Global Markets Break Out to the Upside

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
It was yet another strong week for global stock markets, as the Dow Jones Industrial Average rose 1.81%, matching the S&P 500’s gain of 1.80%. The technology sector continued its rise, with the NASDAQ up 2.36%. In global markets, the MCSI Emerging Markets Index continued to recover, rising 3.28%.
 
Your biggest gainers include your bet on the U.S. housing rebound, with Lennar Corp (LEN) up 7.59%. Apple (AAPL) jumped 6.26%. Your bet on U.S. biotechnology through iShares NASDAQ Biotechnology (IBB) also rose 3.51%.
 
In global markets — iShares MSCI South Korea Index Fund ETF (EWY) — added 4.54% and your bet on “China next door” — the iShares MSCI Mexico Investable Market Index (EWW) — was up 3.15%. Your bet on Japanese small cap stocks — WisdomTree Japan SmallCap Dividend ETF (DFJ) — added 2.14% and moved back to a BUY.
 
On the downside, Stratasys (SSYS) fell 5.55%, slicing through its 50-day moving average on over 5x of its normal volume yesterday.  This bet on 3D-printing has been a big winner in your Alpha Investor Letter portfolio. However, with the stock breaking down technically on high volume, I am going to recommend that you SELL this position today to lock in your gains. But I don’t want to say goodbye to this pick just quite yet, so I am moving it to your watch list.
 
The big news this past week was the Fed’s introduction of a third round of quantitative easing (QE3) last Thursday. I discussed my views on this in yesterday’s issue of The Global Guru, which you can read HERE.
 
Flooding global financial markets with an additional $40 billion a month through the purchase of U.S. mortgage securities is bullish in the short term. The long-term implications are uncertain, to say the least. That’s why it is absolutely crucial that you stick to your stops during any sustained market sell-off.
 
Please note that this week’s “Portfolio Update” includes a separate section highlighting the few picks I have taken on from Robert Hsu’s “China Strategy” portfolio. Note that the iShares Singapore Index ETF (EWS) was already an overlapping pick with The Alpha Investor Letter, and is covered in this section.
 
Finally, I want to announce a special tele-conference for Alpha Investor Letter subscribers for Thursday, Sept. 27, at 2:00 p.m. Eastern Daylight Time (EDT). In this call, I’ll introduce myself to new subscribers, discuss my investment philosophy, as well as review where you stand with your Alpha Investor Letter portfolio. You will also have a chance to ask me questions LIVE.
 

Portfolio Update

MSCI Malaysia Index (EWM) rose 2.43% over the past five trading days. The Malaysian economy benefited greatly this year from a wave of initial public offerings (IPOs). In fact, a massive $2.1 billion IPO closed just last month, making it the third-largest IPO of 2012. EWM is a BUY.
 
iShares JPMorgan USD Emerg Markets Bond (EMB) was flat for the week. EMB experienced a whopping $191.9 million dollar inflow last week, a 3.5% week-over-week increase. EMB is a BUY.
 
Berkshire Hathaway (BRK-B) gained 2.13%. Zack’s upgraded Berkshire Hathaway to “Outperform,” from “Neutral.” And, Mr. Buffett announced that he completed his 44th and final prostate cancer treatment on Friday, stating, “…I am so glad to say that’s over.”  Amen to that. BRK-B is a BUY.
 
Visa Inc. (V) rose 1.65%. Visa spiked higher last week, along with the broader markets, on news of the Fed’s third quantitative easing, and hit a new all-time high of $136.65. V is a BUY.
 
The TJX Companies (TJX) dipped 0.46% recently. Citigroup analyst Oliver Chen initiated coverage on 12 retail stocks last week, and is exceedingly bullish on the sector in the months ahead. Despite continued economic weakness, this discount retailer continues to deliver positive solid same-store sales increases and double-digit percentage earnings growth. TJX is a BUY.
 
Stratasys, Inc. (SSYS) lost 5.55% over the past five trading days. Stratasys announced overwhelming stockholder approval last Friday to the proposed merger with Objet Ltd. The merger is scheduled to be completed in the coming weeks. Sell this position today to lock in your gains. I have moved this position to the watch list.
 
iShares Nasdaq Biotechnology (IBB) gained 3.51%. Even as many stocks pulled back early this week, IBB managed to extend gains each day over each of the past four trading days. Biotechnology remains hot, and IBB remains a BUY.
 
WisdomTree Japan SmallCap Dividend ETF (DFJ) added 2.14%. The Japanese yen strengthened further last week after the U. S. Federal Reserve Bank announced economic stimulus that will weaken the U.S. dollar. However, the Bank of Japan announced today that it will boost its asset purchase program as part of its own economic stimulus. This should have positive effects on the broader Japanese market. DFJ is a BUY.
 
