Portfolio Update — The Global Bull Takes A Breather

Nicholas Vardy

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

Asia, Europe and Emerging Markets indices all closed last week at essentially the same level as they had started 2007. Nevertheless, until the sell-off in the market on Friday, all of our positions were showing a profit. Thanks to our 73% gain in Millicom (MICC) and almost 26% gain in Telefonica (TEF), our average gain in stocks is still 12.53%.


The big news over the weekend was that British telecom Vodafone Group (VOD) won a bidding war for HTX subsidiary Hutchison Essar in a deal that values the rapidly growing Indian telecom at $18.8 billion, including debt. Vodafone will be buying the controlling 67% stake currently owned by HTX for $11.1 billion. The deal is expected to close in the second quarter of this year. Hold onto the stock and your options until we see how the market responds.
Due to the uncertainty about HTX’s price movement, consider the stock a hold until you hear otherwise from me. Meanwhile, move your stop price to $33.


Our Indian banking play reported blow-out earnings for Q4 of 2006. Operating profit increased 65% and net profits rose 42%, compared with the same period a year ago. These results offered a significant surprise on the upside. Commented a leading analyst: "I estimated about 28%-29% growth, but 42% is totally unexpected."

The stock price is off in the past few days, but this comes with the territory in India. ICICI remains one of our favorite long-term plays globally. Raise your stop to $36.75


Millicom announced that China Mobile (CHL) is paying about $286 million to buy control of Paktel, Millicom’s small, unprofitable mobile operator in Pakistan.

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The good news for us is that China Mobile offered Millicom a substantial premium for Paktel. Recall that earlier last year, China Mobile tried to buy all of Millicom for about $48 per share, but the deal fell apart. Since then, Millicom has traded as high as $72. Millicom sold because it could not afford to invest enough to make Paktel a contender. Meanwhile, Millicom reaffirmed that it does not plan to sell holdings in the other 16 markets it serves. The more time passes, the more valuable Millicom becomes for future potential acquirers.


JPMorgan recently issued a positive report on our Spanish conquistador, reiterating its ”overweight” recommendation on the stock. The investment firm also raised its target price for TEF to the equivalent of $74.40 on the back of a favorable earnings outlook. That’s another 12% gain in addition to the almost 24% profits we have booked on this stock so far. Move your stop to $63.


NII Holdings, Inc. is announcing its annual earnings in two weeks time, on Feb. 27. Expect to see solid results for the fast-growing, U.S.-based Latin American play. Move your stop to $65.50

Our other positions continue to be buys. The Singapore Index (EWS) is continuing its steady, upward ascent. Barron‘s recently had a piece on why Singapore is the safest (and best) place to have your money in Asia. Move your stop to $11.25. Also, adjust your stop in Brazilian Unibanco (UBB) upward to $86.20 and China’s Homes Inn (HMIN) to $37.

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Yesterday's sell-off -- the worst since 9/11 -- caught the market by surprise. But the fact that it started in China was no surprise to me...


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