“Risk on” and Record Highs

Nicholas Vardy

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

It was a “risk on” week in global financial markets. The S&P 500 broke through a key resistance level of 1,344 yesterday, hitting multi-year highs. But as we noted earlier, emerging market stocks had already broken out to the upside a few weeks ago. So, the decision to re-enter many of your watch list holdings en masse a few weeks ago has proven to be a profitable one so far.

There was good news all around for your Alpha Investor Letter portfolio, with almost all of your positions gaining strongly. You had no fewer than three positions — Freeport-McMoRan Copper & Gold Inc. (FCX), JinkoSolar Holding Co., Ltd. (JKS) and Universal Display Corp. (PANL) — soar at least 8%.

You had three additional positions — the iShares MSCI South Korea Index (EWY), the Market Vectors Indonesia ETF (IDX) and the Global X FTSE Nordic 30 ETF (GXF) — that hit record highs in the past week. I expect these positions to continue to perform strongly.

Your top value plays in the portfolio remain WisdomTree Japan SmallCap Dividend Fund (DFJ) and the Market Vectors Russia ETF (RSX). Trading at a P/E of less than 4, JinkoSolar Holding Co., Ltd. (JKS) also fits this category — though, because of its volatility, it is a particularly challenging stock to hold.

During a bullish phase in the market, your defensive positions will perform relatively weakly. This includes your bet against U.S. Treasuries through the UltraShort Lehman 20+ Year Treasury (TBT) and your position in gold through Market Vectors Gold Miners ETF (GDX). That said, the fundamental case for both of these positions remains in place. And they have an important role in your Alpha Investor Letter portfolio as a diversifier for your other current “risk on” positions in emerging markets.

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Overall, I remain optimistic — but cautious on your current holdings. We are slowly entering what has traditionally been a quieter time of the trading year. As always, keep an eye on your stops.

Portfolio Update

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) rose 0.35% in the past week, and almost hit record highs. Trading above its 50-day moving average, CYB is a BUY.

WisdomTree Japan SmallCap Dividend Fund (DFJ) rose 1.01% last week. With a price-to-book ratio of a mere 0.74, Japanese small caps remain dirt cheap. DFJ is a BUY.

iShares MSCI Singapore Index (EWS) rose another 2.78% this past week, hitting a record high. South Korea’s economy grew 4.2% in the first quarter, compared with a year earlier, despite concerns that the March 11 disasters in Japan and that the efforts of China’s policymakers to slow growth could crimp their smaller neighbor. The hottest market in Asia, EWS is a BUY.

iShares MSCI Malaysia Index (EWM) rose 1.77% this past week. The Malaysian ringit rallied to its strongest level in more than 13 years on optimism that the Central Bank will raise borrowing costs to cool the fastest inflation in two years. EWM remains a BUY.

iShares MSCI South Korea Index (EWY) soared 4.85% this past week — shooting up to new record highs. Apple suing major ETF component Samsung is a testament to the strength of “Asia’s Apple.” EWY remains a BUY. Raise your stop to $59.50.

iShares MSCI Taiwan Index (EWT) jumped 4.82% this past week, as this tech-heavy market regained its footing. Taiwan’s dollar rose to the strongest level in more than two months on speculation that global funds will add to their holdings of local assets as the Federal Reserve keeps interest rates near zero. Trading above its 50-day moving average, the “other China” remains a BUY.

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Freeport-McMoRan Copper & Gold Inc. (FCX) soared 8.06% this past week. For the first quarter, Freeport reported a per-share profit of $1.5 billion, or $1.57 a share, compared with analysts’ estimates of $1.26. Revenue reached $5.7 billion; analysts were looking for $5.3 billion. Shooting through its 50-day moving average, FCX is now a BUY. Raise your stop to $48.00.

Market Vectors Gold Miners ETF (GDX) dropped 2.3% this past week. Traders’ interest in precious metals evaporated in light of solid earnings in a variety of sectors. Don’t worry; the long-term investment case for gold is firmly in place. GDX remains a BUY.

Global X FTSE Nordic 30 ETF (GXF) soared 5.3% higher this week, closing at a record high of $22.46. For all of the bad press that Europe’s periphery is getting, these Northern European countries continue to power ahead. GXF remains a BUY. Raise your stop to $19.50.

Market Vectors Indonesia ETF (IDX) rose another 2.06% this past week, hitting record highs. Indonesia plans to start a benchmark-sized sale of 10-year dollar bonds this week, a sign of the confidence global investors have in the economy. IDX is a BUY. Raise your stop to $29.00.

JinkoSolar Holding Co., Ltd. (JKS) soared 8.06% this past week. Trading at a P/E of 3.73 (!), this stock has little downside. Expect the stock to move when earnings are announced May 2. Trading close to its 50-day moving average but still slightly below it, JKS remains a HOLD.

Las Vegas Sands Corp. (LVS) rose 2.19% this past week, as your bet on “Asia’s Las Vegas” bounces back. The company will announce earnings next Tuesday, May 2. LVS is a BUY.

Market Vectors Russia ETF (RSX) jumped 2.14% this past week. Russia is the cheapest major market in the world. And it has momentum. Trading back above its 50-day moving average, RSX is back to a BUY.

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Universal Display Corp. (PANL) rose 8.52% this past week. Continuing to expand its footprint in Asia, the company has established a new facility in Hong Kong. Trading well above its 50-day moving average, PANL is a solid BUY.

UltraShort Lehman 20+ Year Treasury (TBT) dropped 1.27% this past week, leaving me scratching my head. It is remarkable that this position has not soared. But when it does, it will be like a dam breaking. Until then, we can’t fight the tape. With TBT now trading below its 50-day moving average, it is a HOLD.

iShares MSCI Turkey Invest Mkt Index (TUR) rose 1.61% this past week. The Prime Minister announced that Turkey’s aim is to become one of the world’s top-10 economies by 2023. The “unheralded” BRIC remains a BUY. Raise your stop to $59.00.

Vale S.A. (VALE) rose 3.49% during the past week. With the Brazilian commodities giant trading back above its 50-day moving average, it is back to a BUY.


P.S. I am pleased to invite you to be my guest at The MoneyShow Las Vegas, May 9-12, 2011, at Caesars Palace, where you can meet face to face with more than 100 world-renowned investing experts. Be there as recommendations and advice are revealed about how to best position your portfolio to profit — in 2011 and beyond. As this new era of investing unfolds, smart investors know it’s imperative to stay informed and educated. The MoneyShow is your one-stop resource for the most comprehensive education, efficient research, and valuable advice. Don’t miss outregister free today! Be sure to use priority code 021714.

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