We’ve had an excellent run in Bull Market Alert so far in 2012. The U.S. S&P 500 is off to its strongest start since 1997. And the market’s rise has been almost unnervingly steady. But, as I expected, the market’s gains slowed last week as the market snapped a five-week win streak. On Friday, the market also had its first serious down day of the year.
I am of two minds on this market. On the one hand, I have been worried about a pullback in the markets for some time. By all of the technical measures that I look at, the market has never been more overbought in the last five years. On the other hand, Bull Market Alert is a trading service focused on booking big short-term gains. So, I am reluctant to stand in the way of market momentum.
This week’s Bull Market Alert recommendation, the SPDR S&P BRIC 40 ETF (BIK), is a crass momentum play — a way for you to profit from a handful of 2012’s top-performing global markets.
The term “BRIC” refers to the four giants of the emerging markets world — Brazil, Russia, India and China. And the best way to summarize my reasons for recommending these markets today is on the map below, reproduced from a recent issue of Investor’s Business Daily. As you can see, each of the BRIC markets has outperformed the U.S. market by 2-1 or even 3-1. This outperformance actually is typical during the bullish phases of the market.
BIK tracks the S&P BRIC 40 Index, which consists of Brazil, Russia, India and China. China dominates the holdings of this fund at close to 48% of assets. Next, Brazil accounts for 25.3% and Russia for 19.9%. Indian stocks make up the small remainder. BIK also has a 2.53% dividend yield and a forward P/E of just 8.5.
So, buy the SPDR S&P BRIC 40 ETF (BIK) at market today, and place your stop at $22.50. There are no options on this one.
Portfolio Update
Alexion Pharmaceuticals (ALXN) was the star of the week, rising 5.78%, propelled higher on a positive earnings report last Thursday. ALXN reported Q4 earnings-per-share of $0.41 vs. a $0.34 estimate from analysts, with revenues of $227.6 million vs. analysts’ $220.75 million estimate. Alexion issued inline guidance for fiscal year 2012. In addition to hitting a new 52-week high, several analysts, including Robert W. Baird, increased their price targets on ALXN. ALXN is a BUY.
Bank of Ireland (IRE) took a breather from its incredible 2012 run and gave back 6.73%. Much of last week’s downward price action was due to negative comments out of Europe on Friday regarding a Greek debt deal. However, as of Sunday, the Greek parliament approved the necessary austerity measures needed to secure Greece’s next round of bailout payments. IRE is a BUY.
National Bank of Greece SA (NBG) remained flat, posting a 0.29% loss. NBG began the week on strength. This upwards movement negated much of last Friday’s dip due to the negative news on the Greek austerity measures. With the vote successfully completed Sunday, NBG should resume its rise. NBG is a BUY.
Companhia de Bebidas Das Americas (ABV) pulled back 1.74% last week. ABV is coming off its 52-week high and making a move back towards its 50-day moving average. If market sentiment holds, this is an attractive entry point as this sell-off is occurring on declining volume. ABV is scheduled to report earnings March 8. ABV is a BUY.
MasterCard Inc. (MA) added another 1.49% last week, hitting a 52-week high. MA’s chart pattern has leveled off after a significant pop on its recent earnings report. With major indexes flat for 2011, MA’s share price managed a 57% rise last year. MA is a BUY.
Ford Motor Co. (F) dropped 2.74% over the past five trading days. Ford is dipping back towards its 200-day moving average for the second time in two weeks. Some of this move can be blamed on Ford’s recent recall of 2012 Ford Expedition and Lincoln Navigator vehicles. That said, it is likely an overreaction and another bounce off of its 200-day moving average is a bullish sign. F is a BUY.
Intuitive Surgical, Inc. (ISRG) came in flat for the week, dropping just 0.24%. ISRG is the leading provider of robotic surgical instruments and is well-established in a market with huge barriers to entry. This makes ISRG a tough nut to crack for any potential competitors. With the number of aging folks increasing globally, demand for robotic surgery should grow for decades to come. ISRG is a BUY.
Melco Crown (MPEL) gave back 4.47% over the past five trading days. MPEL posted earnings on Feb. 9, reporting $0.198 actual and $0.166 estimated earnings-per-share with net revenue for Q4 2011 at $1,008.3 million. This revenue rise is a 30% increase from Q4 2010. The gain was due primarily to an increase in gaming volumes and “mass table games hold percentages.” MPEL’s hotel, food and beverage, and entertainment segments were also major contributing factors. MPEL is a BUY.
Life Technologies (LIFE) was unchanged for the week. LIFE beat earnings estimates last Tuesday when it reported $1.06 actual earnings-per-share versus a consensus estimate of $1.034. Q4 profit rose to $127.4 million, up from $70.7 million one year ago. Citigroup increased its target price for LIFE to $52. LIFE is a BUY.
Stratasys Inc. (SSYS) gave back the previous week’s gain, falling 11.55%, even after posting better than expected earnings. Although you are flat in this position since its recommendation two weeks ago, you already booked 80%+ gains in the options. Stratasys reported $0.31 earnings-per-share compared to analysts’ estimate of $0.27. Q4 revenue was better-than-expected at $43.6 million vs. analysts’ expectations of $42 million. SSYS is trending down towards the 50-day moving average but has bounced off of this level each time it has neared it since Oct 2011. SSYS is a BUY.
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