Markets Pause for Breath ahead of September

Nicholas Vardy

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

It was a mixed week for global stock markets. Markets struggled to consolidate their recent strong gains, even as the S&P 500 breached and briefly held the 2,000 level for the first time. The Dow Jones ended the week down 0.20%, the S&P 500 rose 0.14% and the NASDAQ eked out a 0.57% gain. Reflecting growing geopolitical uncertainties, the MCSI Emerging Markets Index fell 0.79%.

The big gainers in your Alpha Investor Letter portfolio included ICICI Bank Ltd. (IBN), which gained 3.00%; Berkshire Hathaway Class B Shares (BRK-B), which rose 1.26%; Blackstone Group (BX), which climbed 1.12%; and Markel Corp. (MKL), which jumped 1.01%.

Overall, all but four of your positions ended the week higher. Several of your positions also hit new 52-week highs. These include Global X Guru Index ETF (GURU), PowerShares Buyback Achievers (PKW), ICICI Bank Ltd. (IBN), Market Vectors Biotech ETF (BBH) and First Trust US IPO Index (FPX).

Each of your positions, with the exceptions of Google Inc. (GOOGL) and PowerShares Dynamic Energy Exploration & Production ETF (PXE), remains a BUY.

The first trading day after the end of the summer offered few clues as to the future direction of the market.

As I noted in yesterday’s edition of The Global Guru, September has the reputation as the worst-performing month of the trading year. In fact, it is the only month in which the average return in the stock market over time is actually negative. And this applies not only to the major U.S. markets, but also to international markets, as well.

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That said, if you dig deeper, you find that in years where the market has been positive up to this point — and this year qualifies as such — the performance of September has been markedly better, firmly in the plus column.

Of course, these patterns are all about seasonality. They don’t take into account geopolitical events like Russia and the Middle East. And those kind of events can be game changers.

Market sentiment is still neutral to negative, as the market continues to consolidate its recent gains. But after the current bout of uncertainty passes, I fully expect yet another traditional Q4 rally.

Portfolio Update

ICICI Bank Ltd. (IBN) jumped 3% last week to hit a new 52-week high on news that India’s second quarter Gross Domestic Product grew at a 5.7% clip in the three months ended June. That’s the biggest gain since the first quarter of 2012. A bet on India’s turnaround story, IBN is a BUY.

The Blackstone Group (BX) rose 1.12% last week. Showing its willingness to make money by investing in anything, anywhere, Blackstone and Blue Water Energy are teaming up to provide $500 million to Siccar Point Energy, a new U.K.-focused oil company, in one of the largest ever private equity investments in North Sea oil. BX is a BUY.

Berkshire Hathaway Class B Shares (BRK-B) rose 1.26%. Warren Buffett’s role in a deal to finance Burger King’s acquisition of Tim Horton’s — and move the company to Canada to lower its tax take — has stirred some controversy. But Buffett himself is on a roll as Berkshire has risen a whopping 9.64% over the past month alone. BRK-B is a BUY.

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Markel Corp. (MKL) rose 1.01% over the past week. Markel continues to focus on expansion through the recent acquisitions of Alterra in May 2013 for $3.3 billion, Abbey Protection Plc in January 2014 for $190.7 million, Cottrell Inc. in July 2014 for $130 million, as well as Tromp-Pol Baking Equipment BV (Vanderpol) and Den Boer Baking Systems BV (Den Boer) in August 2014. Although acquisitions may impair earnings over the short term, they also increase the company’s float, allowing it to generate Berkshire-style returns. MKL is a BUY.

Global X Guru Index ETF (GURU) rose 0.27% after hitting a new 52-week high. Guru offers retail investors a way to gain exposure to some of the high-conviction picks of top hedge fund investors. GURU remains a BUY.

Nicholas Vardy

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Facing a potential full-scale war in Ukraine and in the midst of another Middle Eastern crisis, market sentiment is still firmly rooted in fear.


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