Last week was a solid one for your Alpha Investor Letter portfolio. The Dow Jones rose 2.10%, the S&P 500 was up 2.55%, and the NASDAQ continued its strong rebound, rising 3.05%. Global markets also bounced strongly with the MSCI Emerging Markets Index soaring 4.04%.
The big gainers in your Alpha Investor Letter portfolio included Yum! Brands (YUM), up 5.91%; The TJX Companies (TJX), up 4.27%; and Stratasys (SSYS), up 4.39%, respectively. Your latest pick, the iShares Nasdaq Biotechnology (IBB), also got off to a strong start by rising 3.74% during its first week in your portfolio.
Having crossed their 50-day moving average, three of your positions moved from HOLD to BUY. These include MSCI Malaysia Index (EWM), Visa Inc. (V) and Stratasys, Inc. (SSYS). In addition, from your current watch list, the MSCI South Korea ETF (EWY) moved back to a BUY.
As you know, I’ve been basing the bulk of my recommendations in the Alpha Investor Letter on the thesis that U.S. markets will continue to decouple from global markets. The French vote Sunday to solidify the mandate of socialist President Hollande — who is now actually lowering the retirement age in France — represents a trend precisely the opposite of U.S. states like Wisconsin. One thing is clear. The markets prefer the outcomes emerging in the United States versus the anti-austerity backlash in France and elsewhere. That’s also why I believe that the U.S. market will continue to outperform as the prospects of a Romney presidency rise.
On a related note, I also think it’s fascinating how perceptions of the emerging economic superpowers like China and India are changing. Yesterday, I attended a conference on India here in London, organized by a friend, and the United Kingdom’s leading expert on India, Deepak N. Lalwani. I was astonished to see the change in sentiment compared with 2010. Two years ago, British born Indians were flocking to India to make their fortune.
Today, thanks largely to government mismanagement, economic growth in India has stumbled. The same foreign investors who sung the praises of “Amazing India” now describe themselves as “unwanted, but needed guests.” The other BRIC countries — Brazil, Russia, and China — are experiencing their own versions of these challenges.
So, what do all the economic slowdowns of these disparate economies — including U.S. states like California — have in common? The government funding simply bloated bureaucracies by picking the pockets of private companies. It seems like the same plot, different actors, no matter where you go in the world.
Portfolio Update
MSCI Malaysia Index (EWM) rose 2.60% last week. Malaysia boasts the second highest per capita income level among all the Southeast Asian nations, and is a fast-growing market for both the mobile consumer and wireless communications sectors. This is good news for EWM, as it holds nearly a 23% weighting in Malaysian telecommunications. EWM is a BUY.
iShares JPMorgan USD Emerging Markets Bond (EMB) added 1.38% for the week. Your position in EMB has been on a tear for nearly three weeks now, since its short-lived drop (and quick recovery) below the 200-day moving average. I expect that EMB will test its twice-tested 52-week high, and major resistance level, again over the next few days if momentum holds. EMB is a BUY.
Berkshire Hathaway (BRK-B) gained 2.12% over the past five trading days. Warren Buffett has put in a bid to purchase $374 billion worth of mortgages held by Residential Capital LLC, the bankrupt mortgage entity of government-owned Ally Financial Inc. to profit from the inevitable rebound in interest rates. BRK-B is a BUY.
Visa Inc. (V) rose 3.58% over the week. Visa, and competitors MasterCard Inc. (MA) and Discover Financial Services (DFS), profit from card-swipe, payment-transaction fee generation. DFS recently announced that its cardholder spending jumped 5.1% during second quarter 2012. It’s a safe bet that Visa is likely experiencing similar (or better) volume as well — a positive sign for its upcoming Q2 earnings report. V is a BUY.
Yum! Brands, Inc. (YUM) jumped 5.91%. YUM shares took a decidedly positive turn last week, posting gains over each of the past four trading sessions. YUM also issued guidance on Tuesday afternoon of 2-3% higher U.S. same-store sales, and reaffirmed its 2012 earnings-per-share growth forecast of 12%. Still trading below its 50-day moving average, YUM is a HOLD.
The TJX Companies (TJX) rose 4.27% over the previous week. TJX announced a quarterly dividend of $0.115/share on Wednesday, payable on Aug. 30 to shareholders of record as of Aug 9. Technically, TJX also posted a bullish move over the past week, breaking through a robust $42.75 resistance level and hitting a new 52-week high. TJX is a BUY.
Stratasys, Inc. (SSYS) gained 4.39% last week. Investor’s Business Daily (IBD) recently ranked SSYS at #41 on its exclusive IBD 50 listing, with analysts’ Q2 earnings-per-share growth forecast at 39%. SSYS is a BUY.
iShares Nasdaq Biotechnology (IBB) rose 3.74% during its first week in your portfolio. IBB posted a strong week making higher highs for all of the past four trading days. IBB also hit a new 52-week high on Tuesday and managed to break its considerable $126.50 resistance level. These are all positive signs for your position in IBB, and exactly what you like to see when opening a new position. IBB is a BUY.
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