It’s been another roller coaster week in global markets. After a strong rally last Friday, markets sold off sharply on Monday, only to recover strongly yesterday. Headlines lamenting the U.S. credit crisis notwithstanding, the fundamentals of the companies in your portfolio remain intact. Most of the holdings in the Global Stock Investor portfolio have held up well, as they are supported by the weakening U.S. dollar.
Currency Shares Japanese Yen Trust (FXY) continues to be your top performer in recent weeks. It hit record highs on Monday. Many of your other positions are becoming as technically oversold as they have been in recent financial memory, and thus offer terrific buying opportunities. Perhaps surprisingly, the weakest market in the world is the Chinese domestic market, (to which you have no exposure), as the air seems to be letting out of that financial bubble — as I discussed in yesterday’s The Global Guru.
Overall, I’d expect to see volatile markets for the weeks ahead, as Mr. Market’s mood swings seem to continue unabated. Your best strategy? Add to your favorite positions, but also be sure to stick to your stops.
PORTFOLIO UPDATE
Anglo American (AAUK) is out of the headlines as rival BHP Billiton continues to press for a merger with Rio Tinto. Anglo American itself has streamlined its operations to a point where it now is both an obvious target and a lean and mean buyer. Whatever the answer, the stock remains in play and is a BUY.
ABB Ltd. (ABB) CEO Fred Kindel said this week that the ongoing credit market crisis has had no impact on the solvency of the company’s clients. Nor does he see a marked slowdown in ABB’s markets. The recent sell off gives you a second bite at the apple to load up on this stock. ABB is a BUY.
Barrick Gold (ABX), our gold mining play, benefits from global demand for gold outstripping supply. Global gold production was down 3% in 2006 and is nearly flat this year. South Africa’s output is down to its lowest level since 1932. Barrick recently told industry analysts that gold production will fall 10-15% below market expectations during the next three to five years. At the same time, thanks to the credit crunch, buyers are looking at gold as an alternative store of value, thereby increasing demand. This supply/demand imbalance will underpin higher gold prices in 2008. Barrick Gold is a BUY.
America Movil (AMX) ended the week flat. Technically, the stock remains oversold as it has been since June 2006 — a level from which it went on to double in price. In my view, there isn’t much downside left with the stock. America Movil is a BUY.
iShares MSCI Sweden Index (EWD) should have benefited from a sharp spike of the Swedish crown against the U.S. dollar this past week. Sadly, the corporate results of the companies that make up the ETF remain weak. This ETF stays a HOLD.
iShares MSCI Brazil Index (EWZ) sold off sharply during the week, but rallied strongly in yesterday’s markets. The fundamentals of the #1 market among the fast-growth BRIC economies remain in place. Brazil is a BUY.
Currency Shares Japanese Yen Trust (FXY) has been our top performer during the past month or so. It closed at a record high of $93.14 on Monday, before selling off on yesterday’s rally. The yen remains the most undervalued currency on the planet (though the U.S. dollar is getting close!) and it remains a defensive BUY.
ICICI Bank (IBN) announced that its ICICI Bank Canada opened its seventh branch, and the fifth branch in the Greater Toronto Area. Since ICICI Bank Canada first opened in 2003, it has grown to more than $2.5 billion in assets and more than 183,000 customers. The shares recovered nicely yesterday after the sharp sell off on Monday. “India’s Citibank” is a BUY.
Millicom International (MICC) successfully has tested support at its 10-week moving average and is rebounding after forming a new base. On a fundamental level, the company keeps going from strength to strength. At the end of September, its after-tax margin stood at 20%, up from 13% just three quarters ago. Millicom remains a BUY.
ArcelorMittal (MT), the world’s largest steelmaker, raised its stake in China Oriental Group Co. Ltd. to more than 73% to become the first foreign company to take control of a Chinese steel maker. The company also reaffirmed plans to build steel plants in Jharkhand and Orissa in India, representing a combined investment of about $20 billion. The stock’s recent pull back makes it a good time to add to your positions. ArcelorMittal is a BUY.
Potash (POT) ended the week flat. With the agricultural boom intact, Potash remains a BUY.
Tesco (TSCDY)‘s CEO Sir Terry Leahy told The Times of London in an interview that this month’s expansion into the United States was just part of a “pretty ambitious” worldwide growth program. He said that Tesco was also considering a move into India and Russia. He predicted international sales would overtake those generated at home, and that the transition would take place “within the decade.” At present, Tesco makes 27% of its GBP 50 billion in annual revenue from its overseas stores. It remains a BUY.