Market Vectors Indonesia Index ETF (IDX) rose 2.48% last week. Indonesia’s purchasing managers index (PMI) rating came in at 51.6 recently, up from 51.4 for the prior period. This is Indonesia’s best PMI report in the past 10 months. IDX is a BUY.
 
PowerShares Global Listed Private Equity Portfolio ETF (PSP) added 2.63%. After several weeks of sideways trading, this bet on private equity took off recently by tacking on nearly 7% in just the past two weeks. PSP is a BUY.
 
iShares Singapore Index ETF (EWS) rose 2.10%. Singapore continues to be a “sweet spot” for investing. Boasting a triple-A credit rating and a stable currency, Singapore is the poster child for a sound economy. Singapore also trades at a 9.4x price-to-earnings ratio, compared to the S&P 500’s 14x figure. EWS is a BUY.
 
Statoil ASA (STO) gained 2.12% over the previous five trading days. Although Statoil gained last week, a temporary outage at its Norwegian gas production facilities, coupled with the recent “mystery dip” in crude oil prices, put some pressure on the stock over the past few trading sessions. Expectations hold that the production outage will not last long. STO is a BUY.
 
Lennar Corp (LEN) jumped 7.59% last week. Lennar continued its winning ways, boosted by the unending wave of positive U.S. housing sector news reports. LEN is scheduled to report earnings on Sept. 24 and is a BUY.
 
iShares MSCI South Korea Index Fund ETF (EWY) added 4.54%. EWY has been on a tear lately after touching its 50-day moving average two weeks ago. Some of the recent rapid rise is likely due to investors rushing back in now that the dust has settled from the Samsung-Apple $1.2 billion lawsuit. Of course, the fact that Samsung expects to sell over 20 million of its latest flagship $700.00 Android mobile phone doesn’t hurt either. EWY is a BUY.
 
iShares MSCI Mexico Investable Market Index (EWW) gained 3.15%. This pure play on the Mexican economy invests 50% of its assets in five of the top Mexican business sectors, a bet on the prosperity of this emerging market next door. EWW is a BUY.
 
Sociedad Quimica y Minera de Chile S.A. (Chemical & Mining Company of Chile) (SQM) gained 2.86% for its first week in your portfolio. The Chilean government will award a lucrative 20-year lithium product contract on Sept. 24, and SQM is one of the three bidders. This contract will give exclusive rights to the winning bidder to produce lithium from a massive brine deposit in Chile. SQM is a BUY.
 
“China Strategy” Legacy Portfolio
 
Apple (AAPL) rose 6.26% last week as the stock broached the $700 level for the first time. Sales of the iPhone 5 have exceeded expectations, as Apple stopped taking orders for its blockbuster product soon after it launched. Sterne Agee analyst Shaw Wu has upped his price target for Apple stock for the second time since the iPhone 5 release. He now believes the stock will hit $840, based on the iPhone 5 and iPad Mini. That’s close to 20% above yesterday’s closing price. AAPL remains a BUY.
 
China Kanghui Holdings (KH) ended the week 2.53% higher. With a network of 335 domestic distributors covering 30 provinces, municipalities, and autonomous regions in China and a network of 41 international distributors that sell products in 29 countries across Asia, Europe, South America, Africa, and Australia, this Chinese healthcare bet remains a BUY.
 
 
P.S. As you know, one of the many subscriber benefits of the Alpha Investor Letter is the opportunity for exclusive members-only teleconferences with me. Next Thursday, Sept, 27, at 2:00 p.m. EDT, you’re invited to join a FREE, 60-minute discussion for the entire Nicholas Vardy subscriber community. You’ll have the opportunity to listen live to my insights and perspectives about our current portfolio positions, how to obtain the best market performance through the end of 2012, the implications for the upcoming presidential election, and much more! Keep an eye on your email inbox for further details. For now, please save the date of Thursday, Sept. 27, at 2:00 p.m. EDT for Nicholas Vardy’s “Best Places in the World to Invest in Now.”

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On Sept. 6, the European Central Bank (ECB) committed itself to buying the bonds of cash-strapped euro-zone members. Last Thursday, the Fed announced quantitative-easing part III (QE3) and its commitment to keep interest rates at near-zero "at least through mid-2015." The Fed also pledged to start buying $40 billion of additional mortgage assets a month. The ECB's goal was to keep the euro zone from splintering. The Fed's goal was to make you feel better as you watch the value of your stock h

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