The roller coaster continues. Global stocks started to recover gradually early this week as the European Central Bank, the Fed, and the Central Bank of Japan pumped billions of Euros, dollars and yen into the global money market. On Monday, conditions seemed to be normalizing. Yet by Tuesday, U.S. markets took another sharp dip. Asian shares followed suit and fell overnight as markets continued to battle credit market crash jitters.
Despite the markets’ vertigo-inducing shenanigans, the fundamentals of our Global Stock Investor portfolio remain in place. But with the market on edge, recurring subprime woes and more bad news about troubled hedge funds, the roller coaster will likely continue. Our strategy? Sit tight, and stick to our stops. Ultimately, I remain confident that the momentum of economic growth in the global economy will prevail, and that global bull markets will steady and move upward by Q4 of this year.
PORTFOLIO UPDATE
ABB Ltd. (ABB) shares attracted a lot of interest this week, with options trading at six times their average frequency. On Monday, a whopping 17% of the total option interest changed hands with seven and a half times as many calls moving as puts. That means some big players are placing big bullish bets on our global infrastructure play. ABB also announced this week that it has begun construction on a $13.5 million turnkey substation installation for mining giant Rio Tinto in Western Australia, its sixth such project in the region. The stock is a BUY.
Anglo American (AAUKD) and other mining stocks were among the worst hit during last week’s sell off, amid fears that global demand for metals could be hit by the credit crunch. But signs that the sell off was overdone in the face of continued strong global demand meant that Anglo American shares shot up a whopping 8.1% on Friday in London trading. Although the stock sold off again yesterday, our commodities supercycle play remains a STRONG-BUY.
Home Inns & Hotels Management (HMIN) reported second-quarter net earnings of 22.7 million yuan ($3 million), or 0.68 yuan (8 cents) per American Depositary share, up from 19.4 million yuan ($2.6 million), or 0.74 yuan (10 cents) per ADS, in the year-ago period. Revenue for the quarter ended June 30 increased to 232.2 million yuan ($30.5 million) from the same period last year. That performance beat analysts’ expectations of $29.5 million. Home Inns opened 26 new hotels during the quarter and its occupancy rate was a staggering 95%. The Shanghai-based company forecasts total revenue in the third quarter in the range of 258 million yuan to 268 million yuan ($33.9 million to $35.2 million). With the stock teetering near the edge of our exit price, the stock remains a HOLD.
As India celebrates its 60th year of independence today, ICICI Bank (IBN) is a symbol of the rise of the new India. According to a study by the McKinsey Global Institute, by 2025, India is expected to emerge as the world’s fifth-biggest consumer market. The middle class will leapfrog almost 12x — up from 50 million today to roughly 583 million 18 years from now — to nearly twice the size of the entire U.S. population. With the explosion in mortgages, car loans and credit cards to service this new middle class, investing in ICICI Bank is the single best way to profit from this powerful global megatrend. The stock is a BUY.
Tesco (TSCDY) has turned from laggard to leader simply by virtue of standing still. As the stock’s defensive qualities have shone, Tesco has quietly emerged as the single lowest risk play in our Global Stock Investor portfolio. Pretend your Warren Buffett and ignore Mr. Market. BUY Tesco.
With sell offs in America Movil (AMX) and Global steel giant Arcelor Mittal (MT) unsupported by any change in the fundamentals, both remain BUYs at current levels.
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