Bet on Aluminum and Book 66.67% and 50% Gains

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 mixed to flat week in U.S. stock markets. The Dow Jones was down 0.56%; the S&P 500 closed essentially flat and the NASDAQ rose 0.68%. The MCSI Emerging Markets Index (EEM) fell 0.48%.

Big gainers in your Bull Market Alert portfolio included AbbVie Inc. (ABBV), which jumped 6.55%, and Russia’s Mobile Telesystems OJSC (MBT), which added 1.54%.

Both Tata Motors Limited (TTM) and Visa Inc. (V) fell below their 50-day moving averages and moved to a HOLD.

With your holding in Abbvie (ABBV) now up 12.03%, raise your stop to $55.76 to lock in at least a 10% gain in the stock.

And with the stock making a big move up in the past three days, and the options due to expire in just over a month, sell all of your August $55 call options (ABBV140816C00055000) to lock in a 50% gain.

Your bet on the bounce in the Russian stock market continues to head in the right direction, with Mobile Telesystems (MBT) up 8.76% since May 26. Sell half of your MBT September $19 call options (MBT140920C00019000) to lock in 66.67% gains. Hold onto the rest for potential future gains ahead.

This week’s Bull Market Alert recommendation, aluminum maker Alcoa (AA), is one of the most famous names to U.S. retail investors.

Commodities-related stocks like Alcoa have been out of favor since the commodity bubble burst a few years ago. It is no wonder then that the remarkable bull market Alcoa’s stock entered this year has snuck up on most investors.

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But Alcoa’s recent price performance is not a sign of a new boom in commodities. Instead, the company’s management is transforming the company by taking Alcoa further away from its dependence on commodity prices.

To that end, Alcoa has embarked on an acquisition spree to diversify its source of revenues. It recently expanded into the aerospace sector with a $2.85 billion acquisition of Firth Rixson, a manufacturer of jet engine components. Other expansion efforts include aluminum truck frames, lighter heavy duty truck wheels and even batteries for electric cars.

As one analyst put it, “The Alcoa of tomorrow is simply not the Alcoa of yesteryear.”

Technically, the stock’s relative strength over the past few months has been remarkable, and the stock has absolutely trounced the broader U.S. averages.

Goldman Sachs recently upped its target price on the stock to $17. Sterne Agee reiterated its “Buy” rating recently and raised its target to $18.00 — a solid 20.56% above Friday’s closing price.

So buy Alcoa Inc (AA) at market today and place your stop at $13.

If you want to play the options, I recommend the October $15 call options (AA141018C00015000), expiring Oct. 18.

Portfolio Update                         

The Bank of Ireland (IRE) lost 1.32% over the previous week and continued to trade sideways at its low point in May. Morgan Stanley initiated coverage on Bank of Ireland early last week, assigning an “Overweight” rating. Macquarie followed suit, initiating coverage and setting an “Outperform” rating. IRE is below its 50-day moving average (MA) and is a HOLD.

AbbVie Inc. (ABBV) jumped 6.55% last week on heavy buying volume to hit a new 52-week high. Several positive news reports helped drive the stock higher. AbbVie also released positive comments regarding its attempt to take over competitor Shire, and Jefferies reiterated its “Buy” rating and $265.00 price target for Shire. AbbVie also started Phase 3 testing of its new breast cancer drug Veliparid. ABBV is a BUY.

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Tata Motors Limited (TTM) dipped 0.49% last week. J.D. Power released its 2014 Initial Quality Study last week and named Tata Motors’ Jaguar second in quality for all automotive brands. Although TTM started the week on a positive note, it ended the week down just enough to move TTM to a HOLD.

Visa Inc. (V) gave back 0.10% last week. One measure of a stock’s performance is a simple comparison to the Dow Jones Industrial Average. Since 2008, Visa shares are up 271%, compared to the DOW’s 40% gain. Following in the path of Tata Motors, Visa dipped ever so slightly last week and moved to a HOLD.

Mobile Telesystems OJSC (MBT) added 1.54%. I’ve been watching MBT’s trading behavior at the 200-day MA over the past few weeks for signs of future bullish behavior. MBT definitively pushed above this level last week and, from a technical perspective, cleared the way for future price appreciation. Russian markets as a whole are also continuing a comeback as stocks recover from several weeks of military-related tensions. MBT is a BUY.

Nicholas Vardy

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