Talking Turkey — And Locking in 81% Gains

Nicholas Vardy

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

With your Global Bull Market Alert portfolio bursting at the seams with 12 positions, this week I am recommending that you sell your positions in PowerShares Financial Preferred (PGF) and the Claymore/AlphaShares China Real Estate ETF (TAO) to make room for other, more profitable picks.

I am also recommending that you sell half of your December $15 calls in First Trust ISE-Revere Natural Gas (FCG) to lock in an 81% gain.

This week’s Global Bull Market Alert pick, the iShares MSCI Turkey Invest Mkt Index (TUR), is yet another momentum play that bets on the continuing strength in emerging markets. Here’s why I think the Turkish market is set to continue to power ahead between now and the end of the year.

With a population of 72 million, Turkey is perched on the strategically important border of Europe and Asia. Once an economic basket case, Turkey got its economic act together over the last decade as it reined in inflation, and saw its average economic growth reach nearly 6% between 2002 and 2008. The combination of its size and economic prospects makes it one of the handful of countries that rivals the BRICs in economic potential.

Hit hard by the credit crunch, the Turkish economy shrank 13.8% in the first quarter. Overall, Turkey’s economy is likely to contract 5.2% in 2009, although GDP will likely grow at an annual rate of 3.7% by Q4, as Germany and France, the two largest export markets for Turkey in the eurozone, have emerged from recession.

Turkey’s stock market has been already one of the top performers in the world in 2009. The Istanbul stock market has soared, as Turkey’s Central Bank reduced its interest rates to a record low. With Q4 traditionally the strongest in emerging markets, I am betting this momentum will continue through the end of the year.

So buy the iShares MSCI Turkey Invest Mkt Index (TUR) at market today, and place your stop at $46.25. A word of warning. Turkey has a reputation for being one of the most volatile markets in the world, so you may want to take a smaller position than normal. There are no options on this one.

Portfolio Alert

The iShares MSCI BRIC Index ETF (BKF) rose 3.34% to close the week at a near-record high of $45.38. With the BRIC markets near highs for 2009, BKF remains a BUY.

Baidu, Inc. (BIDU) pulled back below the $400 level last week as Deutsche Bank trimmed its target price for the stock. I’ll stick with Goldman Sachs’ target price of $475. This is a great time to add to this institutional favorite, which remains a BUY.

iShares MSCI Chile Investable Market Index (ECH) rose a steady 1.65%, hitting a high for the year of $49.10 last week. This relatively low volatility pick is a BUY.

The iShares MSCI Israel Cap Invest Mkt Index (EIS) rose 1.33% last week and climbed above the $51 level before pulling back. EIS remains a BUY.

The iShares MSCI Hong Kong Index (EWH) ended the week flat, after flirting with the $16.00 level. Hong Kong stays a BUY.

SPDR S&P Emerging Markets Small Cap ETF (EWX) ended the week 1.94% higher after hitting a high for the year of $47.00. This emerging markets small-cap bet remains a BUY.

First Trust ISE-Revere Natural Gas (FCG) jumped another 5.57% last week, as it broke out to the upside. Sell half of your December $15 calls to lock in your gain. FCG remains a BUY.

Gafisa S.A. (GFA) soared 12.67% last week, after hitting a record high of $36.60 on Wednesday. With Brazilian construction booming, Gafisa remains a BUY. Raise your stop to $29.00.

ICICI Bank Ltd. (IBN) jumped 3.58% during its first week in the portfolio. India’s second-largest bank remains a BUY.

Mechel OAO (MTL) jumped another 6.7% over the past week, after hitting a high of $21.70 on Thursday. With the Russian market still having plenty of upside, this volatile Russian bet remains a BUY. Raise your stop to $16.30.

PowerShares Financial Preferred (PGF) was flat on the week, but paid out an 11.2-cent dividend on Oct. 15. I am still positive on this high yield play as a defensive position, but because your portfolio is crammed with other high profit picks, I am moving this to a SELL.

Claymore/AlphaShares China Real Estate ETF (TAO) fell slightly this week, as Chinese markets pull back. As the weakest among your current positions, I am recommending that you SELL this position to make room for other higher potential picks.

P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.

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Global markets had their strongest week since July last week. Every single one of your Global Bull Market Alert picks was up, with a handful soaring by double-digit percentages. Mechel OAO (MTL), Baidu, Inc. (BIDU) and First Trust ISE-Revere Natural Gas (FCG) were up 14.36%, 13.8% and 10.46%, respectively. Almost all of your other picks hit highs for the year. As a result, I am adjusting most of your stops upward. (See below.)


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