It was a big week for U.S. stock markets, with the Dow Jones jumping 3.22%, the S&P 500 rising 1.91% and the NASDAQ gaining 1.58%. The contrast with global markets could not be greater, as the MSCI Emerging Markets Index tumbled 6.62%.
Big gainers in your Alpha Investor Letter portfolio included NVIDIA Corporation (NVDA), which rocketed an incredible 21.12%; the Vanguard Russell 2000 Index ETF (VTWO), which rose 9.07%; the Van Eck Vectors Biotech ETF (BBH), which climbed 7.82%; Berkshire Hathaway (BRK-B), which added 6.54%; Phillips 66 (PSX), which climbed 4.77%; and the PureFunds ISE Cyber Security ETF (HACK), which rose 4.54%.
Among this list, Berkshire Hathaway (BRK-B), Vanguard Russell 2000 Index ETF (VTWO), Guggenheim Spin-Off (CSD) and NVIDIA Corporation (NVDA) all hit new 52-week highs.
The following positions crossed back above their 50-day moving average and are now BUYs: Vanguard Russell 2000 Index ETF (VTWO), Guggenheim S&P 500 Equal Weight ETF (RSP), Guggenheim Spin-Off (CSD), Van Eck Vectors Biotech ETF (BBH), PureFunds ISE Cyber Security ETF (HACK), iShares Currency Hedged MSCI Germany (HEWG), Costco Wholesale Corporation (COST) and iShares Exponential Technologies ETF (XT).
Weakness in emerging markets and technology stocks caused you to stop out of KraneShares CSI China Internet ETF (KWEB), Apple, Inc. (AAPL) and BYD Company, Ltd. (BYDDF), each at a double-digit percentage gain.
Other emerging market and technology plays fell below their 50-day moving averages and changed a HOLD. These include the Cambria Global Value ETF (GVAL), Google Inc. (GOOGL), PayPal Holdings (PYPL), Home Depot (HD) and Albemarle Corporation (ALB).
What a week it has been…
After all the hand-wringing of a sharp market sell-off after a Trump election, many U.S. stocks have soared on the prospects of a Trump presidency. As I discussed in yesterday’s issue of The Global Guru, I expect the Trump presidency, with its emphasis on lowering taxes, reducing regulation and increasing spending on infrastructure, to be bullish for the overall stock market. That said, it would be normal after such a strong, euphoric jump that the market pulls back and consolidates. An interest-rate increase by the Fed in December may offer you the opportunity to add to your positions to capture the end of a strong Q4.
I also think that the sell-off in many technology stocks and emerging markets is overdone. After pulling back so sharply, both of these sectors offer solid opportunities looking ahead.
Portfolio Update
Berkshire Hathaway (BRK-B) jumped 6.54%. Endless hand-wringing and negative speculation about President-elect Donald Trump notwithstanding, markets rallied on news of his historic victory. BRK-B pushed to a new 52-week high last week, and now represents a 100% gain in your portfolio. BRK-B is a BUY.
Vanguard Russell 2000 Index ETF (VTWO) rocketed 9.07% to hit a new 52-week high last week. When a new president says he’ll lower corporate taxes, trim employee health care costs and cut government red tape, a pop in small-cap business is a no brainer. Rising up and passing its 50-day moving average (MA), VTWO is now a BUY.
The Walt Disney Company (DIS) rose 3.52% last week after reporting earnings on Nov. 10. Earnings per share (EPS) came in at $1.10 vs. an estimated $1.15. Revenue was $13.1 billion, compared to the estimate of $13.5 billion, falling 2.7% year over year. So why did Disney rally? Although CEO Robert Iger admitted its ESPN holding had a tough quarter, he went on to say that ESPN has experienced growth in 2016 and he believes this will continue long term. DIS is a BUY.
PayPal Holdings (PYPL) gave back 6.35% last week as it traded down to its 200-day MA. However, PYPL has a positive history with that resistance point, managing to remain above it despite nearing it four times since June. With analysts’ firms like Mizuho increasing price targets less than one month ago, and maintaining a “Buy” rating, I expect PayPal to recover strongly. PYPL fell below the 50-day MA last week to become a HOLD.
Van Eck Vectors Biotech ETF (BBH) jumped 7.82% last week. With President-elect Trump trumpeting a “repeal and replace” message on ObamaCare, expect more upside in the health care and related sectors. BBH moved above the 50-day MA and is a BUY.
Phillips 66 (PSX) climbed 4.77% last week, joining the Trump-induced market euphoria. Berkshire Hathaway released its 13-F filing on Monday, detailing its holdings as of Sept. 30. Once again, purchases of PSX were up by another two million shares. If Mr. Buffett is buying, it’s a good idea to follow his lead. PSX is a BUY.
Home Depot (HD) gained 0.12% over the past week. Home Depot reported a Q3 2016 earnings beat, with an earnings per share (EPS) of $1.60 vs. estimates of $1.58. Revenue was $23.2 billion vs. an estimated $23.0 billion, and rose 6.1% year-over-year. With the Christmas shopping season upon us, Home Depot is likely to benefit as its products wind up in millions of do-it-yourselfer’s stockings. HD fell to a HOLD.
NVIDIA Corporation (NVDA) rocketed 21.12% higher last week. The stock that has spent all of 2016 as the “gift that kept on giving” handed out a Christmas bonus one month early last week — popping on its recent earnings report. NVDA reported EPS of $0.83, crushing the $0.57 estimate. Revenue was $2.0 billion vs. the estimated $1.7 billion figure, climbing an astronomical 53.6% year-over-year. As holiday gift-givers hand over millions of items stuffed full of NVIDIA’s hardware, expect more gains in your own portfolio. NVDA remains a BUY.
Liberty Broadband Corp. (LBRDK) fell 2.66% for its opening week in the Alpha Investor Letter portfolio. Although I explained the corporate complexity of this holding in last week’s recommendation, the takeaway is that George Soros is heavily invested in this stock. For many investors, that is all they need to know. LBRDK is a BUY.
Sincerely,
Nicholas A. Vardy
