Another week of “Slow and Steady”

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
It was another slow, late summer week for your Alpha Investor Letter portfolio. The Dow Jones was down 0.76%, and the S&P 500 dropped 0.27%. The MCSI Emerging Markets Index, however, gave back 2.05%.
 
Two of the biggest gainers in your Alpha Investor Letter portfolio came from two of the strongest performing U.S. sectors in the market, housing and biotechnology. Lennar (LEN) jumped 3.50% and the iShares NASDAQ Biotechnology (IBB) rose 2.60%. Your bet on emerging markets debt through the iShares JPMorgan USD Emerging Markets Bond (EMB) also rose 1.02%.
 
I want to highlight a buying opportunity in 3D printing play Stratasys (SSYS) which fell 3.85% over the course of the week — but is already well on its way to recovery. All of your other positions remain Buys.
 
Overall, global financial markets are very quiet as we head into the last days of the summer of 2012. Meanwhile, there are several key events in the weeks ahead whose outcome could impact profoundly what happens in global stock markets this September. Traders anxiously are awaiting Ben Bernanke’s keynote speech at the annual central bankers meeting in Jackson Hole, Wyo., on Friday to see whether quantitative easing part III (QE3) is on the way. And on Sept. 6, the ECB will decide whether to step in to buy government bonds, mimicking the Fed and Bank of England’s QE strategy.
 
This week I am attending the Republican National Convention in Tampa, where I saw Chris Christie’s and Ann Romney’s speeches last night.
 
As an American who has lived overseas for over 20 years, I am struck by a couple of things.
 
First, it seems to me that the media has gotten out of control. The hullabaloo surrounding a hurricane that I don’t think it even came with 100 miles of Tampa left me scratching my head. Yes, Monday was a little windy, but hardly a reason to cancel the first day of the convention. And maybe it’s just because I live in cloudy London, but yesterday seemed like a pretty nice Florida beach day to me. Yet when I turned on the TV, apparently I was living through the apocalypse.
 
Second, the level of vitriol in the U.S. media is astonishing. The entire political and media class of the U.S. has been reduced to a nasty cat fight. The twisting and turning and spinning of the every single word or event in favor of your particular political cause — coupled with an overlay of sappy political correctness — strikes me as just bizarre.
 
Third, the security and lock-down of downtown Tampa reminds me of a scene from one of those post-apocalyptic disaster movies. When I was growing up in Pittsburgh, I can’t recall seeing a single military uniform on the streets. Today seeing dozens of uniformed military armed with machine guns alongside police and secret service agents seems to be the norm.
 
Although I travel to the U.S. three or four times a year, I kind of feel like Rip Van Winkle who just woke up after 20 years asleep.
 
And I’m not crazy about what I see…

Portfolio Update

MSCI Malaysia Index (EWM) finished the week flat. Malaysia’s Q2 gross domestic product (GDP) jumped an impressive 5.4% — gaining nearly a full percent over last year’s 4.3% GDP Q2 figure. This performance sets Malaysia apart as one of the strongest of the emerging market economies. EWM is a BUY.
 
iShares JPMorgan USD Emerg Markets Bond (EMB) rose 1.02%. EMB closed at $119.33 yesterday (Tuesday) after hitting a 52-week high of $119.56 just three weeks ago. This move represents a bullish chart pattern if EMB breaks out above $119.56. EMB is a BUY.
 
Berkshire Hathaway (BRK-B) lost a mere 0.35%. The Zacks investment research firm added BRK-B to its “Zacks #1 Rank” list last Friday, giving Berkshire Hathaway a “strong buy” recommendation. BRK-B is a BUY.
 
Visa Inc. (V) was nearly unchanged. The mobile payments space holds immense room for growth, and Visa is well positioned to prosper as the future unfolds. Visa will launch its own digital wallet service, named V.me, this fall in the U.K., France, and Spain. The V.me service will reach the U.S. in 2013. V is a BUY.
 
The TJX Companies (TJX) ended up flat. “Short Interest” is a measure of how many investors are betting against a stock, and looking for a decrease in the stock price in order to profit. TJX falls into a group of retailers whose Short Interest fell for the month of August. TJX is a BUY.
 
Stratasys, Inc. (SSYS) lost 3.85% over the past five trading days. Stratasys took a breather early last week after the stock ha been on fire over the past several months and recently hit a new 52-week high. This dip may be a short-lived buying opportunity as the stock jumped sharply yesterday. SSYS is a BUY.
 
iShares Nasdaq Biotechnology (IBB) gained 2.60%. After trading sideways for several weeks, IBB began an upswing last week and appears to be making another run at $138.75 — its 52-week high. A break above this level signals bullish times ahead. IBB is a BUY.
 
WisdomTree Japan SmallCap Dividend ETF (DFJ) gave back 1.48%. DFJ closed out the week just above its 50-day moving average. A bounce from this level may signal the beginning of a third run at the $43.00 resistance level. DFJ is a BUY.
 
Market Vectors Indonesia Index ETF (IDX) fell 2.75% last week. IDX dipped last week on some negative news regarding possible future depreciation of the rupiah. IDX remains a BUY.
 
PowerShares Global Listed Private Equity Portfolio ETF (PSP) dipped 1.30% last week. The private equity industry has outperformed the S&P 500 Index on a one-year, five-year, and 10-year basis. This well-diversified private equity fund is a BUY.
 
iShares Singapore Index ETF (EWS) gave back 1.29%. EWS holds nearly 47% of its assets in financials — a safe bet given Singapore has a AAA credit rating and can back up its banking sector with a government-owned sovereign wealth fund holding nearly $250 billion in assets. IDX is a BUY.
 
Statoil ASA (STO) was flat for the week. Statoil announced that it would triple its Arctic technology research budget, and drill nine new wells in the Barents Sea region during 2013. STO is a BUY.
 
Lennar Corp (LEN) jumped 3.50% last week. Lennar enjoyed further upside last week as competitor Toll Brothers Inc. reported a better-than-expected earnings report. Toll Brothers CEO Douglas Yearley said the company is seeing the most sustained demand it has seen in the past five years. LEN is a BUY.
 
iShares MSCI South Korea Index Fund ETF (EWY) gave back 1.96%. Apple’s $1 billion dollar judgment against South Korean tech giant Samsung reflected negatively in both Samsung’s stock price and EWY’s price. However, this may represent a buying opportunity, as $1 billion is just 1.5% of Samsung’s annual telecom revenue — a loss that Samsung will likely recover from quickly. EWY is a BUY.
 
iShares MSCI Mexico Investable Market Index (EWW) was flat over the previous week. Mexico will boost annual auto output by 1 million vehicles within three years, a 38 percent jump from last year, as foreign manufacturers use the country as an export base. Manufacturers are opening new plants in Latin America’s second-largest economy as wages in China rise. EWW is a BUY.
 

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