You may not have have guessed it looking at the headlines, but global stock markets booked a terrific week. The S&P 500 Index ended the week 2.37% higher and the MSCI Emerging Markets Index jumped 2.74%. Markets continue to climb a wall of worry.
The big news this morning is Warren Buffett’s illness, which does not appear to be life threatening. This may have a short-term impact on your holding in Berkshire Hathaway (BRK-B). I recommend you take advantage of any potential dip in the stock as a buying opportunity.
Your Alpha Investor Letter portfolio also had a terrific week, with every single position gaining, and many up by more than 3%.
Your biggest gainer was last week’s new pick, The TJX Companies (TJX), which soared 6.93%. Other strong gainers included Yum! Brands, Inc. (YUM), up 6.88%; Visa Inc. (V), up 4.57%; and Statoil ASA (STO), which gained 4.83%.
Many of your positions also changed from a HOLD to a BUY from last week. These include WisdomTree Japan SmallCap Dividend Fund (DFJ), MSCI South Korea Index (EWY), MSCI Malaysia Index (EWM), iShares JPMorgan USD Emerg Markets Bond (EMB), Market Vectors Indonesia Index ETF (IDX), iShares Singapore ETF (EWS) and, perhaps surprisingly, Berkshire Hathaway (BRK-B).
You now have a record 17 positions in your Alpha Investor Letter portfolio. And that may make you feel nervous.
So I want to highlight my thinking in this regard.
First, as you know from our quarterly update call two weeks ago, I have a bullish bias for the U.S. stock market with a target price of around 15,000 on the Dow by October. I based this prediction on the average gain in the Dow after an unusually low level of consumer sentiment last October. This leaves about a 14% upside in the U.S. market from current levels. That’s also why I have been focusing on recommending U.S. blue chips stocks that are set to gain from a U.S. recovery.
Second, I may actually increase my price target in the coming months, for reasons that have nothing to do with the strength of the economic recovery. And that is the possible outcome of the U.S. presidential elections. If it looks like Mitt Romney has a real shot at the presidency — and recent polls among likely voters show that he has — this will usher in a much more business-friendly administration into the White House. That, in turn, could signal the beginning of a huge “Romney Rally” — and a huge boost to stock markets both in the United States and abroad.
Meanwhile, you do have stops in place for each of your positions, which I update regularly. Make sure you stick to these in case of any unexpected market sell-off.
Portfolio Update
WisdomTree Japan SmallCap Dividend Fund (DFJ) rose 3.20% over the past week. Japan’s attempts to shore up its economy continue to reap dividends. The Japanese stock market’s last quarter was its best since 1988, and the Nikkei is up more than 23% since early Dec 2011. DFJ is a BUY.
Las Vegas Sands Corp. (LVS) gained 1.06%. Wall Street is predicting a $0.59/share profit on $2.57 billion in revenue for LVS’ upcoming earnings report. In general, the Macau outlook remains very positive where demand for gambling is far above the regulated supply of table gaming. LVS will report earnings on Apr 26, and is a BUY.
MSCI South Korea Index (EWY) rose 2.84% for the week. North Korea’s recent saber-rattling missile launch may have missed South Korea, but managed a small hit on your position in EWY on the day of the event. EWY is holding just above its 50-day moving average and appears poised to move back to the $60 range where it has been trading in recent weeks. EWY is a BUY.
MSCI Malaysia Index (EWM) moved up 2.52% last week. Malaysia is gearing up for an upcoming general election, including the Prime Minister’s office. Not unlike the United States, government handouts have been spread far and wide in an attempt to stimulate the economy. It would appear that all politicians do in fact come from the same mold, no matter what country they were born in. EWM is a BUY.
Market Vectors Russia ETF (RSX) added 2.22% last week. While the downward pressure on oil prices is great for the broader U.S. economy, it has been taking a slow toll on oil net-exporter Russia — and RSX. However, other than death and taxes being “sure things,” the eventual rise in oil prices comes in as a close third. RSX is a HOLD.
iShares JPMorgan USD Emerg Markets Bond (EMB) went up 1.06%. EMB has solidified its move upwards and even managed a move back above the 50-day moving average. This bodes well for the future of EMB’s price action. EMB is a BUY.
