Keeping an Eye on Shifting Trends

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 solid, unspectacular week for U.S. stock markets, with the Dow Jones up 0.89%, the S&P 500 rising 0.83% and the NASDAQ gaining 0.82%. The MCSI Emerging Markets Index had a much stronger run, ending the week 2.75% higher.

Big gainers in your Alpha Investor Letter portfolio included the Cambria Global Value ETF (GVAL), which jumped 5.09%; Google Inc. (GOOGL), which climbed 3.95%; the Vanguard Global ex-US Real Estate ETF (VNQI), which gained 1.77%; and the iShares MSCI Philippines (EPHE), which rose 1.52%.

Two positions, the Vanguard Global ex-US Real Estate ETF (VNQI) and the Global X Guru Index ETF (GURU), hit new 52-week highs.

Both Google Inc. (GOOGL) and the iShares MSCI Philippines (EPHE) moved back to a BUY.

Several of your positions dropped below their 50-day moving averages and moved to a HOLD. These include the iShares S&P Global Timber & Forestry ETF (WOOD), Markel Corp. (MKL), PowerShares DB US Dollar Bullish ETF (UUP), Actavis plc (ACT), Market Vectors Biotech ETF (BBH) and Illumina Inc. (ILMN).

A handful of potential shifts in longer-terms trends are emerging in your Alpha Investor Letter portfolio.

First, global stocks and exchange-traded funds are starting to outperform. You see this in the performance of Cambria Global Value ETF (GVAL), the Vanguard Global ex-US Real Estate ETF (VNQI) and the iShares MSCI Philippines (EPHE). As I have written many times before, this is long overdue.

Second, the bullish move in the U.S. dollar is starting to weaken, as expectations of a Fed rate hike are pushed off into the fall. The chart for your holding in PowerShares DB US Dollar Bullish ETF (UUP) looks sloppy, having dropped now for four consecutive days. From a short-term standpoint, the position is oversold and due for a bounce.

Third, U.S. domestic-oriented large-cap bets like Berkshire Hathaway (BRK-B) and Union Pacific (UNP) are having a rough time, as both are down in 2015. In contrast, U.S. small caps — represented by your position in Vanguard Russell 2000 ETF (VTWO) — are having a strong year.

Finally, the long, strong biotech rally has taken a break and all of your related positions — Actavis plc (ACT), Market Vectors Biotech ETF (BBH) and Illumina Inc. (ILMN) — have pulled back in recent weeks, though nothing compared with the large pullback in the sector in March of 2014.

The challenge in each of these situations is to assess whether the long-term trend has ended.

As it stands today, I’m not willing to call a turn on any of these major trends just yet. But I’ll be keeping an eye on each of these in the coming weeks, especially as we enter the seasonally weak time of the year.

Portfolio Update

Berkshire Hathaway (BRK-B) gained 0.98%. Berkshire Hathaway stands as the second-largest gainer in your portfolio — up a whopping 87.55% since its recommendation. However, even the best stocks have to correct every so often, and BRK-B is no exception as it touched down to its 200-day moving average (MA) last week. Mr. Buffett’s stock last touched the 200-day MA in early 2014, after which it rose 27% through the end of that year. With attention on Berkshire set to rise with its annual shareholder meeting at the end of this week, BRK-B is likely positioning for another move upwards. BRK-B is a HOLD.

Vanguard Global ex-US Real Estate ETF (VNQI) gained 1.77% last week and hit a new 52-week high. With U.S. markets cooling off since the start of 2015, investors have been pouring into many other global markets, with global real estate getting its fair share. With the trend toward global investing likely to continue, VNQI could experience gains for quite some time to come. VNQI is a BUY.

Markel Corp. (MKL) lost 1.12%. MKL will report earnings on May 6, after markets close. Analysts’ consensus estimates are calling for $5.88 earnings per share (EPS) on $1.31 billion in revenue. MKL fell below its 50-day MA last week to become a HOLD.

Skyworks Solutions Inc. (SWKS) dipped 0.92%. Skyworks remains the top gainer in the Alpha Investor Letter portfolio and is focused on one of the strongest trends of today — connecting virtually everyone and everything via electronic and wireless means, including smartphones, tablets and wearables, as well as automobiles. Also offered are in-home connectivity, broadband and cellular, as well as serving the industrial, medical and military markets. SWKS will report earnings on Thursday, after markets close. SWKS is a BUY.

Union Pacific Corporation (UNP) lost 1.47% last week after a weaker-than-expected earnings report. UNP reported $1.30 earnings per share (EPS) vs. a $1.37 analysts’ consensus estimate. Sales revenue came in at $5.61 billion vs. a $5.71 billion estimate. Although the company reported gains in pricing, a 2% dip in shipping volume weighed slightly on the stock price. UNP is a HOLD.

Cambria Global Value ETF (GVAL) jumped 5.09%. This play on a collection of the cheapest markets on earth picked up momentum last week as it pushed through some important technical milestones. Not only did GVAL move up through the 3x-tested $21 resistance level on strength, but it managed to touch upwards to its 200-day MA just yesterday. GVAL should continue making gains from these strong foundations. GVAL is a BUY.

Google Inc. (GOOGL) rose 3.95% last week and reported earnings on Thursday. Google reported $6.57 EPS vs. a $6.60 analysts’ consensus estimate. Google made $6.27 EPS for the same quarter one year ago. Revenue came in at $17.26 billion vs. a $17.50 billion estimate. FBR Capital raised it price target to $672, a potential 19% gain from yesterday’s close, and retained its “Outperform” rating. GOOGL is a BUY.

Illumina Inc. (ILMN) fell 7.49% last week, despite handily beating earnings expectations. ILMN reported $0.91 EPS vs. a $0.72 analysts’ consensus estimate. Sales revenue was $538.6 million vs. a $525 million estimate. Several firms raised expectations on ILMN. Mizuho raised its price target to $230 and Janney raised its target to $240. Both firms maintained a “Buy” rating on the stock. And, Tigress Financial upgraded its rating to “Strong Buy.” By my short-term measures, the stock is oversold and due for bounce. But with ILMN dipping below the 50-day MA last week, it has technically moved to a HOLD.

Newly Updated Special Reports

As a courtesy, I invite you to view the newly updated versions of the following special reports: My Safest Bet on Booming Biotech, Alpha Opportunities: Where the Smart Money is Investing Now, My #1 Way to Play India’s Stock Market Rally, The ‘Buffett Clone’ that Beats Berkshire by 70%…, 10 Top-Tier Irish Biopharmas in One Low-Risk Investment and Be Ready to Pounce on this World-Beating Biotech. These reports and others are available FREE on my website to you.

Nicholas Vardy

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