but left an 18-billion euro shortfall in Greek bank balance sheets. However, Greek government officials agreed to a bridge financing plan last week in a move to close the 18-billion euro hole. S&P also upgraded Greece from its “Selective Default” classification last week. NBG is a HOLD.
 
Intuitive Surgical, Inc. (ISRG) lost 3.53%. ISRG’s pricing power, lack of direct competition, high margins, recent beats on both sales and earnings expectations, and a boost in its forward-year guidance make it one of the few stocks that could one day hit $1,000. ISRG’s current dip makes a great buying opportunity. ISRG is a BUY.
 
Altisource Portfolio Solutions (ASPS) fell 5.50% over the past five trading days. Although ASPS released positive Q1 results on April 26, ASPS sold off the past week on lighter-than-average volume and now stands at $57, a significant support level set in April. This level also coincides with the 100-day moving average, and several technical indicators are showing an oversold condition. A bounce is likely in the cards for the company. ASPS is a HOLD.
 
Monster Beverage Corp. (MNST) gained 1.85% last week. Speculation over a Coca-Cola buyout boiled over on Monday to send MNST from $65 to an astronomical $84 high for nearly 15 minutes. For you nail-biting, day-trader types who just happened to be watching, and sold — congratulations! For the rest of you, MNST will report earnings on May 9 and I expect very good news. Your chance for a nice pop may still come, as Goldman Sachs raised its MNST price target to $75 on Friday — a 12.38% hike over Friday’s price. MNST is a BUY.
 
Dick’s Sporting Goods (DKS) lost 1.95% over the previous week. DKS is up 35% this year alone and continues to further its growth. DKS acquired the Top-Flite brand last month, a popular line of golfing equipment, and is currently working on a “mini-store” concept to increase sales of the well-liked Under Armour brand. DKS is scheduled to report earnings May 17 and is a BUY.
 
Novo Nordisk A/S (NVO) added 1.94%. Novo Nordisk announced an agreement with Caisson Biotech, LLC last Tuesday for exclusive developmental use of Caisson’s “heparosan-based drug delivery technology.” In essence, this technology is a controllable “cloak” for drugs introduced into the bloodstream, allowing drugs to stay in the body much longer. Although I’m no biotechnology specialist, NVO may be developing a methodology to decrease injection frequency for diabetics — and that would be an amazing breakthrough in the treatment of diabetes. NVO is a BUY.
 
Digital Realty Trust Inc. (DLR) dipped 1.40%. DLR’s stock price hit a new 52-week high on good earnings news, but is now drifting lower towards the 50-day moving average. If DLR repeats the pattern it has been following since mid-March, DLR may bounce this week once again. Watch for a buying opportunity near the $73 level. DLR is a BUY.
 
Companhia de Bebidas Das Americas (ABV) dropped 5.65% over the past five trading days. The Fitch Ratings agency upgraded Ambev’s credit rating to “A” and marked its outlook as “Stable.” It highlighted that Ambev’s ‘A’ ratings are amongst Fitch’s highest corporate ratings in Latin America. The ratings “reflect the unique qualities of the company, which include excellent business positions in several markets, continued strong operating cash flows, and the stability and defensive nature of the beverage industry.” ABV is a HOLD.
 
3D Systems Corp. (DDD) lost 2.32%. Investors took some profits last week after DDD reported a strong first quarter and hit a new 52-week high. However, this pullback may be very short-lived, based upon the amazing possibilities for the future of “3D printing,” and the limited number of competitors in the marketplace. DDD is a BUY.
 

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