It was another tough week for both U.S. and global stock markets. The Dow Jones fell 2.90% and the S&P 500 was down 2.47%. The MCSI Emerging Markets Index also tumbled 3.70%.
As a result, several of your positions in the Alpha Investor Letter dropped below their 50-day moving averages and moved to a HOLD. These include Berkshire Hathaway (BRK-B), iShares MSCI Singapore Small Cap Fund (EWSS), WisdomTree Japan Hedged Equity (DXJ), Guggenheim Spin-Off (CSD) and Vanguard Global ex-US Real Estate ETF (VNQI).
Among your current holdings, your bet on Ireland through the iShares MSCI Ireland Capped Investable Market Index (EIRL) is holding up the best. In contrast, your bets on Japan are proving to be more choppy over the past few months. But the long-term bullish case for both remains firmly intact.
I continue to believe that your set of specialist exchange-traded funds (ETFs) — First Trust US IPO Index (FPX), PowerShares Buyback Achievers (PKW) and the Guggenheim Spin-Off (CSD) remain among your best long-term bets on the U.S. market.
Looking ahead, there are a bevy of technical and sentiment indicators that attempt to divine the future. My favorite one indicates that the U.S. stock market has not been this oversold since November of 2012 and is due for a bounce. As a result, I have been adding to some of my personal positions.
Seasonality is also a strong factor during this time of the year. Markets continue to pull back as earnings season winds down. Overall, the current pullback is in-line with expectations for this time of year. That said, historically, the coming weeks are fraught with the risk of an extremely choppy market with a downside bias.
Finally, I wanted to add that I enjoyed meeting those of you who attended the Money Show in San Francisco last week. It’s always great to connect with each of you personally.
For those of you who couldn’t make it, I also wanted to offer you the opportunity to download a copy of my Money Show presentation “The Seven Secrets of Successful Speculation.” This presentation takes you inside the mind of some of the most successful hedge fund managers and speculators in the world. I think you’ll see some things you’ve never seen before anywhere else.
You can download the presentation by clicking HERE.
Portfolio Update
Berkshire Hathaway (BRK-B) dipped 1.94% last week. Warren Buffett bought a $5 billion stake in Bank of America (BAC) two years ago. Just two weeks ago, Mr. Buffett and BAC’s CEO Brian Moynihan met for dinner in Warren’s hometown of Omaha, Neb., to discuss the economy, and likely Warren’s investment. Today, Warren Buffett’s stake in BAC is up $5.27 billion dollars — just over a return of 100% in only two years. Word has it that Warren paid for dinner. BRK-B dipped below its 50-day moving average (MA) and is now a HOLD.
Visa Inc. (V) gave back 3.35% over the past five trading days. Speaking of Warren Buffett, he also holds a $284 million position in Visa. With your position up 80% as of yesterday, you are likely to join Mr. Buffett in the “100%-gain club” as Visa should move higher with the traditional fourth quarter tailwinds. V is a HOLD.
iShares MSCI Ireland Capped Investable Market Index (EIRL) dipped 0.81% last week. Ireland held up very well last week as broader markets continued to suffer in the latest pullback. Expect Ireland to be first out of the gate when markets begin to recover as EIRL is on a very short list of winning global markets for 2013 — including the United States and Japan. EIRL is a BUY.
iShares MSCI Singapore Small Cap Fund (EWSS) fell 3.75%. After spending the previous week trading along the 50-day MA, EWSS was unable to push up through this level last week. With strong support just pennies below its current price, EWSS will likely turn higher and make another attempt at the 50-day MA soon. EWSS is now a HOLD.
Google Inc. (GOOG) dipped 1.80% last week. I’ve mentioned Google’s recent hit with its Chromecast media-streaming device in previous updates, as well as its “Internet TV” aspirations, and it appears that Google Internet TV may be taking a step closer to reality. DirecTV’s NFL “Sunday Ticket” contract, a service that allows viewers unlimited access to America’s most popular sport, expires at the end of the upcoming 2014 football season. Sources are saying Google CEO Larry Page has been in talks to acquire rights to this package. GOOG is a HOLD.
WisdomTree Japan Hedged Equity (DXJ) fell 4.38%. Japan has been a star performer so far this year, and DXJ falls in the “top three” exchange-traded funds (ETFs) for 2013 cash inflows. The winning 2013 ETFs, in order of dollar inflows, are the SPDR S&P 500 (SPY), the WisdomTree Japan Hedged Equity Fund (DXJ) and the iShares MSCI Japan ETF (EWJ). DXJ moved just below the 50-day MA and is now a HOLD.
Guggenheim Spin-Off (CSD) lost 3.40% over the previous week. CSD also pulled back from its 52-week high last week to touch the 50-day MA and slip a few pennies under. This moves CSD to a “Hold” in your portfolio. However, CSD has touched the 50-day MA three times in 2013, rallying an average 15% higher after each occurrence. From a technical standpoint, CSD appears poised to do it once again. CSD is a HOLD.
PowerShares Buyback Achievers (PKW) gave back 2.07% last week. Trading on the positive news of a company repurchasing its stock, PKW tracks the Buyback Achievers Index to deliver its returns. A company must repurchase at least 5% or more of its outstanding shares over the past one-year period to become an eligible member of this index. PKW is a BUY.
First Trust US IPO Index (FPX) lost 2.10%. FPX continued a measured pullback from its recent 52-week high last week, but managed a strong uptick Tuesday on nearly double its average daily trading volume. FPX remains a BUY.
WisdomTree Japan SmallCap Dividend (DFJ) dipped 1.68% over the previous five trading days. The “other Japanese position” in your Alpha Investor Letter portfolio fared slightly better last week, managing to stop at and hold the 50-day MA. DFJ is well diversified across major Japanese sectors including Industrials, Consumer Cyclicals, Basic Materials and Technology — casting a wide net for gains, as well as providing the inherent safety of diversification. DFJ is a BUY.
Vanguard Global ex-US Real Estate ETF (VNQI) closed the week down 2.32%. This global play on the real estate sector marked yet another week of range-bound trading. However, VNQI benefits from the combination of both the 50-day MA and a major support level falling directly at the $54 level. VNQI dipped slightly below the 50-day MA last week and is now a HOLD.
iShares S&P Global Timber & Forestry Idx (WOOD) dipped 1.20%. As the economy continues to recover, and the Federal Reserve begins “tapering,” inflation may rear its ugly head. This is where timber shines. While stocks and bonds tend to react negatively to rising inflation, timber will generally hold value and even rise in an inflationary environment. WOOD remains a BUY.
PowerShares Global Listed Private Eq (PSP) dipped 1.37% last week, stopping just short of its 50-day MA. Although PSP is also pulling back with the broader markets, keep in mind that this private equity ETF pays a 6.3% dividend, which boosts its overall return. PSP is a BUY.
Market Vectors Biotech ETF (BBH) fell 2.31% last week. The red-hot biotech sector continued to “cool off” last week. However, the overall biotech sector remains poised to go higher in the face of the never-ending pursuit of better drugs and therapies. Mirroring the performance of 25 top U.S.-based biotech firms, BBH puts you in the sweet spot to profit from this bull market. BBH is a BUY.
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