The top performer in your Global Stock Investor portfolio this week was Reston, Va.-based NII Holdings (NIHD), which soared 10.7% after announcing better-than-expected earnings. Following in the footsteps of Alpha Investor George Soros, who spotted this turnaround play at the end of last year, is paying off.
Overall, global markets have been characterized by two trends during the past few weeks. First, the trade that had been the biggest money spinner this year for investors — "long commodities and short financial stocks" — was thrown off kilter by oil’s biggest single-day fall in 17 years, combined with the sharpest rebound in financial stocks on record. That has negatively affected our oil and commodities-based holdings during the short term. But there is a lot of smart money out there that is betting that this trade will revive again. That would help boost your holdings in Transocean (RIG), Petrobras (PBR) and the Elements Rogers International Commodity ETN (RJI).
Second, investors have been “throwing the baby with the bathwater” during the past month — dumping perfectly good stocks whose business prospects remain solid, purely due to market jitters. Take the example of our former Global Stock Investor holding ArcelorMittal (MT), which we stopped out of during a market swoon a couple of weeks ago. Today, ArcelorMittal soared in European trading as the company’s second-quarter profit more than doubled and CEO Lakshmi Mittal offered an optimistic third-quarter view.
ArcelorMittal is one of our former holdings that we’ll be looking to get back into once global markets settle. But with volatility in global markets soaring, and general uncertainty far from abating, that time has not come yet.
PORTFOLIO UPDATE
Barrick Gold (ABX) has struck a deal with Perth-based Cortona Resources to develop and mine gold’s resources under a royalty agreement. The stock is a safe haven and gold may be in the final leg of its current correction. Barrick is a BUY.
NII Holdings (NIHD) posted a better-than-expected quarterly profit, driven by 72% revenue growth at its Brazilian operations, sending its shares up nearly 11%. NII Holdings has slightly more than 5% of Brazil’s post-paid market and plans to invest $100 million this year in the region. With analysts posting a target price between $70 and $81 for NIHD, the stock is a BUY.
Transocean (RIG) has been traditionally weak in August during the past four years, so its current swoon may signal a technical bottom. Buying drillers like Transocean is the best way to profit from the oil story according to Chris Nelder, co-author of the new book, "Profit from the Peak.” With Transocean trading at 7.8 times 2009 earnings estimates — a level not seen since 1998 when oil was trading at around $10 a barrel, the stock remains undervalued and a BUY.
Petrobras (PBR) opened a biodiesel factory in the northeast of Brazil, following an investment of 100 million reals. Investment Bank HSBC just initiated an "overweight rating" on Petrobras. Use the short-term weakness in oil to BUY.
Elements Rogers International Commodity ETN (RJI) weakened this week as the oil price dropped back. Short-term sell offs notwithstanding, the commodity boom remains intact. And this diversified ETN remains your #1 way to profit from it. It is a BUY.
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