Despite the initial sharp rally in the markets after Fed Chairman Ben Bernanke’s surprise announcement to hold off on tapering, U.S. stock markets ended the week on a down note. The Dow Jones fell 1.26% and the S&P 500 fell 0.43%. The MCSI Emerging Markets Index bucked the trend and ended the week 0.82% higher.
It was, however, an excellent week for your Alpha Investor Letter portfolio. Big gainers in your portfolio included several bets on Asia with iShares MSCI Singapore Small Cap Fund (EWSS) up 3.47%, WisdomTree Japan SmallCap Dividend (DFJ) rising 2.18% and Wisdom Tree Japan Hedged Equity (DXJ) climbing 1.62%. Ireland continued its reign as the best-performing stock market of 2013, with iShares MSCI Ireland Capped Investable Market Index (EIRL) jumping 1.47%. Guggenheim Spin-Off (CSD) gained 1.42% and the Vanguard Global ex-US Real Estate ETF (VNQI) rose 1.39%.
Although Visa (V) only rose 0.91% this past week, that was enough to turn it into a 100.5% gainer — the first “double” for your Alpha Investor Letter portfolio.
The PowerShares Global Listed Private Equity (PSP) pulled back sharply as it went ex-dividend. But your short-term “losses” will be made up for by a nice dividend payment of 56.8 cents per share by the end of the month.
That means that all but two of your current Alpha Investor Letter recommendations — 13 out of 15 — are profitable.
Currently, Wall Street strategists are predicting a flat rest of the year for the S&P 500. As of Sept. 17, the average forecast was for the S&P 500 to end 2013 at 1,694, just 3 points below where it closed yesterday.
I disagree.
This past week’s pullback in the markets notwithstanding, I remain bullish on global stock markets. As I pointed out in last week’s edition of The Global Guru, I expect emerging markets to have a strong Q4, as they catch up to the strong performance of the U.S. markets.
Although prices have taken a breather, the pullback has occurred on relatively small volume. As sentimentrader.com points out, this is the first time in the 20+ year history of the S&P 500 tracking fund, SPDR S&P 500 (SPY), that it dropped four days in a row — all on lower volume than the day before. When this happened once each for PowerShares QQQ (QQQ) (3/3/09) and iShares Russell 2000 Index (IWM) (7/6/01), both rallied over the short term.
Portfolio Update
Berkshire Hathaway (BRK-B) dipped 0.29% last week. BRK-B flirted with its 50-day moving average (MA) last week, rising above early in the week, only to fall back below once again. The new Wall Street worry is the latest round of debt-ceiling negotiations. Will it really matter this time? Warren Buffett seems to think not. In fact, his take on it is simply, “The market is not gonna fall apart, because investors expect Washington will only act irrationally for a certain length of time.” He’s probably right, as usual. BRK-B is just pennies below its 50-day MA and remains a HOLD.
Visa Inc. (V) rose 0.91% over the past five trading days. It is also now officially the first stock recommendation that has doubled in price since my initial recommendation. Monday marked Visa’s first day as a member of the Dow Jones Industrial Average. Visa also hit the $200 mark for the first time, marking a new all-time (and 52-week) high. V is a BUY.
iShares MSCI Ireland Capped Investable Market Index (EIRL) added 1.47% last week. Ireland’s economy recently turned a corner as it posted a 0.4% gain in Q2 gross domestic product (GDP), officially ending a recession that has gripped Ireland for the past nine months. EIRL is a BUY.
iShares MSCI Singapore Small Cap Fund (EWSS) gained another 3.47%. EWSS has been on a tear the past month, marking gains nearly every day in a move that now sees EWSS well above its 50-day MA, and currently straddling its 200-day MA. By way of comparison, EWSS has more than tripled the gains of its U.S.-based small-cap cousin, the iShares Russell 2000 ETF (IWM). EWSS is a BUY.
Google Inc. (GOOG) ended the week flat, coming to rest just above its 50-day MA. While most companies are in the traditional business of selling things and making money, Google is in the enviable business of giving things away for free — and making money. Google announced last week that it was giving away Google QuickOffice, an app that is essentially ”Microsoft Office in your pocket” (and one of Microsoft’s bread-and-butter products, no less), to both Android and iOS users for the excellent price of free. Why, you may ask? Simply, for the additional millions of new users drawn to gaze upon Google’s ads, as well as add to its unfathomable coffers of priceless consumer analytics data. The “GE of tomorrow,” as the famous General Electric ad goes, really is “bringing good things to life.” GOOG is a BUY.
WisdomTree Japan Hedged Equity (DXJ) gained 1.62%. A big chunk of DXJ’s movement relates directly to the strength of the Japanese yen. With the yen failing a recent attempt to break above a key resistance point, there is good evidence that the yen will continue to weaken, and that DXJ will continue to rise. DXJ is a BUY.
Guggenheim Spin-Off (CSD) gained 1.42% over the previous week and hit a new 52-week high. CSD has been making solid gains lately, rising nearly 11% in just four weeks. Expect CSD to consolidate its recent gains for a bit. CSD is a BUY.
PowerShares Buyback Achievers (PKW) hit a new 52-week high early last week, before pulling back 0.73%. Corporate stock buyback activity is at a historical high point. For the 12-month period ending June 30, 2013, companies have repurchased an astounding $455 billion of their own stock, collectively — and there is nothing on the horizon to suggest this trend will abate in the near term. PKW is a BUY.
First Trust US IPO Index (FPX) rose 0.58%, also hitting a new 52-week high. It is no secret that most investors get mighty excited when they hear the term “Initial Public Offering” — especially if they can get in on the ground floor. Here’s why. Of the top 25 IPOs released over the last year, the stock lowest on the list returned a gain of 69%. The top-performing IPO returned 338% — and its IPO date was only 12/12/2012. Of those 25 stocks, 16 returned 100% or more. These are exciting numbers. FPX remains a BUY.
WisdomTree Japan SmallCap Dividend (DFJ) gained 2.18% over the previous five trading days. DFJ leapt nearly 4% above the considerable $50 resistance level on Wednesday alone. DFJ is a BUY.
Vanguard Global ex-US Real Estate ETF (VNQI) rose 1.39%. In a nod to the strength of the global real estate markets, Wan Jianlin, the “richest man in China,” is embarking on a new global real estate venture. Motivated by the large price increases over the past few years in the Chinese property markets, Mr. Jianlin is planning to build 15 five-star hotels every year in locations around the globe. VNQI is a BUY.
iShares S&P Global Timber & Forestry Idex (WOOD) ended the week flat. Housing continues to be a major driver of the demand for wood, and from a global perspective, Ghana’s logging operations have been so successful over recent years that timber resources are now dwindling due to the boom in housing. Local housing projects have been turning to bamboo as a substitute for timber. WOOD is a BUY.
PowerShares Global Listed Private Equity (PSP) fell 4.33%. PSP dropped sharply because it went ex-dividend on Sept. 20, declaring a substantial dividend of 56.8 cents per share, which equals a 4.95% dividend yield. That should hit your account by the end of the month. With PSP now just under its 50-day MA, it is a HOLD.
Market Vectors Biotech ETF (BBH) dipped 1.46% last week. BBH pulled back along with the broader markets last week after hitting a new 52-week high early in the week. Biotech remains hot and BBH remains a BUY.
ProShares Ultra-Short 20+ Year Treasury (TBT) lost 5.88%. Ben Bernanke’s delay of tapering pulled the rug out from under this trade, at least over the short term. That said, over the long term, however, interest rates will have to rise. It’s just a question of waiting it out. Slipping below its 50-day MA, TBT is now a HOLD.
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