Global stock markets rallied sharply yesterday in the Fed’s creative move to inject more liquidity into the marketplace. Wall Street indices closed with its biggest-single advance in more than five years. The S&P 500 closed up 3.7% — its best performance since October 2002. The Nasdaq soared 4% to 2,255.76 and the Dow Jones Industrial Average climbed 3.6%. Most of your Global Stock Investor holdings jumped even more, with some stocks like Potash (POT) rallying almost 10%. The only holding that weakened was the CurrencyShares Japanese Yen Trust (FXY), which had hit a record high the previous week. Six of your nine Global Stock Investor picks are still showing double-digit percentage profits and two are notching single-digit percentage profits.
This strong performance was marred by the announcement of worse than expected results from Veolia Environnement (VE), which sent the stock plunging on Friday. Because of the uncertainty surrounding the stock, I am moving the stock to a HOLD. Veolia is our only position that is trading under its buy price.
While the long-term impact of the Fed’s actions are unclear, it is important to remind you that short, sharp relief rallies are typical of bear markets. That’s what makes them so tough to trade. Your top picks continue to beat the bets on the commodities boom – agricultural investments in particular. Potash (POT) is up 42.58% since October, and PowerShares DB Agriculture (DBA) is up 9.8% in just the last month. Barrick Gold (ABX), up 20.08% since November, will continue to shine as gold breaks through the $1,000 per ounce barrier. The CurrencyShares Japanese Yen Trust (FXY) is strengthening steadily, and remains your best hedge against market downturns. All other picks below continue to remain BUYs.
PORTFOLIO UPDATE
Barrick Gold (ABX) announced that with gold prices nudging toward $1,000 an ounce and with further increases expected, the company will not be hedging its production. "The fundamentals are in place for a good sustained rally in gold prices," said Barrick CEO Greg Wilkins, in an interview on CNBC, while adding that there is a lot of room to go in the gold price. The bullish outlook for gold is why the world’s largest gold miner remains a BUY.
Coca-Cola Hellenic Bottling (CCH) finished the week one penny below its record high. This stock remains a BUY.
PowerShares DB Agriculture (DBA) rallied slightly this week. The correction in this ETF may have already come and gone, and it is up 9.8% in just the first month we’ve recommended it. The agricultural boom remains your top theme in the Global Stock Investor portfolio, and DBA remains a top BUY.
iShares MSCI Brazil Index ETF (EWZ) fell to its lowest level in a month and the currency tumbled before rallying sharply yesterday. Despite the decline on Monday, the Brazilian real has gained about 4.1% in 2008 and is trading near its strongest levels since May 1999 as overseas investors pour dollars into the country to benefit from high local interest rates. Brazil is a BUY.
CurrencyShares Japanese Yen Trust (FXY) hit record highs before selling off on yesterday’s sharp rally. But hold on to this steady defensive play as it is a hedge on the markets. The yen remains a BUY.
Millicom International (MICC) was one of the Nasdaq’s biggest gainers yesterday as it added $6.68, or 6.6%, to $107.92. The stock is a BUY.
ArcelorMittal (MT) was lifted by a buoyant outlook for global steel prices. ArcelorMittal itself announced a price hike of between 12% and 14%. Deutsche Bank noted on Monday that a key steel price index had jumped to $393 per metric ton — well ahead of the index’s 2007 peak of $352 per ton. The stock remains a BUY.
Potash (POT) jumped almost 10% yesterday after selling off earlier in the week. Wall Street analysts have put an average target price of $183 on this stock, so it has plenty of upside left. The stock remains a BUY.
Veolia Environnement (VE) sold off sharply on the back of Friday’s below-consensus 2007 earnings and cautious medium-term guidance. Deutsche Bank cut its price target by 7% to 52 Euro ($79), commenting that the outlook for Veolia looks uncertain and margins appear to be suffering. Citigroup upped its recommendation to ‘BUY’ from ‘HOLD’ and even Deutsche Bank said it sees long-term fundamental value in the shares. But until the uncertainty clears up, let’s move the stock to a HOLD.
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