Markets Continue to Grind Upward

Nicholas Vardy

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

U.S. stock markets eked out gains over the holiday-shortened week, with the Dow Jones up 0.43%, the S&P 500 rising 0.65% and the NASDAQ gaining 1.05%. The MCSI Emerging Markets Index, however, dropped 2.06%.

Big gainers in your Alpha Investor Letter portfolio included Illumina Inc. (ILMN), which jumped 5.73%, and Allergan plc (AGN), which gained 3.55%. Google Inc. (GOOGL) rose 1.84% to hit a new 52-week high. The PureFunds ISE Cyber Security ETF (HACK) also added 1.78%.

This week, I am also recommending that you re-enter your remaining two positions on your watch list: the iShares Currency Hedged MSCI Germany (HEWG) and the Global X Guru ETF (GURU). Both of these are now trading above their 50-day moving averages.

Overall, the current market tone remains broadly bullish. The U.S. stock market is coming off its second straight month of gains for the first time since May. And it started December with a bang, with the Dow ending up 168 points.

December has been historically kind to investors. Over the past 100 years, December has been the top-performing month of the year, posting an average gain of 1.46%. The average gains in December have pared back to 1.37% in the past 20 years. An average December would put the market back to the levels at which it started 2015.

Of course, the big event this December comes on Dec. 16, when the Federal Reserve is expected to hike interest rates for the first time in nearly a decade. Investors are expecting the Fed to raise rates by a quarter point. Low rates have acted as a tailwind for U.S. stocks and a shift to higher rates may signal tougher times ahead. Still, I expect the positive seasonality of the market to trump most of these interest rate concerns and the current market melt-up to continue in steady, if unspectacular, fashion.

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Portfolio Update

Google Inc. (GOOGL) rose 1.84% and hit a new 52-week high. The subject of “drone-based delivery” has been in the news as of late, and Google X (along with Amazon and Wal-Mart) continues to push the technology forward at a breakneck pace. Matternet, a startup that has been running drone deliveries of medical supplies in other countries around the world, has already made this a reality. With a huge potential for profit, Google’s stock could be pushed to amazing new highs. GOOGL is a BUY.

The Walt Disney Company (DIS) lost 2.17% last week. FBR & Co. recently maintained its “Outperform” rating on Disney, as well as a price target of $126.00 — a potential 9% rise above yesterday’s close. The latest movie, “Star Wars: The Force Awakens,” opening Dec. 18, is expected to rake in a domestic box office haul of $730 million. This could contribute greatly to a 35% upside potential in Disney’s earnings per share (EPS) by 2017. DIS is a BUY.

Freeport-McMoRan Copper & Gold Inc. (FCX) traded flat last week, trading sideways along the $8 support level. FCX may hold this level, or test it a few times, over the next several weeks. But technical indications look right for a potential bottom to form here. FCX is a HOLD.

Guggenheim Spin-Off (CSD) added 1.40%. As we near the end of 2015, the corporate spin-off calendar reveals a healthy outlook. In fact, 19 spin-offs appear imminent at this point with several well-known brands in line such as Yum! Brands (YUM) spinning off Yum! China, Hertz Global Holdings (HTZ) divesting Hertz Equipment Rental Corporation (HERC) in second-quarter 2016, Alcoa (AA) spinning off Value-Add Company and ConAgra Foods (CAG) uncoupling Lamb Weston, both in the second half of next year. CSD is a BUY.

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Allergan plc (AGN) gained 3.55% last week, bringing AGN’s total gain to 6.70% since its re-recommendation on Nov. 13. As much as the Internal Revenue Service (IRS) and Donald Trump would love to stop the corporate inversion of Allergan and Pfizer, the deal continues to make headway and appears unstoppable. AGN is above both its 50-day and 200-day moving averages (MA) and is a BUY.

Illumina Inc. (ILMN) jumped right out of the gate to move 5.73% higher for its first week back in the Alpha Investor Letter portfolio. Illumina joined the S&P 500 Index on Nov. 13 and managed to close November as the index’s #3 performer. Illumina finished November up 26.2 percent. ILMN is a BUY.

PureFunds ISE Cyber Security ETF (HACK) also rejoined your portfolio less than one week ago, adding 1.78%. HACK has been locked in a sideways trend since the end of August after undergoing a significant correction over the months prior to August. However, this pullback and consolidation make for a solid entry point into HACK. HACK is above its 50-day MA and is a BUY.

Nicholas Vardy

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