Expecting a Positive End to a Mixed Year

Nicholas Vardy

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

The last week was mixed for U.S. stock markets, with the Dow Jones down 0.61%, the S&P 500 dipping 0.22% and the NASDAQ up 0.12%. The MCSI Emerging Markets Index eked out a 0.34% gain.

Big gainers in your Alpha Investor Letter portfolio included KraneShares CSI China Internet ETF (KWEB), which gained 2.42%; Allergan plc (AGN), which added 1.95%; and the iShares MSCI Philippines (EPHE), which rose 1.76%.

Berkshire Hathaway (BRK-B) fell below its 50-day moving average to a HOLD.

This has been a surprisingly tough December for stocks.

Last week marked the first time since 2007 that the S&P 500 has lost 1% on back-to-back days in the latter half of December, meaning any time after the 15th of the month.

The time before that was in the year 2000.

Going back to 1928, this has only happened at the beginning or in the midst of bear markets.

Yet, even during those terrible market environments, markets managed to eke out gains. Buying the S&P after the second down day (that’s Dec. 21) and holding until the last day of the year (or even the first day of the New Year) resulted in a winning trade every time.

So odds are December will end on a strong note. But with the S&P 500 down 2.78% over the past month, Santa Claus has been unusually stingy this year.

I’ll be spending time with my family next week, so I will be back with an Alpha Investor Letter update on Jan. 6.

Portfolio Update

Berkshire Hathaway (BRK-B) dipped 1.29% over the last five trading days. Berkshire Hathaway holds 48 publicly listed stocks in addition to its privately-held businesses, according to its most recent Form 13F filing from Nov. 16. Although most holdings are weighted below 5% of the total positions, a few interesting standouts top the list. These include Wells Fargo (18.95%), Kraft Heinz (18.04%), Coca-Cola (12.60%), IBM (9.22%) and American Express (8.82%). BRK-B fell below its 50-day moving average (MA) and changed to a HOLD.

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Markel Corp. (MKL) lost 0.87% last week. Steve Markel, vice chairman of Markel, and his co-president, Tom Gayner, had the following to say about great businesses: “The best business in the world is one that makes a good return on its capital and can reinvest profits at the same returns. That’s a compounding machine that generates great wealth over time.” They had this to say about bad businesses: “The worst kind of business in the world is one that doesn’t make very good returns on capital, but needs more of it all the time. We call those airlines and try to make sure we don’t invest in those at all.” Needless to say, MKL is a good business and is a BUY.

First Trust US IPO ETF (FPX) gained 0.45%. First Trust Advisors L.P. recently announced dividend payments for its funds, including FPX. FPX will pay a quarterly dividend of $0.1034 per share on Dec. 31. The ex-dividend date is Dec. 23 and the record date is Dec. 28. FPX is a HOLD.

Guggenheim S&P 500 Equal Weight ETF (RSP) dipped 0.38% last week. Weighting within major indexes can be a contentious point, especially with folks like Vanguard’s John Bogle, who advocated traditional, market-cap-weighted indexes. RSP is your equally-weighted play on the 500 (or so) stocks that make up the S&P 500. Guggenheim offers several weighted funds and has offered RSP for nearly 10 years. RSP now holds $9.5 billion in assets under management and has consistently beaten the returns of traditional S&P 500 funds. RSP is a HOLD.

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The Walt Disney Company (DIS) lost 4.83% last week. The world is abuzz over Disney’s new “Star Wars: The Force Awakens” movie. The film raked in $248 million in the United States and $281 million overseas last weekend, beating analysts’ expectations by a long shot. Despite this, broader fears relating to television viewers “cutting the cord” rippled through the media-based sector, weighing on Disney’s market price as well. DIS is a HOLD.

Market Vectors Biotech ETF (BBH) rose 0.64%. BBH will pay an annual distribution of $0.337 per share on Dec. 28. The ex-dividend date is Dec. 21 and the record date is Dec. 23. BBH is a BUY.

Cognizant Technology Solutions Corporation (CTSH) dipped 0.68% last week after taking a second recent bounce from its significant $58.50 support level. CTSH has effectively stayed above $58.50 since rising above it back in early February and tested this level strongly by bouncing higher from it four times this year. This most recent “double bounce” is a good technical indication of a near-term move higher. CTSH is a HOLD.

Costco Wholesale Corporation (COST) closed the week nearly perfectly flat. This latest addition to the portfolio stands as one of the best, if not the best, retailers on the planet. Pulling back from a recent 52-week high, Costco is likely creating an excellent dip to buy on. With multiple catalysts pulling on COST’s reins, Costco is very likely to see higher stock prices in a stronger first half of 2016. COST is a BUY.

Nicholas Vardy

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