Global markets have performed surprisingly strongly over the past five trading days — that is, until yesterday’s sharp, early sell-off that dented the sentiment. Both Latin American cell phone giant America Movil (AMX) and last month’s pick, Millicom International (MICC), hit record highs over the past week. America Movil is now the top performer in our portfolio, up 14.39%. Dollar weakness continues to act as a tailwind to our European positions in the Swedish ETF (EWD) and U.K. holding Tesco (TSCDY), up 12.19% and 9.93%, respectively.
Cognizant Technology Solutions Corp.’s (CTSH) strong earnings were unable to buck the emerging negative sentiment surrounding Indian outsourcers. The stock is down 9.2% since announcing positive earnings last Wednesday. Meanwhile, China’s Home Inns & Hotels Management Inc. (HMIN) and Indian banking giant ICICI Bank (IBN) were surprisingly steady this week.
All of our positions remain BUYS at current levels, except for Cognizant (CTSH) and Home Inns (HMIN), which we are keeping at HOLDS.
AMERICA MOVIL (AMX)
America Movil recovered from the bad news concerning its failed bid for Telecom Italia and hit record highs on Monday. The stock was up 5.6% on the week and 14.39% since our initial recommendation. One of the most reliable of growth stories in the emerging market universe, it remains a strong BUY.
COGNIZANT TECHNOLOGY (CTSH)
Cognizant Technology and Ordina, one of the fastest-growing and largest services providers in consulting and outsourcing in the Netherlands and Belgium, announced that they have entered into a major outsourcing arrangement with Rabobank, the largest banking group in the Netherlands. This effort is consistent with Cognizant’s efforts to expand its business in Europe.
Nevertheless, sentiment has turned against Indian outsourcers like Cognizant over the past week despite both Cognizant and its rivals meeting or beating earnings expectations while maintaining their margins. I think the selling is overdone and technically, the stock is as oversold as I have seen it since 2005. With the stock price approaching our stop price of $78.75, Cognizant (CTSH) remains a HOLD for now.
ICICI BANK (IBN)
India is a country of the future — and ICICI bank is angling to profit from it in many ways.
The Delhi Master Plan 2021 — a government plan to transform New Delhi from a chaotic city into a clean, organized and world-class metropolis — proposes making land available to build 2.4 million housing units in Delhi. ICICI Venture Funds Management Co. — a joint venture with Tishman Speyer, a U.S. real-estate company — is already actively looking at funding a large chunk of the project. The prospects look strong.
Meanwhile, ICICI Bank’s international aspirations continue to bear fruit. Last week, ICICI received a license to set up a branch in the Qatar Financial Centre, Doha, Qatar. ICICI Bank is the first Indian bank to receive a license from Qatar Financial Centre Regulatory Authority (QFCRA).
I continue to be very bullish on the long-term prospects of ICICI bank (IBN) and it remains a BUY.
MILLICOM INTERNATIONAL CELLULAR SA (MICC)
Millicom hit a record high of $85.95 on Monday, before falling back on light volume yesterday. From a technical point of view, the stock may be poised for a breakout on the upside. Millicom (MICC) remains a strong BUY.
ISHARES MSCI SWEDEN INDEX (EWD)
Last week, Sweden announced that it will sell a 19.7 billion kronor (US$2.9 billion) stake in telephone company TeliaSonera AB to institutional investors in the new government’s first asset sale. Deutsche Bank and UBS will manage the disposal of 8% of the Stockholm-based company. The sale will be the biggest in Sweden in almost five years. This is all part of Prime Minister Fredrik Reinfeldt’s center-right coalition-government’s plans to privatize assets worth at least 200 billion kronor over the next four years.
There was an unexplained sell-off on high volume in the Swedish ETF yesterday. This does not appear to have anything to do with the Swedish market itself and it is a terrific opportunity to add to your positions. Sweden (EWD) remains a strong BUY.
Tesco has reportedly hired Merrill Lynch to advise it on preparing a bid for Coles, Australia’s # 2 retail group. Tesco is hoping to buy Coles’ food and liquor operations and Kmart. Coles put itself on the block in February, after posting disappointing results and downgrading its 2008 profit target by 10%.
Tesco is, of course, also planning to enter the U.S. market by opening stores starting later this month in Los Angeles, Phoenix, Las Vegas and San Diego under the name Fresh & Easy.
Tesco (TSCDY) — one of Warren Buffett’s favorite overseas picks — remains a strong BUY.