LESSONS FROM MR. MARKET’S MOODSWINGS

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

After the shortest and sharpest drop in four years, global markets bounced strongly yesterday. Homes Inns & Hotels (HMIN) jumped 6.91%, Cognizant (CTSH) rose 5.10%, ICICI (IBN) Bank gained 4.17%, the Swedish ETF (EWD) moved up 2.70%, and America Movil (AMX) grew by 2.14%.

Advertisement.

As sharp as the past week’s sell-off seems, it’s still a far cry from the correction in May where the MSCI Emerging Markets Index (EMM — chart) dropped more than 26% over a period of five weeks. In comparison, the index dropped only about 8% this time around. Despite the market’s volatility, we’ve maintained our positions in all of our stocks except Unibanco (UBB), which hit our sell stop on March 5. As you know, Global Stock Investor focuses on "buy and hold" investments, so I’ve tried to set the stops on our picks wide enough to survive the occasional hiccups like the ones this past week.

Here are three lessons from this past week.

First, market corrections can come suddenly and from nowhere — and for no good reason. Here’s a rule of thumb, based on my experience of having lived (and invested) through dozens of these corrections. Unless there is some major event — like a devaluation of a major currency against the backdrop of a financial mania — more often than not, the sell-off is just a correction. It ends up being a buying opportunity in the long run. The financial mania in Chinese domestic markets isn’t enough to bring down global financial markets. The global economy and corporate earnings remain in rude health.

Advertisement.

Second, during times of market panic, selling becomes indiscriminate, without regard to companies’ fundamentals. The baby goes out with the bathwater. Nothing fundamental changed about any of our picks over the past few trading days. It’s all been about Mr. Market’s moodswings.

Exclusive  Stocks Hit New Highs… Then Bitcoin… and Now Gold: Welcome to the New Roaring Twenties!

Third, the riskier the stock, the more volatile the price. Our stocks behaved in line with our risk assessments. High risk Homes Inns (HMIN) was the most volatile, while the Swedish ETF (EWD) sold off the least. How best to handle this? Take smaller positions in riskier stocks. When you do this, the overall volatility of your portfolio can drop by half. You’ll make less money in the long run, but you’ll sleep better at night.

The bottom line? Many of the stocks in our Global Stock Investor portfolio rallied more than 50% after the sell-off in May. It was wise to hold on. Unless we hit our stops, you should, too.

STOCK UPDATE

Advertisement.

Expect significant movement in Home Inns (HMIN) today and tomorrow, as it has an earnings conference call scheduled for tonight, starting at 8:00 p.m. EST. Details here. We expect Homes Inns’ results to confirm our bullish stance on the stock.

Also, Indian financial giant ICICI Bank announced that it plans to transfer investments in four subsidiaries to a new wholly owned unit, ICICI Holdings. This includes its investments in ICICI Prudential Life Insurance Co. Ltd., ICICI Lombard General Insurance Co. Ltd., Prudential ICICI Asset Management Co. Ltd. and Prudential ICICI Trust Ltd.

This is great news. ICICI’s listing means that these businesses are growing even faster than they expected and that these subsidiaries need more investment than ICICI alone is able provide. ICICI bank plans an IPO of this subsidiary this coming year but intends to retain its majority ownership in the new company. The ICICI story is going from strength to strength.

Exclusive  Day Trading Uses Three Strategies of Andrews’ Pitchfork

Finally, don’t forget to sign up for my Eagle colleague Mark Skousen’s conference FreedomFest, where I’ll be speaking, as well. Mark’s special "early bird" discount of $100 off is ending next week and he already has had a huge positive response with more than 500 paid attendees signing up. With 77 speakers, including top financial professionals, it’s the "greatest show on earth" in a fun city, Las Vegas, July 5-7. Don’t miss it. Call Tami Holland to sign up today at 866.266.5101.

Advertisement.
share on:

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE