Slow and Steady Recovery

Nicholas Vardy

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

The market continued a modest recovery last week, with the S&P 500 rising 0.80%, the NASDAQ up 1.75%, and MCSI Emerging Markets Index bouncing 0.58%.

The biggest gainer in your Alpha Investor Letter portfolio was Stratasys Inc. (SSYS), which soared 13.69% as the entire 3D printing sector returned to favor after an acquisition by General Electric Company (GE). This position is now up 17.93% since you re-entered it.

In a sign of a sustained bounce, three of your positions moved to a “Buy”: Berkshire Hathaway (BRK-B)PowerShares Global Listed Private Equity Portfolio ETF (PSP) and iShares MSCI Mexico Investable Market Index (EWW).

All of your Alpha Investor Letter positions are a “Buy” except MSCI Malaysia Index (EWM) and Sociedad Quimica y Minera de Chile S.A. (Chemical & Mining Company of Chile) (SQM).

With the fiscal cliff negotiations unresolved, the bounce in the markets has slowed somewhat, after its strongest week since June last week. But as the gradual uptick in your Alpha Investor Letter holdings confirms, sentiment is improving somewhat.

According to sentimentrader.com, over the past 20 years, the stretch from the day-prior-to Thanksgiving through the third day in December has been positive 17 out of 20 times (with one of those losses being negligible). Combine that with strong seasonality, along with the market coming out of a severely oversold condition, and odds are that you can expect a strong December.

This is also the time of the year that emerging markets tend to perform the strongest. So, I want to highlight the performance of two of your recent Alpha Investor Letter picks versus the broader MSCI Emerging Markets Index.

First, here is iShares MSCI Turkey Index Fund (TUR) versus the benchmark MSCI Emerging Markets Index over the past six months:

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Second, here is iShares MSCI Mexico Investable Market Index (EWW) versus the same index over the same time period.

Of course, past performance does not guarantee future results. But it does highlight the importance of being in the right markets at the right time.

Portfolio Update

MSCI Malaysia Index (EWM) lost 1.90% over the shortened Thanksgiving holiday week. Malaysia will hold general elections in six months and, as in the U.S. elections, the incumbent party is spending lavishly in a bid to appeal to voters. The $444 billion “Economic Transformation Program” has been a boost to the Malaysian economy, and will likely boost EWM, as well. EWM is a HOLD.

iShares JPMorgan USD Emerg Markets Bond (EMB) gained 0.26% last week. BlackRock’s recent ETP Landscape Report listed global year-to-date inflows of $60.7 billion to emerging markets debt exchange-traded funds (ETFs). This accounts for a whopping 32% of all inflow to all ETF categories. EMB is a BUY.

Berkshire Hathaway (BRK-B) added 1.49% over the past four trading days. Warren Buffett’s primary approach to amassing tremendous wealth is to buy quality companies when the going gets tough. When asked how he felt about the looming U.S. “Fiscal Cliff,” Buffett’s response was, “I will not be selling stocks.” BRK-B moved above the 50-day MA and is now a BUY.

Visa Inc. (V) ended the week flat. Visa reported yesterday that consumers spent a record-breaking $5 billion from “Black Friday” through the following Monday. Visa also noted a 20% increase in online payment volume for U.S.-issued VISA cards, compared to the same period last year. Up 52.21% since you bought it just under a year ago, V is a BUY.

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WisdomTree Japan SmallCap Dividend ETF (DFJ) rose 0.83% over the past week. Bank of Japan Governor Masaaki Shirakawa has slowly eased Japanese monetary policy in an effort to slow deflation. However, Japanese elections could change all of this in the coming months as the political challenger, Shinzo Abe, is calling for even more aggressive “unlimited” easing in an effort to stimulate inflation and speed Japan’s recovery. DFJ is a BUY.

Market Vectors Indonesia Index ETF (IDX) ended flat for the week. Analysts’ are predicting robust 6% gross domestic product (GDP) growth for Indonesia over the coming years. That compares with an anemic 1-2% in the United States. IDX is a BUY.

PowerShares Global Listed Private Equity Portfolio ETF (PSP) gained 1.59%. After touching its 200-day moving average, PSP moved aggressively back to its 50-day MA and is now a BUY.

Lennar Corp (LEN) added 1.63% last week. LEN recently made the list of the NYSE top four residential construction stocks for dividend yield, paying a dividend of 0.40%. Up 28.64% since my initial recommendation, LEN is a BUY.

iShares MSCI South Korea Index Fund ETF (EWY) gained 0.87%. EWY’s high weighting in South Korean technology has helped the fund deliver a 21% return for 2012. With analysts forecasting more of the same growth in global technology demand for 2013, EWY should continue to deliver positive results. EWY is a BUY.

iShares MSCI Mexico Investable Market Index (EWW) rose 0.87% over the past four trading days. Mexico is emerging from the global economic slowdown relatively unscathed, as compared to its big neighbor to the North. Mexico’s 2013 gross domestic product (GDP) is forecast to grow 3.5%, its unemployment continues to fall, and its consumer confidence continues to rise. EWW is now a BUY.

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Sociedad Quimica y Minera de Chile S.A. (Chemical & Mining Company of Chile) (SQM) gave back 6.47% after issuing an earnings miss. SQM reported third quarter earnings of $0.63 per share vs. an analyst’s estimate of $0.73 per share. Revenue was $615.3 million vs. an expected $669.48 million. However, earnings and revenue figures were both up year-over-year for Q3. SQM is a HOLD.

Vanguard Global ex-U.S. Real Estate Index Fund (VNQI) gained 1.14%. VNQI followed suit with the broader real estate sector and continued its rise from the 50-day MA. VNQI is on track to challenge its recent 52-week high in the coming days. VNQI is a BUY.

Stratasys (SSYS) jumped 13.69% last week. Stratasys and competitor 3D Systems both rallied significantly last week as news broke that bellwether General Electric purchased a private 3D printing company named Morris Technologies. The 3D printing space is back on fire. SSYS is a BUY.

iShares MSCI Turkey Index Fund (TUR) rose 1.64%. TUR took an upward turn from its 50-day MA early last week. This marks the fifth bounce that TUR has taken from the 50-day MA in as many months. TUR’s upward trend remains intact since it began in early June. TUR is a BUY.

P.S. Don’t put off until tomorrow what you can do today. Use this convenient opportunity to renew now and get another year of the Alpha Investor Letter. Click Here to Renew Now.

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