A Bullish Outlook for the Remainder of the Year

Nicholas Vardy

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

Last week was broadly flat for global stock markets. The Dow Jones was up 0.53%, S&P 500 rose 0.67% and NASDAQ jumped 1.37%. In contrast, the MCSI Emerging Markets Index dipped 0.17%.

The one big gainer in your Alpha Investor Letter portfolio was Skyworks Solutions Inc. (SWKS), up 5.07%. All other gainers rose by less than 1%.

Nevertheless, the broad direction of your portfolio is positive, as several of your positions did hit new 52-week highs: Berkshire Hathaway (BRK-B), WisdomTree Japan Hedged Equity (DXJ), Markel Corp. (MKL), PowerShares DB US Dollar Bullish ETF (UUP) and Skyworks Solutions Inc. (SWKS).

I remain bullish on the market over the course of the next three months. In addition to positive seasonality, here’s another reason why.

Through last Friday, the S&P 500 hadn’t moved any more than 0.077% (up or down) on a closing basis. That’s the tightest series of closes ever.

That all changed yesterday, when the S&P 500 broke out to the upside. According to sentimentrader.com, breakouts to the upside like these have boded well for stocks historically, especially in the intermediate- to long-term future.

Three months after similar upside breakouts in the past, the S&P returned an average of 4.0% with no losses of more than -1%. After three months, only three occurrences out of a total of 24 showed negative returns. And except for one, those losses were insignificant.

I also wanted to let you know about my regular columns on the Trading Deck section of the Wall Street Journal’s Marketwatch.com website. Since I started contributing regularly, three out of my last four articles have been the most popular among the ones published, and they have attracted hundreds of comments.

Finally, I want to remind you of today’s quarterly update conference call. If we have your phone number, we will be calling you at 1:00 pm EST today. If not, you can call  1-800-211-4774 to give us your phone number.

Portfolio Update

Berkshire Hathaway (BRK-B) gained 0.59% over the last week to hit yet another a new 52-week high. About 58% of Berkshire’s equity holdings are concentrated in just four stocks: Wells Fargo (WFC), IBM (IBM), Coca-Cola (KO) and American Express (AXP). BRK-B is a BUY.

WisdomTree Japan Hedged Equity (DXJ) rose 0.87% and hit a new 52-week high last week. After Japan fell back into recession, the Japanese government delayed implementation of its new consumption tax. DXJ is a BUY.

Market Vectors Biotech ETF (BBH) pulled back 1.38% this week. Holding 26 securities in the basket, BBH is largely concentrated on the top three firms — Gilead Sciences (GILD), Amgen (AMGN) and Celgene (CELG). These three firms combine for 37.2% of the fund’s assets. BBH remains a BUY.

Global X Guru Index ETF (GURU) gained 0.88%. GURU stocks are slowly but surely making a comeback, rising 7.04% over the past month. GURU is a BUY.

Markel Corp. (MKL) gained a robust 0.22% last week to hit a new 52-week high. Markel lead portfolio manager Tom Gayner bought Deere & Co, Unilever PLC and Marsh & McLennan Companies Inc., LLC, and sold Teva Pharmaceutical Industries Ltd., International Game Technology and Northern Trust Corp during the three months ending September 30, 2014. MKL is a BUY.

Skyworks Solutions Inc. (SWKS) soared another 5.07% last week. Three earnings estimates moved higher in the past month. Consensus estimates increased from $3.59 per share 30 days ago to $3.98 per share today, an increase of 10.9%. SWKS is a BUY.

Nicholas Vardy

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