The volatility in markets continues. Last week, U.S. markets closed with one of their strongest performances since March, only to give up many of their earlier gains in the market sell off yesterday.
As we noted last week, when volatility in the market shoots up as it has in the past few weeks, it is best to stand back from the market. All of the global megatrends that underlie our stock picks remain intact. Therefore we will be looking to re-enter our positions in the market once global markets have settled.
PORTFOLIO UPDATE AND WATCH LIST
Anglo American’s (AAUK) diamond mining and retail arm, De Beers, aims to conclude its long-delayed joint venture deal for exploration projects in Russia by the end of next year. The company first signed a memorandum of understanding with Russian diamond mining monopoly OAO Almazy Rossii-Sakha, also known as Alrosa, in September 2006 to create such a venture.
ABB Ltd. (ABB) announced that it will sell its oil and gas-production plant Lummus Global for $950 million. The sale of the unit — which is expected to boost ABB’s already substantial cash position to more than $3 billion — is the final milestone in its strategy of focusing on its core business of power and automation technology. ABB is now expected to focus on acquiring competitors in the automation and energy-technology sector in the United States and in emerging markets.
America Movil (AMX) may be rewarding shareholders with an extraordinary dividend of $2.5 billion in the fourth quarter of 2007 — at least according to investment bank UBS. America Movil executives had noted during a recent conference call with analysts that it could return more cash to shareholders at the end of the year if it doesn’t announce a major acquisition in the second half of this year. The company already has spent 4.1 billion pesos ($371.7 million) on share buybacks during the first half of 2007 and paid a dividend of about $650 million in July.
Currency Shares Japanese Yen Trust (FXY) received a boost as negative sentiment in the credit markets encouraged speculators to unwind their carry trades. Recall that the carry trade involves selling short a low-yielding currency, such as the yen, and investing the proceeds in a higher yielding one, like the Australian dollar for a profit. However, the need to quickly raise cash in order to cover redemption requests from increasingly anxious investors has left many investors scrambling to close out their short currency positions by buying yen. BUY the Japanese Currency Trust.
ICICI Bank (IBN) received a strong buy rating from investment bank Merrill Lynch, with a target price of $60. That’s a whopping 50% upside from current levels. Once markets calm, this stock will come roaring back.
Millicom International (MICC) received a highly favorable write-up in yesterday’s Wall Street Journal. It highlighted Millicom’s brand name "Tigo," and how the company now has 18 million subscribers in 16 markets, up from just 2.8 million just five years ago. Millicom’s stock price had more than tripled from the beginning of 2006 to almost $100 a share last month. CEO Marc Beuls also highlighted Millicom’s growth prospects in Africa in this week’s Business Week.
Global steel giant Arcelor Mittal (MT) overcame the obstacles of some minority shareholders who attempted to bar Mittal Steel from holding a shareholder meeting today to complete the merger between Mittal and Arcelor. The shareholders had wanted the courts to force Mittal Steel to pay more for the remaining Arcelor shares than it is currently offering. The second phase of the merger — folding Arcelor into Arcelor Mittal — is set to be complete in the fourth quarter of this year.
Tesco (TSCDY) has Wal-Mart quaking in its boots. The U.S. giant Wal-Mart announced that it is considering acquisitions in the United States for the first time in 25 years as it attempts to broaden its reliance on its 2,300 colossal "Supercenters" for future growth. The move is widely seen as a response to the upcoming opening of Tesco’s "Fresh & Easy" grocery markets in the United States. BUY Tesco.
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