Consolidating Your Gains

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
The last three weeks have been all about the market consolidating its recent gains. Although the U.S. markets ended the week flat, they held above key support levels. The Dow Jones Industrial average remained perched well above the 13,000 mark. And the S&P 500 held above the 1,370 mark, eking out a 0.69% gain.
Overall, the U.S. markets have continued to outperform their global counterparts. You saw this reality as broadly diversified Berkshire Hathaway (BRK-B) hit a nine-month high last week, while the MSCI Emerging Markets Index lost nearly 3%.
That said, you always have pauses in markets that are climbing quickly. And the markets’ ability to stay above key support levels bodes well for the sustainability of the current bull run. The lack of trading volume, however, remains a concern. A lot fewer market players are making money on the current rally than the headlines would indicate. Many investors clearly remain “once bitten, twice shy” and have stayed on the sidelines.
With respect to your Alpha Investor Letter portfolio, Yum! Brands, Inc. (YUM) was the big mover last week when it posted a 2.30% gain. Las Vegas Sands Corp. (LVS) continues to power ahead and rose 1.99%. Otherwise, many of your holdings in emerging markets have reached technically oversold levels. Assuming the bull resumes its run, this is a good time to add to your current positions. I’d highlight, in particular, the MSCI Malaysia Index (EWM) in this regard.
The current slowdown in the market’s gains actually makes me feel a bit more bullish over the next two months or so, with April traditionally a strong month for stocks. It’s when markets hit the “sell in May and go away” time period that I expect the current rise to slow down on a more sustained basis.

Portfolio Update

WisdomTree Japan SmallCap Dividend Fund (DFJ) lost 1.21% over the past week. DFJ continued to test the $44 price level but held on. Last week was the one-year anniversary of the Japanese earthquake and tsunami disaster. A glance at DFJ’s chart shows a 52-week high of $46.46 just before the quake. Only one year later, DFJ clawed back to within $2 of that level. DFJ is a BUY.
Las Vegas Sands Corp. (LVS) last week continued its relentless move upward by rising 1.99% to hit a new 52-week high. Sands China Ltd., a subsidiary of LVS, recently announced that Sands Cotai Central would open next month. This massive addition of hotel and retail capacity is the latest phase in the development of the Cotai Strip joint venture — with over $8 billion invested so far. Sands China Ltd. Chairman Sheldon Adelson declared that the new development “is a game changer for the future of Macau.” LVS is a BUY.
MSCI South Korea Index (EWY) gave back 1.46%. EWY exposes you to a collection of the top South Korean corporations, including Samsung Electronics, for far less capital than you would need to hold the stocks individually. Samsung alone is trading at just about $1,000 per share. EWY is a BUY.
MSCI Malaysia Index (EWM) lost 1.85% last week. EWM fell to its 50-day moving average on Tuesday. If emerging markets rebound, EWM will very likely bounce handily off of this level. Technically oversold, the timing is ideal to add to your position. EWM is a BUY.
Market Vectors Russia ETF (RSX) gave back 4.62% last week. The chart for RSX reflects a very positive technical picture. RSX bounced off the 200-day moving average two weeks ago and has returned once again. In addition, the 50-day moving average is just under the 200-day moving average and very close to intersecting. This type of setup usually creates tremendous support for a move upwards. RSX is a BUY.
iShares JPMorgan USD Emerg Markets Bond (EMB) pulled back 1.42% last week. Prospects for growth in emerging markets for 2012 are improving as the global economic recovery gains steam. Emerging market debt will remain an attractive investment for those seeking yield. EMB is a BUY.
Market Vectors Indonesia Index ETF (IDX) gave back 1.69%. Market Vectors announced a new Indonesian small-cap exchange-traded fund on Tuesday. The announcement listed the primary reason for the fund’s creation as a method to capitalize on “the rapidly growing Indonesian economy.” IDX is a HOLD.
Listed Private Equity ETF (PSP) came in flat for the week. The financial sector has been on fire lately, as the beginnings of a real recovery seem to be emerging. A look at Bank of America’s chart (BAC) shows this quite clearly. PSP has a heavy weighting in financials and should continue to reap good gains. PSP is a BUY.
iShares Singapore ETF (EWS) lost 1.55%. The 50-day moving average crossed up through the 200-day moving average on Monday. This “golden cross” gives EWS an extra measure of bullish support going forward. EWS is a BUY.
Berkshire Hathaway (BRK-B) gained 0.85%. After waging a two-month battle, BRK-B finally managed to break the extremely stubborn $80 barrier last week. BRK-B also managed to make a new nine-month high. The recent surge in financial stocks was likely a strong contributing factor to this positive move upwards. BRK-B is a BUY.
iShares MSCI Hong Kong Index (EWH) lost 2.63% last week. This morning, Bloomberg ranked Hong Kong as the best place to do business in the world. The city of about 7 million people secured top position in a new index based on six criteria, including the degree of economic integration and labor costs. The Netherlands, the United States, the United Kingdom and Australia occupied the next four leading slots. EWH is a BUY.
Freeport McMoRan Copper & Gold Inc. (FCX) was flat last week. Both gold and copper have taken it on the chin as of late, and FCX has endured a beating, as well. However, demand for these metals will never cease and a comeback is imminent. FCX has leveled off at the $38 price level over the past three weeks and short-term technical indicators are looking very oversold. FCX is a HOLD.
Visa Inc. (V) was also flat last week, losing just 0.64%. The economic recovery has made significant gains as of late, and consumer credit card use has increased respectively. A recent credit card study found that U.S. consumers charged 424% more in 2011 than in 2010 — and all those additional card swipes were good news for Visa. V is a BUY.
Ford Motor Co. (F) dipped 1.26%. Ford reported that 1,700 workers took early retirement packages and will no longer be on the company’s payroll as of June 1. Although Ford plans to replace nearly 250 of these workers, the new labor will come at a much cheaper price — and that is good news for Ford’s improving bottom line. F is a BUY.
Yum! Brands, Inc. (YUM) gained 2.30% over the past five trading days. The positive outlook for YUM became even rosier on Monday as Oppenheimer initiated coverage of the stock and issued an “Outperform” rating. Oppenheimer also set a price target of $82, giving this $70.50 stock a potential 14% upside. YUM is a BUY.
Statoil ASA (STO) dipped 2.50%. Statoil signed a “letter of award” last Friday with Dutch oil services company Fugro NV. Fugro will begin a $40 million 3-D seismic survey off the coast of Newfoundland in the second half of 2012. The results of this survey will allow Statoil to focus its oil recovery efforts on fertile, oil-bearing patches of sea. STO is a BUY.
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