My Top Three Investment Themes for 2013

Nicholas Vardy

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

Global stock markets ended the week slightly in the plus column. The Dow Jones was up 0.18%, while the S&P 500 rose 0.23%. The MCSI Emerging Markets Index ended the week 0.83% lower.

The biggest gainer in your Alpha Investor Letter portfolio was Visa Inc. (V) which rose 1.83% and is scheduled to report earnings today.

Several of your other positions hit 52-week highs during the week. They include PowerShares Global Listed Private Equity Portfolio ETF (PSP), iShares MSCI Mexico Investable Market Index (EWW), Vanguard Global ex-U.S. Real Estate Index Fund (VNQI) and Two Harbors (TWO).

You were stopped out of the iShares JPMorgan USD Emerg Markets Bond (EMB) after what has been a long and profitable run.

This week, I am recommending that you re-enter your position in 3D-printer Stratasys (SSYS) for a second time. Set your stop loss at $67.50. The stock is now oversold and due for a more sustained bounce. At the same time, I am also recommending that you sell Sociedad Quimica y Minera de Chile S.A. (Chemical & Mining Company of Chile) (SQM) at a loss. Despite what I believe to be its fundamental strengths, this stock has proven to be a (fortunately rather rare) dud in terms of price performance.

It was great to have so many of you on yesterday’s Alpha Investor Letter subscriber call. I always enjoy “meeting” with you and answering your questions personally.

If you missed the call, here are the “Top Three Investment Themes for 2013” that I covered. (By the way, you can listen to a recording of the call by clicking here.)

First, I pointed out your big bet on the U.S and global real estate recovery through four of your current Alpha Investor Letter picks — Lennar Corp (LEN), Vanguard Global ex-U.S. Real Estate Index Fund (VNQI), S&P Global Timber & Forestry Index Fund (WOOD) and Two Harbors (TWO). This is probably the biggest thematic bet I’ve had in The Alpha Investor Letter‘s history.

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Second, I highlighted the importance on betting in the right global markets at the right time. While the past few years were about the BRICs — Brazil, Russia, India and China — you’ll see bigger gains in some of the other markets you may not have even thought of — whether they are in Latin America, Asia or elsewhere. You’ll see more of this “targeted” approach to global investing in the Alpha Investor Letter in the months ahead.

Third, I spoke about how the biggest winners this year could come from European bank shares. Much like Citibank and Bank of America in 2009, European bank stocks have been hammered hard. At the same, I believe that they are “over the hump” and will survive, back-stopped by their governments and the European Central Bank. These stocks have the potential to double or triple between now and the end of the year.

I’m not sure whether any of these highly volatile banking stock recommendations will make it into The Alpha Investor Letter. But they certainly will make it into my new, high-end, elite trading service, Triple Digit Trader, which launches later this month.

You can find out more about that service by clicking HERE.

Portfolio Update

Berkshire Hathaway (BRK-B) rose 0.69% last week. Big oil refiners such as Phillips 66 and Valero need a constant supply of cheap and plentiful crude oil. The Bakken oil region is their latest target, save for one large problem — how to get the oil to the refineries. Berkshire Hathaway just happens to own Burlington Northern Santa Fe, the primary rail lines in the region, and is ramping up oil supply transport to the refineries. This will bring strong growth to the railway’s bottom line in 2013. BRK-B is a BUY.

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Visa Inc. (V) rose 1.83%. Visa is scheduled to report earnings today after the markets close. A Wedbush analyst specializing in Visa expects the company to report another strong quarter, citing strong global growth and the recovery in U.S. debt markets as positive catalysts. V is a BUY.

WisdomTree Japan SmallCap Dividend ETF (DFJ) gained 0.74% last week. The Bank of Japan (BOJ) is moving aggressively to implement new monetary easing policies. The current BOJ governor is set to leave his post in March, three weeks earlier than scheduled. This will allow central bank action to begin under new direction even sooner than expected. DFJ is a BUY.

PowerShares Global Listed Private Equity Portfolio ETF (PSP) added another 0.55% last week and hit another 52-week high. PSP has had an amazing run in your portfolio, generating a tremendous 21% gain since my initial recommendation. Private equity should remain strong as the global recovery continues into 2013. PSP is a BUY.

Lennar Corp (LEN) gave back 4.01% last week. Big name investors like John Paulson and Warren Buffett have huge bets riding on the current recovery in real estate — and you should, too. The housing sector has experienced year-over-year home price increases for the past 10 consecutive months. And, home prices are still down an average of 27% from their 2006 peak, leaving plenty of upside ahead. LEN is a BUY.

iShares MSCI Mexico Investable Market Index (EWW) ended the week flat, but still managed a new 52-week high during last week. BlackRock’s recent monthly exchange-traded product (ETP) report showed record inflows to emerging market ETPs, and highlighted EWW as winning example. EWW is a BUY.

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Vanguard Global ex-U.S. Real Estate Index Fund (VNQI) hit a new 52-week high last week, but ended the week flat. Tom Shapiro, president & chief investment officer of GTIS, manages over $2 billion in the global real estate industry, and he sees no end to the current bull run. VNQI also touched its 50-day moving average (50MA) yesterday — a rare occurrence. This is notable as VNQI has been above the 50MA since last June 2012 and has been in a period of consolidation (trading sideways) for the past several weeks, rallying from the 50MA each time it has even come close to it. VNQI remains a BUY.

S&P Global Timber & Forestry Index Fund (WOOD) dipped 0.74%. A recent CNBC report ranked timber as the number one commodity in 2012, highlighting a 40% increase for the year. With the recovery in U.S housing just starting, there is no reason for timber’s strong performance to slow down in 2013. WOOD remains a BUY.

Two Harbors (TWO) also hit a new 52-week high and closed the week flat. TWO will report earnings today after markets close. Analysts are calling for $0.33 earnings per share, and eleven out of fourteen analysts covering this stock rank it a “Buy.” TWO is a BUY.

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