Markets Stabilize, Your Portfolio Rallies

Nicholas Vardy

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

After a sharp rally on both Friday and Tuesday, global stock markets finally recorded a positive week during the past holiday-shortened four trading days. The Dow Jones rose 1.14%, the S&P 500 jumped 2.34% and the NASDAQ soared 3.92%. In addition, MCSI Emerging Markets Index recovered 2.67%.

Big gainers in your Alpha Investor Letter portfolio included PayPal Holdings (PYPL), which jumped 8.44%; KraneShares CSI China Internet ETF (KWEB), which added 7.23%; Illumina Inc. (ILMN), which moved up 6.90%; Phillips 66 (PSX), which jumped 6.42%; PureFunds ISE Cyber Security ETF (HACK), which rose 5.71%; and the Market Vectors Biotech ETF (BBH), which climbed 5.44%.

Both PayPal Holdings (PYPL) and the iShares MSCI Philippines (EPHE) jumped above their 50-day moving average (MA). Both once again are a BUY.

It is notable that many of your Alpha Investor Letter positions strongly outperformed the broader stock market over the past week. That suggests that these positions are highly oversold and should continue to recover strongly along with the market.

Of course, there are no certainties about the near-term future of the stock market. At the same time, numerous technical and sentiment indicators that I have cited in recent weeks suggest that the market should trade higher in the coming months. And based on very recent (and hopefully sustainable) price action, your Alpha Investor Letter portfolio is set to outperform.

Also encouraging is the fact that a lot of the smart money in the market — Warren Buffett, David Tepper and others are placing big bets, particularly in the highly oversold energy sector. It’s precisely on occasions like this, when investors are punishing a particular sector such as energy, that the best long-term opportunities present themselves.

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I’ve seen this many times in my investment career, whether in emerging markets like Russia in the late 1990s, casino stocks in 2008 or the energy sector today. All of these situations yielded tremendous returns to investors who took the plunge while other investors were panicking. But it does take an extraordinary amount of psychological stamina and discipline to profit from it. That’s because you will never catch the bottom, and you may have to endure big short-term losses for bigger, longer-term gains.

Portfolio Update

Berkshire Hathaway (BRK-B) gained 0.66% over the latest four-day, holiday-shorted trading week. Yahoo announced yesterday that it will live-stream Berkshire Hathaway’s upcoming annual shareholders’ meeting on April 30. This is the first time this method of transmission has ever been used for Warren Buffett’s annual live update, which is often described as “The Woodstock of Capitalism.” BRK-B inched up closer to its 50-day moving average last week but remains a HOLD.

Markel Corp. (MKL) dipped 0.41% last week. Markel reported fourth-quarter earnings on Feb. 10 of $14.14 per share vs. an analysts’ consensus estimate of $7.21. Revenue also beat expectations, coming in at $1.42 billion vs. an estimated $1.33 billion. Alan Kirshner, MKL’s Executive Chairman, said, “2015 was a tremendous year for our underwriting operations, which made substantial contributions to profitability despite challenging market conditions. We celebrated the 10-year anniversary of our Markel Ventures operations this year, which surpassed $1.0 billion in revenues.” MKL is a HOLD.

Google Inc. (GOOGL) rose 2.37%. In addition to Google’s recent restructuring and the advent of the “Alphabet” name, Google announced yesterday that it will separate its Google Ideas technology incubator company and rename it to “Jigsaw.” This move involves no changes to Google’s trading symbol or stock price. GOOGL is a BUY.

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The Walt Disney Company (DIS) added 0.64%. DIS reported earnings last Tuesday, Feb. 9, after markets closed. This was Disney’s highest quarterly earnings in its history and, as expected, its latest Star Wars movie did move the proverbial needle. Chairman and CEO Robert Iger said results were “driven by the phenomenal success of Star Wars.” Revenue in its movie division rocketed 46% to $2.72 billion and operating income soared 86% higher to $1 billion. In total, Disney reported $1.63 earnings per share (EPS) vs. an estimated $1.44. DIS remains a HOLD, but now could be primed to change in the near future.

PayPal Holdings (PYPL) jumped 8.44% last week as extreme volatility buffeted its stock price for the third week in a row. PayPal has experienced moves of this magnitude ever since reporting stellar earnings back on Jan. 27. Last week’s move was enough to push PYPL above its 50-day MA and back to a BUY.

iShares MSCI Philippines (EPHE) added 2.53%. As I mentioned in my recent March Alpha Investor Letter newsletter, EPHE appears ready to sustain an upwards move. Despite the substantial market turbulence of late, EPHE has been exhibiting strength and did move above its 50-day MA last week to become a BUY.

Phillips 66 (PSX) jumped 6.42% for its opening week in your portfolio. Although one can look at a stock’s technical indicators on a chart, calculate ratios and returns, or research fundamentals until blue in the face, news that Warren Buffett is backing up the truck and buying a particular stock is perhaps the strongest “Buy” indicator you can find. Oil prices could be nearing a bottom and PSX is an excellent vehicle to profit from its gains. PSX is a BUY.

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Join me at The MoneyShow in Orlando, March 2-5!

Receive free admission to the MoneyShow in Orlando, Florida, as a guest of Eagle Financial Publications and me. The show’s new venue is at Disney’s Contemporary Resort near the company’s famous theme parks. I especially encourage you to attend my presentations, as well as those of my colleagues Bryan Perry and Dr. Mark Skousen, among more than 150 other speakers who will address a range of income and growth investments. Register today.

Nicholas Vardy

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