Markets across the globe pulled back over the past week, with the S&P 500 ending the week 1.35% lower and the MSCI Emerging Markets Index down 1.93%. But global stock markets are rallying this morning, buoyed by positive sentiment stemming from Apple’s (AAPL) better-than-expected earnings.
As we wrap up the month of April, it’s clear that the U.S. market’s strong Q1 rise has abated over the past two months. Yesterday, the S&P 500 closed around the same level it did on March 1. And the MSCI Emerging Markets Index is back to levels last seen on Jan. 23. That said, I continue to maintain my bullish bias.
At times like this, the best strategy is to focus on the markets and the stocks that are the best relative performers. And that’s exactly what I have been doing in The Alpha Investor Letter. Specifically, that means: (1) focusing on the strongest markets and (2) within that, focusing on the strongest-performing stocks.
Overall, U.S. stocks are outperforming their global rivals — which is why your Alpha Investor Letter recommendations have focused on U.S.-based stocks in the past six months or so.
Although the U.S. market has been flat over the past two months, your positions are outperforming the S&P 500 by a healthy margin. You can see this by looking at the charts of two of your recent Alpha Investor Letter recommendations below.
Visa (V) versus the S&P 500
Yum! Brands, Inc. (YUM) versus the S&P 500
All of your Alpha Investor Letter positions ended the week lower, with the exception of safe-haven holding iShares JPMorgan USD Emerg Markets Bond (EMB), which rose slightly.
As you know, our rule of thumb is that if a position drops below its 50-day moving average, we move it from a BUY to a HOLD. If a position climbs back above the 50-day moving average, it moves from a HOLD to a BUY.
This past week, six of your positions dropped below their 50-day moving averages, and moved from a BUY to a HOLD. These include WisdomTree Japan SmallCap Dividend Fund (DFJ), Las Vegas Sands Corp. (LVS), MSCI South Korea Index (EWY), MSCI Malaysia Index (EWM), Market Vectors Indonesia Index ETF (IDX), and Berkshire Hathaway (BRK-B).
I’d also highlight the TJX Companies (TJX) — last month’s recommendation and a play on the strong bounce in the U.S. retail sector — as a position you may want to add to on the current pullback. Visa Inc. (V) is also likely to report strong earnings, as well.
Finally, iShares Singapore ETF (EWS) ended the week on its 50-day moving average so it is now a BUY, despite having fallen slightly over the past week.
Portfolio Update
WisdomTree Japan SmallCap Dividend Fund (DFJ) dipped 1.01% over the past week. In a further effort to stimulate the economy, Bank of Japan policymakers will likely execute a second round of monetary easing on Friday — but just how much is unclear. This will be the second move of its kind in just two months. DFJ is a HOLD.
Las Vegas Sands Corp. (LVS) fell 4.44%. There was no apparent reason for the recent dip in LVS’ stock price. Macau news has remained strong over previous months and analyst firm Stern Agee even raised its price target to $68 yesterday, a full 17% above Tuesday’s close. A solid earnings report on Thursday should see LVS rebound. Trading below its 50-day moving average, LVS is a HOLD.
MSCI South Korea Index (EWY) dropped 2.64% for the week on news that North Korea is nearly ready for its third nuclear test. Bad news out of North Korea is usually bad news for the South Korean market. EWY is a HOLD.
MSCI Malaysia Index (EWM) lost 1.84% last week. EWM broke through the $14.30 price level on Feb 1 and has stayed above this level ever since. EWM has tested this level six times since then, with the most recent test occurring just yesterday. It remains a HOLD.
Market Vectors Russia ETF (RSX) pulled back 1.10% last week. RSX continued to suffer last week along with the price of oil. However, support is starting to form at the $29.25 price level and several technical indicators are showing RSX is oversold. RSX is a HOLD.
iShares JPMorgan USD Emerg Markets Bond (EMB) rose 0.21%. iShares Global Chief Investment Strategist Russ Koesterich cites reduced volatility, improved overall financial condition, and fading inflation risk as a reason to hold emerging markets debt. EMB is a BUY.
