Are Global Stock Markets Set for a Comeback?

Nicholas Vardy

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

Global stock markets closed a solid week with the Dow Jones up 1.00%, the S&P 500 rising 1.53% and the NASDAQ gaining 2.33%. Global stock markets continue to rebound, with the MCSI Emerging Markets Index rallying 2.32%.

Big gainers in your Alpha Investor Letter portfolio included Markel Corp. (MKL), which jumped 6.12%; ICICI Bank Ltd. (IBN), which added 3.75%; and Cambria Global Value ETF (GVAL), which rose 3.44%.

The Cambria Global Value ETF (GVAL) rose above its 50-day moving average and moved to a BUY.

Several of your positions hit new 52-week highs. These include the iShares S&P Global Timber & Forestry Index (WOOD), the Vanguard Russell 2000 Index ETF (VTWO), Markel Corp. (MKL), Union Pacific Corporation (UNP) and Actavis plc (ACT).

All of your current Alpha Investor Letter positions are a buy, except for ICICI Bank Ltd. (IBN), which is just under its 50-day moving average.

It is a feel-good time in the market. After almost three months of being locked in a trading range, market sentiment, as measured by the CNN Fear & Greed Indicator, has not been this high since mid-summer of 2014.

The major indexes are all up, right off their 200-day moving averages, and right back to previously tested resistance and 52-week highs. All the CNBC gurus were up-beat and predicting markets will continue higher.

The notion of Europe being “the next big thing” is suddenly becoming consensus. That’s a big change from last Wednesday, when my own bullishness was greeted with some skepticism on my appearance on Fox Business.

As you know, I’ve been expecting a rally in global stock markets for several years. In my opinion, a massive rally in global stock markets is a matter of “when” and not “if.”

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Global markets have been already rallying strongly — though few U.S. investors have noticed because the 15%-or-so gain in the U.S. dollar over the past six months has canceled out the bulk of this gain for U.S. dollar investors.

Still, to generate gains even in the face of such headwinds is impressive. And the U.S. market ranking only 31st out of 46 among the global stock markets so far in 2015 confirms that the global stock market rally is real. The question is whether it is sustainable.

If it is, you are well positioned with current bets on iShares Currency Hedged MSCI Germany (HEWG), ICICI Bank Ltd. (IBN), the Cambria Global Value ETF (GVAL), Actavis plc (ACT) and the Vanguard Global ex-US Real Estate ETF (VNQI).

Finally, for those of you who were not able to make it to the MoneyShow in Orlando last week, you can download a copy of my presentation, “My Top 5 Investment Themes for 2015,” by clicking HERE.

Portfolio Update

Guggenheim Spin-Off (CSD) added 1.26% over the four-day trading week. A 2004 study by McConnell and Ovtchinnikov, out of Purdue University, looked at a 36-year sample of spun-off companies and their returns. They found that spin-offs did, in fact, generate positive returns for nearly every holding period considered. Their findings revealed that corporate spin-offs generated the following average returns over the 36-year time period: 19.4%, 24.4% and 26.3% over 12-, 24- and 36-month periods. Although there is no “sure thing” in investing, this study may suggest otherwise. CSD is a BUY.

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iShares S&P Global Timber & Forestry Index (WOOD) rose 1.16%. The fire continues to burn for WOOD, as it continued a nearly unbroken run of weekly gains for 2015. WOOD also turned in another new 52-week high last week. Well above its 50-day moving average (MA), WOOD is a BUY.

Global X Guru Index ETF (GURU) added 2.87% last week. This exchange-traded fund (ETF) that attempts to “pick what the pros pick” linked a third week of gains. Now comfortably above its 50-day MA, GURU is a BUY.

Markel Corp. (MKL) jumped 6.12% last week after reporting earnings on Feb. 11. MKL also hit a new 52-week high. Markel reported fourth-quarter earnings of $8.05 per share vs. Wall Street’s expected earnings of $5.70 per share. This figure is up $1.10, or 15.83%, year over year. MKL is a BUY.

Cambria Global Value ETF (GVAL) rose 3.44% during the four-day trading week. The drumbeat grows louder and louder in the media that global markets are now starting to become an attractive investment prospect. With GVAL invested in a collection of some of the cheapest markets on Earth, this bet on global gains is perfectly positioned to rise. GVAL rose above the 50-day MA last week and is now a BUY.

Actavis plc (ACT) gained 2.78% and rose to a new 52-week high. This “safe bet” on biotech will report earnings today after markets close. ACT is a BUY.

ICICI Bank Ltd. (IBN) added 3.75%. IBN continued to rebound last week as it extended gains from its touch down to the 200-day MA the week prior. IBN now rests just below its 50-day MA, standing as a HOLD for the moment.

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iShares Currency Hedged MSCI Germany (HEWG) dipped 0.72% for its debut week in your portfolio. Investors were eager for currency-hedged Germany ETFs last week, as HEWG alone saw a huge inflow of funds — gaining $491 million in just the week ending on Friday the 13th. HEWG is 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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