It was a topsy-turvy week for your Alpha Investor Letter portfolio. Last week saw a sharp sell-off in your positions, while this week they have begun to recover.
With oil dropping 27%, and silver tumbling 27%, the sell-off in commodities was big. London’s Clive Capital, the world’s largest commodities hedge fund, noted that the drop in the price of Brent crude was a “five standard deviation event.” According to my back of the envelope calculation, a five standard deviation event in financial markets should happen only once in every 8,721 years. Yet these moves seem to happen every couple of years.
The good news is that the impact on your portfolio was minimal. You were stopped out of your bet on “soft commodities” — Agrium Inc. (AGU) — for a slight loss. And the rest of your commodities-related positions — Freeport-McMoRan Copper & Gold Inc. (FCX), Market Vectors Gold Miners ETF (GDX), and Vale S.A. (VALE) — have all fallen below their 50-day moving averages and have been moved to HOLD. You also stopped out of Market Vectors Russia ETF (RSX) on Monday, May 9, to finish with a profit of 18.8%.
The biggest news in your Alpha Investor Letter portfolio was yesterday’s monster drop of 18.21% in Universal Display Corp. (PANL), which ended the week 12.57% lower. The company reported better than expected revenues, but earnings missed due to higher than expected costs. With positive cash flows, a debtless balance sheet and still-rapidly growing revenues, I continue to believe PANL will do well. But clearly, this is a very volatile pick, and not for the faint-hearted. With the stock slicing through its 50-day moving average, I am moving it to a temporary HOLD.
Asia continues to be the strongest theme in your Alpha Investor Letter portfolio. The Market Vectors Indonesia ETF (IDX) hit yet another record high. iShares MSCI Taiwan Index (EWT) had a strong week and was up almost 2%. iShares MSCI South Korea Index (EWY) and iShares MSCI Singapore Index (EWS) also ended the week higher. Your top value play, WisdomTree Japan SmallCap Dividend Fund (DFJ), also rose. You should feel reasonably comfortable in adding to any of these positions at current levels.
It also was good to see many of you at the Las Vegas MoneyShow yesterday in my private meeting with subscribers. For those of you who couldn’t make it, you should know that we spent a good deal of time discussing not only the markets, but also brainstorming on what you would like to see in a future Vardy investment service. We’ll be asking you for more input over the coming months as these ideas take shape.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) ended the week 0.35% lower, trading off record highs. Still above its 50-day moving average, CYB remains a BUY.
WisdomTree Japan SmallCap Dividend Fund (DFJ) ended the week 0.74% higher. Trading at a book value of 0.8 and a price-to-sales ratio of .37, this would have to rise four-fold to reach the Nasdaq’s current valuation. DFJ remains a BUY.
iShares MSCI Singapore Index (EWS) rose 0.56% this past week. Singapore aims to woo medium and small-size Indian companies to Singapore by easing taxes. Committed to staying the most developed market among the Asian Tigers, EWS is a BUY.
iShares MSCI Malaysia Index (EWM) ended the week flat. The Malaysian Central Bank raised rates .25% last week, in order to reign in inflation in its booming economy. EWM remains a BUY.
iShares MSCI South Korea Index (EWY) ended the week slightly higher. The economy is currently on track to meet or slightly exceed the central bank’s forecast for 2011 of growth of 4.5%. EWY remains a BUY.
iShares MSCI Taiwan Index (EWT) rose almost 2% this week. This tech-heavy index remains a BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) dropped another 2.99% this past week. That’s not surprising, given the huge sell-off in commodities. Trading below its 50-day moving average, FCX is still a HOLD.
Market Vectors Gold Miners ETF (GDX) dropped 2.5% this past week. This ETF includes holdings such as Barrick Gold, Goldcorp, Newmont Mining, AngloGold Ashanti and Kinross. Trading below its 50-day moving average, GDX is now a HOLD.
Global X FTSE Nordic 30 ETF (GXF) ended the week 2.3% lower. Still above its 50-day moving average, this bet on the Nordic markets remains a BUY.
Market Vectors Indonesia ETF (IDX) rose another 1.05% this past week, closing at a record high. Continuing its relentless run, IDX is a BUY.
JinkoSolar Holding Co., Ltd. (JKS) rose a solid 4.66% this past week. The company has a share repurchase program, which authorizes it to repurchase up to $30 million of its ordinary shares represented by American depositary shares (ADSs) within 12 months. Now trading above its 50-day moving average, JKS is back to a BUY.
Las Vegas Sands Corp. (LVS) dropped 5.82% this week, unable to recover its sharp losses from the middle of last week. Trading at its 50-day moving average, LVS remains a HOLD.
Universal Display Corp. (PANL) fell 12.57% this past week — 18.21% just in yesterday’s trading, coming within a hairbreadth of its stop price. The company posted a first-quarter net loss of $11.9 million, or 31 cents per share, compared with a loss of $3 million, or 8 cents per share, in the same period last year. Revenue more than doubled to $9.6 million, edging past the average Wall Street estimate of $9.2 million. Slicing through its 50-day moving average, PANL is now a HOLD.
UltraShort Lehman 20+ Year Treasury (TBT) ended the week down. Still trading below its 50-day moving average, TBT is a HOLD.
iShares MSCI Turkey Invest Mkt Index (TUR) dropped 5.18% this past week. Turkey’s current-account deficit expanded in March to a record $9.8 billion as the growing economy draws in imported goods and oil prices rise. The deficit was the biggest since the central bank began releasing monthly figures in 1984. Still above its 50-day moving average, the “unheralded” BRIC remains a BUY.
Vale S.A. (VALE) fell 1.66% during the past week. In Q1, the company’s net earnings were $1.29 per ADR, up compared with 30 cents per ADR in the year-ago quarter. That beat consensus estimates of $1.16 per ADR. With the Brazilian commodities giant trading back below its 50-day moving average, this remains a HOLD.