Choppy Markets Offer a Good Entry Point

Nicholas Vardy

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

Global stock markets pulled back last week, with the Dow Jones down 1.51%, the S&P 500 falling 1.50% and the NASDAQ tumbling 1.91%. The MCSI Emerging Markets Index also fell 0.53%.

Big gainers in your Alpha Investor Letter portfolio included Vanguard Global ex-US Real Estate ETF (VNQI), which rose 0.95%; Markel Corp. (MKL), which gained 0.74%; and the WisdomTree Japan Hedged Equity ETF (DXJ), which eked out a 0.36% gain. Google Inc. (GOOGL) hit a new 52-week high.

Both the Vanguard Russell 2000 Index ETF (VTWO) and the Guggenheim Spin-Off (CSD) fell below their 50-day moving averages and moved to a HOLD.

The market continues to be choppy. The S&P 500 lasted only 14 days above its 200-day moving average after having spent more than two months below it. Then, the market reversed sharply over the past two days, and it is now back above this widely followed measure.

Looking at my own favorite short-term technical indicators (which I use more in my trading services), this is a good time to enter the market or to add to your U.S. stock market positions. Specifically, these positions include Berkshire Hathaway (BRK-B), First Trust US IPO ETF (FPX), Guggenheim S&P 500 Equal Weight ETF (RSP), PayPal Holdings (PYPL), AdvisorShares TrimTabs Float Shrink ETF (TTFS), Cambria Global Value ETF (GVAL), Vanguard Global ex-US Real Estate ETF (VNQI), Market Vectors Biotech ETF (BBH) and the iShares MSCI Philippines (EPHE).

Although Freeport McMoRan (FCX) has gotten off to a very rough start, it is nearing a key support line around the $8 mark. If you are a buyer (like Carl Icahn), $8 is certainly a good level to reach out and hope to catch the dull side of the knife.

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I have been writing about the strong seasonality of the stock market between November and April. And that will be one of my major themes in tomorrow’s subscriber teleconference event at 1:00 PM Eastern. If you have any questions, you can submit them before the call here. If we don’t call you tomorrow, you can join the call by calling 1-877-229-8493 and, when prompted, enter PIN #14884.

Portfolio Update

Berkshire Hathaway (BRK-B) dipped 1.22% over the last five days. Warren Buffett recently trimmed his positions in Goldman Sachs and Walmart. However, owners of these stocks should not be alarmed at this news alone. In a recent CNBC interview, Mr. Buffett remarked that he sold stock to raise cash to cover his $30 billion acquisition of Precision Castparts Corp. BRK-B is a BUY.

First Trust US IPO ETF (FPX) lost 2.38% last week. The initial public offering (IPO) market has been strong for several years, despite a recent correction (and excellent entry point), as evidenced by a long-term FPX chart. The reason for the pullback: initial public offering (IPO) buyers are no longer as willing to pay often-inflated IPO prices. This is good news, since it is driving IPO pricing lower, which should increase IPO demand. FPX is a BUY.

Guggenheim S&P 500 Equal Weight ETF (RSP) fell 1.86%. A common belief regarding equal-weight S&P 500 funds is the higher volatility one must endure when investing in them due to a higher weighting in lively small-cap positions. Looking back over three years of data, RSP was just 30 basis points higher in volatility than the Vanguard 500 Index Fund (VOO). RSP is a BUY.

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PayPal Holdings (PYPL) gave back 2.14% over the last week. PayPal is up nearly 17% since the end of the third quarter and is up 8.22% since joining your Alpha Investor Letter portfolio. The list of who has bet on PYPL has included some of the biggest players in the industry, including Carl Icahn. PYPL was the most popular ticker for new acquisitions in the third quarter among the 200 largest hedge funds, with 17% of the big players buying up a whopping combined total of 123.5 million shares. PYPL is a BUY.

KraneShares CSI China Internet ETF (KWEB) moved 1.53% lower last week. KWEB is a past winner in your portfolio, and it now is up 7.72% on its second time in your portfolio. Although rising steadily over the past two months and pushing up past the 200-day moving average (MA) just recently, KWEB touched back down to the 200-day MA on Monday and caused an unusually high million-share buying spike, suggesting higher prices ahead. KWEB is a BUY.

Allergan plc (AGN) dipped 1.63% for its first week in the Alpha Investor Letter portfolio. AGN is a member of both a very long and a very short list — and it all adds up to positive news. There are only three stocks in the S&P 500 (a long list) with a 100% “Buy” rating among analysts. Looking at this (short list), AGN enjoys the number two position, with a consensus 12-month upside potential of 31%. AGN is a BUY.

Cognizant Technology Solutions Corporation (CTSH) fell 4.78% last week. Cognizant’s strong revenue growth, stable financial position with reasonable debt and growth in EPS (earnings per share) have been behind its strong performance in 2015. CTSH remains a BUY.

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Nicholas Vardy

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