Stocks Resume Rally and Making Sense of a Sharp Sell-off

Markets continued to rally last week, with the Dow Jones up 1.88%, the S&P 500 rising 1.90% and the NASDAQ gaining 1.40%. The MCSI Emerging Markets Index also rose 2.71%.

Big gainers in your Alpha Investor Letter portfolio included the WisdomTree Japan Hedged Equity ETF (DXJ), which gained a robust 5.72%; the iShares Currency Hedged MSCI Germany (HEWG), which added 5.50%; and The Walt Disney Company (DIS), which jumped 5.43%.

Home Depot (HD) hit a new 52-week high. Both the WisdomTree Japan Hedged Equity ETF (DXJ) and Costco Wholesale Corporation (COST) rose back above their 50-day moving average and moved to a BUY.

The big news in your Alpha Investor Letter portfolio was Illumina, Inc. (ILMN), which dropped a whopping 20.16%, hitting levels not seen since early February.

The company announced that Q1 revenue likely will be $572 million — a figure that is up 6% year-over-year, but 4% lower than analysts’ projections. lllumina said it now expects 12% revenue growth for the year, compared with prior guidance of 16% growth.

The reason behind lowered expectations is sluggish demand in Europe. Users on the Old Continent tend to share gene-sequencing machines more than users in other parts of the world. Still, sales in the rest of the world remain on track for mid-teens growth.

In my experience, markets overreact to news like this, and the affected stocks often make a quick recovery. I believe this will be the case with Illumina as well.

It’s worth recalling that Illumina is the father of the field of genomics — and not an over-inflated dotcom stock. Dubbed “the world’s smartest company” by MIT Technology Review back in 2014, Illumina successfully sequenced a person’s genome for less than $1,000, compared with $100 million just 15 years ago. Today, it remains the biggest player in gene sequencing by far. And the personalized medicine it pioneered isn’t going anywhere.

The bottom line?

Despite short-term headwinds, this past week’s sell-off in Illumina offers a chance to add to your position.

However, I also want to wait for Illumina to resume its uptrend, and recapture its 50-day moving average, which stands today at around $156.00.

So for now, Illumina has moved to a HOLD.

Portfolio Update

Berkshire Hathaway (BRK-B) gained 2.49% over the last five trading days. Berkshire Hathaway will hold its annual shareholders’ meeting on April 30. As usual, investors will have a grand old time eating steak, listening to Mr. Buffett speak and enjoying the overall ambiance. With over 40,000 shareholders expected to attend in person, Berkshire will livestream the event over Yahoo Finance for the first time ever. That means you (and the rest of the world) are invited to attend! BRK-B is a BUY.

Vanguard Russell 2000 Index ETF (VTWO) added 3.14%. Small caps have led the recent market rally, closing strong last week. VTWO also breached above its 200-day moving average (MA) for the first time since last August, signaling the possibility that a long-term rebound may be in store for the small-cap sector. VTWO is a BUY.

Markel Corp. (MKL) rose 1.04%. Global investment banker and asset management firm William Blair upgraded Markel from “Market Perform” to “Outperform” last week. MKL is expected to report earnings on May 4 after markets close. MKL is a BUY.

Google Inc. (GOOGL) only rose 1.56% last week. Google reported that its CEO Sundar Pichai made $100.5 million last year. This figure makes him one of the highest-paid corporate executives on earth. GOOGL will report earnings on April 21, after markets close. GOOGL is a BUY.

WisdomTree Japan Hedged Equity ETF (DXJ) gained a robust 5.72% last week and jumped above its 50-day MA as well. DXJ spent most of March flirting with its 50-day MA, only to drop back near its 52-week low that it hit two weeks ago. However, DXJ now appears to be holding above this line. DXJ is now a BUY.

The Walt Disney Company (DIS) jumped 5.43%. After a very long period of trading sideways, DIS pushed upwards last week on strength in an attempt to break out to the upside. DIS will report earnings on May 10 after markets close, and the news could be quite good. DIS is a BUY.

iShares Currency Hedged MSCI Germany (HEWG) added 5.50%. Your second currency-hedged exchange-traded fund (ETF) jumped much like your holding in WisdomTree Japan Hedged Equity ETF (DXJ) last week. HEWG also closed yesterday a few pennies above the 200-day MA — an occurrence not seen since the end of last November. HEWG is a BUY.

Apple Inc. (AAPL) pulled back 3.20% last week after gaining nearly every week since bottoming in early February. Apple will report earnings on April 25, after markets close. AAPL is a BUY.

Home Depot (HD) gained 1.01% for its first week in the Alpha Investor Letter portfolio. HD also pushed to a new 52-week high, breaking above its long-term resistance level established at the end of last November. HD is a BUY.

Sincerely,