With the benefit of hindsight, you may be kicking yourself for not buying Citigroup stock (Friday’s closing price: $3.95) when it was trading near $1 back in March of 2009. While some paranoid investors began heading for the hills of Montana just about then, Alpha Investor David Tepper (and fellow Pittsburgh native) of Appaloosa was busy gobbling up Citigroup shares at an average price of just over $1.00. His bet paid off handsomely, and Citigroup traded as high as $4.93 in April of this year. The result? Tepper made $7 billion for himself and his clients in 2009.
Recently, Tepper has said it was “the easiest trade I ever made.” Why? Because the U.S. government said that it would do anything to keep Citigroup from going bankrupt. Citigroup was simply “too big to fail.” All Tepper did was to listen, buy and wait…
This week’s Global Bull Market Alert pick, the Bank of Ireland (IRE), just may be your opportunity to replicate Tepper’s classic trade.
You’ve probably heard that Ireland’s banking industry has been a mess lately. Much like in the United States last year, the Irish government has had to step in to keep major players like Allied Irish Bank (AIB) afloat, pumping close to $50 billion into the bank to keep it from going under. And if you think the U.S. bailout was expensive, consider that the bailout took Ireland’s deficit-to-gross domestic product (GDP) ratio to a remarkable 32% for 2010 — proportionately triple the size of the deficit in the United States. And unlike the U.S. government, the Irish also created a “bad bank” to purchase the toxic debt of Ireland’s banks.
The bottom line? The Irish government clearly is willing to pull out all of the stops to save its banks.
The news is bad everywhere. But as Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, said:
“The time to buy is when there’s blood in the streets.”
While AIB is truly a “lottery” ticket that I cannot recommend in good faith, the Bank of Ireland (IRE) — the strongest among the Irish banks — already may have turned the corner. Just last week, a leading U.K. stockbroker Collins Stewart put out a “Buy” recommendation on the Bank of Ireland’s stock, describing it as the “strongest player” in the Irish banking sector. Unlike Allied Irish Bank, the central bank has said that Bank of Ireland would not need more capital. And Collins Stewart calculates that the Bank of Ireland will be capable of generating 1 billion euros in earnings a year — even in this tough economy.
This is a position that I am holding for my clients at my firm Global Guru Capital. I think of my position as an “option” that does not expire. Like an option, the stock price will fluctuate tremendously, moving up or down 10% or more a day. But because it does not expire, you can hold onto it “forever” — giving you plenty of time to wait for the market to turn.
If I am right on this, this stock has the potential to triple, or even quadruple, over the span of a few months — just like Citibank did between March of 2009 and September 2009. And with Q4 traditionally the strongest time for global markets, the Bank of Ireland just may turn out to be your biggest Global Bull Market Alert winner yet.
So buy the Bank of Ireland (IRE) at market today. Because of the highly unusual nature of this pick, I am not recommending an option or a specific stop price. I will, however, update you on specific times to exit your position.
Bank of Ireland: The Luck of the Irish?
Portfolio Update
Credicorp Ltd. (BAP) jumped another 6.05% this past week. Central Reserve Bank of Peru Governor Julio Velarde said that the general elections scheduled for next year won’t change the fundamental direction of the Peruvian economy. Peru’s BAP remains a BUY.
iShares MSCI Chile Investable Mkt Idx (ECH) hit a record high of $75.00, before ending the week 1.94% higher. With the peso currently trading near 29-month highs against the dollar, ECH remains a BUY.
ProShares UltraShort Euro (EUO) fell back ever so slightly last week. But with bullish sentiment for the U.S. dollar at a mere 3%, I expect the greenback to rally soon. I am moving your bet against the euro back to a BUY.
Global X/InterBolsa FTSE Colombia 20 ETF (GXG) rose slightly this week, after hitting a record high of $46.72. Ratings agency Fitch has revised the rating outlook to positive, reflecting Colombia’s economic resilience and improved macroeconomic performance in relation to its peers. GXG remains a BUY.
ICICI Bank Ltd. (IBN) hit a high of $52.56, before retreating slightly. Indian industry expects the economy to grow by more than 8% during 2010-11, mainly due to a rise in capital investment and capacity utilization. IBN remains a BUY.
Market Vectors Indonesia ETF (IDX) ended the week flat. Indonesia was the only G20 country to lower its ratio of debt to GDP during the financial crisis. The “Next BRIC” remains a BUY.
Itaú Unibanco Holding S.A. (ITUB) rose slightly this week, after hitting a high of $26.05. Banks in Brazil will post earnings growth of 39% in 2010 and 31% in 2011. ITUB remains a BUY.
SINA Corporation (SINA) rose 5.44% in its first week in the portfolio. The National Basketball Association announced that Sina will operate its website in China. “China’s Twitter” is a BUY.
iShares MSCI Thailand Investable Market Index Fund (THD) hit a record high of $64.72, before ending the week 2.86% higher. The International Monetary Fund said that Thailand’s economy may grow 7.5% this year because of increased global trade and government spending. THD remains a BUY.
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 or on my new blog, NickVardy.com.