Market Vectors Indonesia Index ETF (IDX) continued moving up last week and added 1.88%. Last week’s monster 8.6 magnitude earthquake off the coast of Indonesia, and a Pacific tsunami warning (which never materialized), didn’t seem to faze IDX in the least. IDX continued its schizophrenic behavior, moving above and below the 50-day moving average, as if everything was business as usual. IDX is a BUY.
Listed Private Equity ETF (PSP) gained 3.38% for the week. Although PSP has pulled back from its sturdy $9.50 resistance level over the past two weeks, PSP took a healthy bounce off of the 200-day moving average last week. This highly significant line-in-the-sand will likely hold up as a solid support level over the coming weeks. PSP is a HOLD.
iShares Singapore ETF (EWS) rose 3.29% over the past five trading days. EWS has been trading upwards off $12.50 and downwards from $13 since Feb. 1 like clockwork. Buying and selling a portion of your EWS holdings on these moves can be a profitable little side bet while waiting for a larger move upwards. EWS is a BUY.
Berkshire Hathaway (BRK-B) went up 2.62%. Warren Buffett announced his recent diagnosis of stage 1 prostate cancer on Tuesday. The condition is not life threatening. This event may cause some volatility in the stock and possibly even a short-lived dip. Keep in mind, there is no material change at Berkshire Hathaway and any news-driven pullback is likely a buying opportunity. BRK-B is a BUY.
iShares MSCI Hong Kong Index (EWH) rose 2.46% last week. China recently announced it would allow its yuan currency to trade in a wider range — from 0.5% up to the new 1% range. Some analysts are taking this as evidence China will not suffer a hard landing, confirming that China is comfortable enough to reduce the manipulation of its currency. Good news for China likely means better news for neighboring Hong Kong. EWH is a HOLD.
Freeport McMoRan Copper & Gold Inc. (FCX) gained 3.08% over the past five trading days. Bloomberg released its valuation of FCX on Tuesday stating it was cheaper than any other base metals producer with more than $10 billion in market value. Citigroup also upgraded FCX to a “Buy” on Monday and set a price target of $45. FCX paid you a $0.3125 dividend on April 11 and will report earnings on Thursday. FCX is a HOLD.
Visa Inc. (V) jumped 4.57%. With all five of the major credit card companies posting double-digit percentage gains so far for 2012, the future remains bright for industry-leader Visa. As global economies continue to recover, consumer credit card use is returning as well. Visa will report earnings on May 2 and is a BUY.
Ford Motor Co. (F) added 1.02% over the past week. Ford’s stock price found support at the 100-day moving average and remained parked there all last week. Ford reported last week that its Q1 European market share rose 8.5%. F is scheduled to report earnings on April 24 and will pay you a $0.05 dividend on April 30. F is a HOLD.
Yum! Brands, Inc. (YUM) powered ahead 6.88%. The pullback YUM! took two weeks ago turned out to be quite a gift. YUM! took off early last week and never looked back as it made a new 52-week high. YUM! paid you a $0.285 dividend on April 11 and will report earnings on Wednesday. YUM! is a BUY.
Statoil ASA (STO) rallied 4.83% last week. STO perked up early last week on rumors of new rig designs and sales of its holdings. Statoil did report Tuesday that it will release a new type of oil rig engineered specifically for subsea oil recovery. This new rig is capable of a full 1% increase in recovery capacity, which turns out to be a whopping 180 million extra barrels of oil. Statoil also announced the $2.8 billion sale of Statoil Fuel & Retail ASA. STO is a HOLD.
The TJX Companies (TJX) popped 6.93% in its first week in your portfolio, hitting another new 52-week high. The retail sector is all the rage right now and one look at TJX’s chart really tells the story. The perception of a real turnaround in the economy, coupled with endless positivity in the news, is keeping this fire burning brightly. TJX is a BUY.
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