Markets Bouncing Back

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
The biggest gainer in your Alpha Investor Letter portfolio was Stratasys (SSYS), which soared 12.21% and announced earnings today before the market’s open. Your bet on Market Vectors Indonesia Index ETF (IDX) rose 5.52%, outperforming the broader emerging markets index. Visa Inc. (V) also jumped 5.23%. In your current portfolio, Statoil (STO) moved to a BUY, after it moved back above its 50-day moving average. All current positions are Buys except for WisdomTree Japan SmallCap Dividend ETF (DFJ). Also, note that I have raised the stops on a number of your positions in the Portfolio Update section below.
From your watch list, the iShares MSCI South Korea Index Fund ETF (EWY) crossed above both its 50-day and 200-day moving averages last week. With South Korea the emerging market that acts as a “canary in the coal mine” for emerging markets as whole, this is a bullish sign. EWY is back to a BUY. Set a stop price at $50.00.
Finally, on a personal note, it has been a busy week here in London. Last Thursday, I had a chance not only to attend a fundraiser with Gov. Mitt Romney but also chat with him briefly. It turns out he is a good friend of Eagle Publishing — the publisher of this newsletter — and he appreciates the fine work done by the staff in Washington D.C. You can check out my impressions of his visit in an article I’m writing for our sister publication Human Events.
London is, of course, buzzing with the Olympics. I had a chance to see opening ceremonies — which, I thought were entertaining, if a bit curious — especially the odd tribute to the National Health Service (NHS) complete with the flying hospital beds and the giant baby. For the Brits, the NHS is a secular religion. And although I have had personally some fairly shockingly bad experiences with the NHS which have led me straight to an expensive private clinic, decorum prevents me from criticizing other folks’ religion.
I also had a chance to watch some Olympic sporting events broadcast on giant screens in Hyde Park over the weekend. Overall, security was high; attendance was low. Many Londoners have been scared away and the city is surprisingly empty. But I was happy to be able to finally secure seats to the U.S.-China volleyball game tonight just down the street from me, after seeing the stadium essentially empty for the past five days running.
Tonight’s game is just before I take off for Spain tomorrow myself, where, in addition to some meetings with financial types in Madrid, I’ll be cycling the famous medieval Christian pilgrimage of the Camino de Santiago, as chronicled in Paulo Coelho’s book, "The Pilgrimage" and the subject of a recent film starring Martin Sheen called The Way.

Portfolio Update

MSCI Malaysia Index (EWM) gained 1.77% last week. The Malaysian Institute of Economic Research expects the Malaysian economy to grow 4.2% in 2012 and 4.7% in 2013. These are encouraging forecasts — and stack up even better, given the sad state of many global economies. EWM is a BUY.
iShares JPMorgan USD Emerg Markets Bond (EMB) added 1.49%. The recent pullback in EMB proved to be an excellent buying opportunity. EMB spent the past week quickly moving back to the $118 resistance level, breaking through to post a new 52-week high. EMB is a BUY. Raise your stop to $113.50.
Berkshire Hathaway (BRK-B) rose 1.36% over the past five trading days. Analysts are increasingly pondering about Berkshire Hathaway’s future success post-Buffett. However, with Warren being far removed from daily operations at the companies he’s invested in, it’s a safe bet that the existing management will continue their excellence (and profits) well after Warren is gone. BRK-B is a BUY right now — and likely for a long time to come. Raise your stop to $78.00.
Visa Inc. (V) jumped 5.23% after reporting positive earnings Wednesday. Visa reported fiscal Q3 profit up 25% to $1.56/share vs. a $1.45/share estimate from analysts. Revenue also rose, hitting $2.57 billion vs. an expected $2.52 billion. Visa also authorized a $1 billion share repurchase plan. V will pay a $0.22 dividend on Aug. 15 and is a BUY. Raise your stop to $109.50.
The TJX Companies (TJX) was nearly flat last week, but did manage to eke out a gain of 0.61%. TJX will pay a $0.115 dividend on Aug. 7 and is scheduled to report earnings on Aug. 14. Earnings may be quite good as TJX recently raised its Q2 estimates and rarely misses earnings expectations. TJX is a BUY. Raise your stop to $39.00.
Stratasys, Inc. (SSYS) had another great week, rocketing 12.21% going into its earnings report. The company reported record revenue of $49.4 million for the second quarter ended June 30, a 31% increase from the $37.8 million for the same period last year. That beat average estimates of 23.6% growth in revenues. Non-GAAP net income was $7.0 million for the second quarter, or $0.32 per share, representing a 39% increase over the non-GAAP net income of $5.0 million, or $0.23 per share, for the same period last year. The company raised revenue estimates but lowered earnings estimates due to costs associated with its merger with Objet. SSYS is a BUY. Raise your stop to $39.50.
iShares Nasdaq Biotechnology (IBB) washed out last week’s loss, gaining 3.30% after breaking the $135 resistance point and making a new 52-week high. Watch IBB’s price action closely as it is pulling back slightly and may be readying for another brisk upward move. IBB is a BUY. Raise your stop to $115.00.
WisdomTree Japan SmallCap Dividend ETF (DFJ) added 2.94% over the past five trading days. DFJ bounced off of its well-tested $40 support level to the 50-day moving average. Although another dip to $40 is possible, DFJ’s price action looks positive and the appropriate buy-point is just pennies away, based upon our “buy at the 50-day moving average” rule. DFJ remains a HOLD.
Market Vectors Indonesia Index ETF (IDX) popped 5.52%. Indonesia is the largest economy in the Southeast Asia region and currently has an exceptionally low 25% debt-to-GDP ratio. Indonesia is also experiencing tremendous growth in its middle class population — a group that is capable of spending an economy into a significant upswing. IDX is a BUY.
PowerShares Global Listed Private Equity Portfolio ETF (PSP) rose 2.65% last week. PSP’s outlook remains quite positive as it continues its battle to break through $9. This is especially true as pro-private equity Gov. Mitt Romney’s presidential candidacy grows stronger and the election draws nearer. Your cleanest bet on a “Romney Rally,” PSP is a BUY.
iShares Singapore Index ETF (EWS) gained 2.90%. The $13 price level has been a huge point of resistance for EWS over the past year. However, EWS has rallied sharply over the past two months and finally managed to break this barrier. With $14.60 the next major stop upwards, the possibility of an additional 12% gain is now on the table. EWS is a BUY.
Statoil ASA (STO) added 2.37% over the past five trading days. STO reported earnings last Wednesday, revealing a 2% increase in net operating income. Statoil CEO Helge Lund said the company increased oil and gas production by 17% in Q2 and maintained guidance for 2012. Things are so good that board member Lady Barbara Judge made an insider purchase of 1,336 shares last Friday. STO is a BUY.
Lennar Corp (LEN) was the only position to go down last week, giving back 3.47%. Although not expected to report earnings until September, two of LEN’s competitors recently reported better-than-expected quarters, and beat expectations on orders and margins. One competitor even reported a hefty 32% year-over-year jump in new home orders for Q2. LEN is a BUY.

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