Santa Claus Leaves Early

Nicholas Vardy

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

The Santa Claus rally petered out early this year, as global stock markets flat-lined over the past week. Nearly every position in your Alpha Investor Letter portfolio moved less than 1%.

The Dow Jones was down 0.23%, the S&P 500 fell 0.09% and the NASDAQ jumped 0.25%. The MCSI Emerging Markets Index was the star of the week, and it ended up a mere 0.62%.

The biggest gainer in your portfolio was the Vanguard Russell 2000 Index ETF (VTWO), which rose 0.74%. Both the Vanguard Russell 2000 Index ETF (VTWO) and the PowerShares DB US Dollar Bullish ETF (UUP) hit new 52-week highs.

You have booked some solid gains in your Alpha Investor Letter portfolio since your last hotline on Dec. 16. Recall that was a day global markets panicked and many positions gapped sharply down.

You were stopped out of India’s ICICI Bank (IBN) for a 32.28% gain. You were also stopped out of the WisdomTree Japan Hedged Equity (DXJ) position for a 23.55% gain. Your position in Google (GOOGL) hit its stop for a 15.89% gain. You were also stopped out of your position in the Gulf States ETF (MES) at a loss, thanks in large part to the plummeting price of oil.

On Dec. 23, you were also stopped out of the Market Vectors Biotech ETF (BBH) for a 40% gain.

Although I felt it was important to lock in gains in these markets after a strong run, I am keeping all of these positions on the watch list for potential re-entry at a later date.

All other positions in your Alpha Investor Letter portfolio remain a “Buy” except Vanguard Global ex-US Real Estate ETF (VNQI).

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Indeed, 2014 repeated the now-familiar pattern of U.S. stocks outperforming their global counterparts. The U.S. market looks to finish the year at #7 among the 46 global stock markets I monitor on a daily basis; I keep expecting global and emerging markets stocks to rebound after several years of underperformance.

But it just has not happened. 2014 was a particularly difficult year as the U.S. dollar soared against all foreign currencies, clocking its best year since 2005. And large emerging markets like Brazil and Russia endured significant economic challenges with the slump in oil and commodity prices.

Looking ahead to 2015, I’ll be on the lookout for the markets, sectors and stocks that will continue to generate big returns, no matter where they may be on the globe.

Until then, I wish you and yours a happy and prosperous 2015!

Portfolio Update      

Berkshire Hathaway (BRK-B) closed out the four-day Christmas week nearly flat. Warren Buffett did an interview on Monday and his enthusiasm for being an investor in America shined brightly. He stated, “I think there’s no place on Earth, no time on Earth, where I’d rather be than in the United States at this time.” When a man like Mr. Buffett makes a statement like this as we are poised to begin a new year, it certainly puts a positive spin on the investment case for 2015. BRK-B remains a BUY.

iShares S&P Global Timber & Forestry Index (WOOD) also closed the holiday week flat. WOOD was squarely on its 50-day moving average (MA) at my last portfolio update just two weeks ago. However, WOOD is now up nearly 5% and very near its 52-week high once again. Given the recent and prolonged rout in commodities, WOOD continues to deliver remarkable gains. WOOD is comfortably above its 50-day MA and is a BUY.

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Vanguard Russell 2000 Index ETF (VTWO) rose 0.74%. VTWO is a play on a broad basket of small-cap stocks and has done quite well through the recent “Santa Claus rally.” In fact, VTWO hit a new 52-week high on Monday at a price level that stands as a long-term and staunch resistance point. An appreciable break above $97.00 spells excellent news for small caps going into 2015. See my recent article regarding my long-term bet on small caps. VTWO is a BUY.

Skyworks Solutions Inc. (SWKS) dipped 0.74% last week, hitting a new 52-week high just one week ago. SWKS will report earnings in mid-January, giving us even better visibility on further gains for the first quarter of 2015. SWKS is a BUY.

PowerShares DB US Dollar Bullish ETF (UUP) was flat last week. The dollar continued its bull run over the past two weeks, hitting a new 52-week high on Monday. Although it dipped just 0.08% last week, UUP gained 2.57% during the holiday week off from your Alpha Investor Letter updates. The dollar remains strong, and UUP remains a BUY.

Latest Special Report

As a courtesy, I want to bring to your attention the newest version of The Top 12 Stocks for 2015, which features three of my top investment recommendations, as well as bonus picks from each of my fellow investment newsletter editors at Eagle. This report and others are available FREE on my website to you.

Nicholas Vardy

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