Market Vectors Indonesia Index ETF (IDX) lost 1.44%. IDX has traded along the 50-day moving average for months now. However, the range above/below this line has been progressively tightening into a “wedge” pattern. This pattern generally means IDX will break in a defined direction, with a greater chance of heading upwards. IDX is a HOLD.
Listed Private Equity ETF (PSP) dipped 1.09% for the week. PSP continued trading sideways, maintaining its position above its 200-day moving average. Private equity can be a very expensive arena to invest in, normally requiring partners to bring gobs of money to the table. However, PSP allows you to participate in this otherwise inaccessible asset class with fees of just 0.60%. PSP is a HOLD.
iShares Singapore ETF (EWS) fell 0.70% over the past five trading days. Singapore’s Q1 gross domestic product (GDP) rose 9.9% (annualized). This handily beat estimates of 6.8%. EWS is a BUY.
Berkshire Hathaway (BRK-B) came in a bit lower last week, as expected, based upon the recent concerns over Warren Buffett’s health. However, BRK-B jumped on Tuesday in what could be the start of a rebound to the $80 support level and its 50-day moving average. Your buy point is just pennies away. BRK-B is a HOLD.
iShares MSCI Hong Kong Index (EWH) lost just 0.57% last week. The HSBC Flash Purchasing Managers Index (PMI) revealed further evidence that China’s growth rate bottomed in Q1. The PMI figure rose from 48.3 to 49.1. EWH is a HOLD.
Freeport McMoRan Copper & Gold Inc. (FCX) dropped 2.04% over the past five trading days. FCX beat expectations slightly as it reported Q1 earnings-per-share at $0.96 vs. analyst estimates at $0.86. Revenue of $4.6 billion also beat expectations of $4.5 billion. FCX is a HOLD.
Visa Inc. (V) gave back 2.58%, trading down slightly over the past few sessions and managing to touch its 50-day moving average. Analyst firm Jefferies raised its price target on the stock to $142, 14% above the current price. Visa’s May 2 earnings report is just around the corner and results are likely to come in strong. This is a good point to add to your position. V is a BUY.
Ford Motor Co. (F) fell 4.37% over the past week. Fitch upgraded Ford’s credit rating to “stable” on Monday, lifting Ford’s debt to “investment grade.” F will report earnings on April 27, and will pay you a $0.05 dividend on April 30. Investors traded several large blocks of Ford’s May $12 call options over the past few days. Someone obviously thinks Ford’s earnings report could surprise on the upside. F is a HOLD.
Yum! Brands, Inc. (YUM) was down 1.30%. YUM! reported Q1 earnings-per-share (EPS) at $0.76 vs. a $0.73 estimate, and EPS growth of 21%. Revenue came in at $2.74 billion vs. a $2.70 billion estimate. YUM! also made positive comments regarding its future outlook, expecting EPS growth to increase 12% in 2012. J.P. Morgan, Morgan Stanley and UBS each raised price targets to $75, $79, and $81, respectively. YUM! is a BUY.
Statoil ASA (STO) fell 1.12% last week. Analyst firm Exane BNP Paribas upgraded STO to “Outperform” from “Underperform,” and raised its price target to $33.14 — 20.5% above STO’s current price. STO is a HOLD for now.
The TJX Companies (TJX) lost 2.66%. TJX made a healthy pullback last week from its recent 52-week high, bringing some short-term indicators back to a “Buy” position. TJX is scheduled to report quarterly earnings on May 15. TJX did give investors a heads-up on April 5, reporting that same-store sales rose a better-than-expected 10% and beat the consensus estimates of just 5.3%. Couple this with the recent glut of retail sector good news, and I think TJX may be headed for a strong earnings report in May. TJX is a BUY.
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