Our Global Stock Investor portfolio consolidated over the last week as we head into the traditionally quiet summer months. As I noted in last week’s update, global markets also need to digest their strong gains of recent weeks.
The biggest danger I see to global markets is contagion from a collapsing Chinese stock market. Efforts by Chinese authorities to cool the nation’s stock market frenzy could begin to have a ripple effect in other markets. Even though a collapse of a purely domestic market like Shanghai should only impact local investors, negative sentiment could spread like wildfire across other global markets — as it did on Feb. 27th. Our strategy in this case is clear: we ride out the storm, but stick to our stops.
PORTFOLIO UPDATE
Anglo-American (AAUK), our latest pick, was flat for the week. The consensus in London — where the bulk of Anglo-American’s shares are traded — is that share prices of mining stocks have only just started to reflect the strength of underlying metal prices. Last week, Merrill Lynch also put out a note where it increased its forecasts for platinum group metals. This is bullish news for Anglo-American’s share price and the stock remains a STRONG BUY.
"Imitation is the sincerest form of flattery." And our emerging markets telecom plays America Movil (AMX) and Millicom International (MICC) are certainly attracting their share of imitators.
Consider the case of U.K.-based Vodafone, the world’s largest wireless services provider. Vodafone’s growth from European operations in 2007 was only 1.4% — lackluster at best. The only bright spot in Vodafone’s portfolio were emerging markets like Eastern Europe, Africa, and Asia where revenues grew by 14.9%. Trouble is, Vodafone is late to the party — and its efforts in these markets have often been awkward and unwieldy. America Movil and Millicom International are both savvy players and long-time veterans in emerging markets — and profiting handsomely. Both also remain STRONG BUYS at current levels.
Home Inns & Hotels Management (HMIN) continues its vertigo-inducing ride. China’s benchmark stock index plunged 6.5% on Wednesday, after Beijing tripled the stamp duty tax on share transactions. The Shanghai Composite Index dropped as much as 7.4% before ending down 6.5% at 4,053.01, its lowest level since May 21. The Shanghai and Shenzhen 300 index, which covers both markets, fell 6.8% to 3,859.9. Trading was heavy, with the combined turnover on the two exchanges reaching a record $53 billion. Although Home Inns trades in the United States, it will be inevitably affected by turmoil in China. With the stock so near our current stop price, and the growing jitters in the Chinese market, Home Inns remains a HOLD.
Global retailer Tesco (TSCDY) introduced a special bonus scheme to reward Sir Terry Leahy, its chief executive, if he manages to pull off the launch of the Fresh & Easy convenience chain in the United States. This shows Tesco’s unusually strong commitment to the success of its U.S. expansion. Please note that because of the way Tesco is now traded in the United States, you may not be able to place a stop loss on the stock through your online broker. That means our stop of $22.50 has to be a mental one. I will, of course, keep you apprised of any sudden changes in Tesco’s stock price. Tesco remains a strong BUY.
The Swedish ETF (EWD) and India’s "Citibank" ICICI (IBN) were flat on the week and both remain BUYs.
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I personally invite you to sign up for this year’s Money Show, July 26-28, 2007, at the San Francisco Marriott located in the heart of the city’s picturesque downtown. Join over 50 of the country’s premier policy analysts, advisors, and money managers who will share their best strategies for taking advantage of economic, political, and market opportunities to grow your investment assets. You can choose from over 150 educational workshops and 15 panel presentations. The show also features a state-of-the-art exhibit hall with more than 125 of the finest financial companies in the country displaying their cutting edge products and services. For complete details or to register for free admission, call 800.970.4355 (be sure to mention priority code #008564), or visit: The Money Show San Francisco’s Home Page to register today!
