Raising Stops and Reporting Harvard’s Stock-Picking Woes

Nicholas Vardy

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

Global markets traded in a narrow range over the past week, with Dow Jones up 0.18%, the S&P 500 gaining 0.13% and the NASDAQ down 0.06%. The MSCI Emerging Markets Index eked out a 0.73% gain.

Big gainers in your Alpha Investor Letter portfolio included Illumina Inc. (ILMN), which recovered 4.48%; BYD Company, Ltd. (BYDDF), which rose 2.28%; and the iShares MSCI Philippines (EPHE), which added 2.01%. The PureFunds ISE Cyber Security ETF (HACK) moved to a HOLD.

Both Cambria Global Value ETF (GVAL) and Google Inc. (GOOGL) hit new 52-week highs.

This week, I am recommending that you raise your stops in many of your Alpha Investor Letter positions to lock in at least double-digit percentage gains.

Raise your stops as follows:

Apple Inc. (APPL) to $106.00;

Berkshire Hathaway (BRK-B) to $136.00;

BYD Company Ltd. (BYDDF) to $6.00;

Google Inc. (GOOGL) to $740.00;

Markel Corp. (MKL) to $830.00;

KranesShares CSI China Internet ETF (KWEB) to $37.25;

NVIDIA Corporation (NVDA) to $54.00; and

PayPal Holdings, Inc. (PYPL) to $36.85.

This Friday, I am heading to Berlin for a Harvard University in Germany alumni conference.

Harvard’s current $6.5 billion fundraising campaign is the official rubric, with Harvard President Drew Gilpin Faust coming to Europe to address alumni.

The elephant in the room for both alumni and students is the recent poor performance of the Harvard endowment. Despite boasting the largest endowment among universities with the highest number of staff, Harvard’s latest annual return of minus 2% was its worst since the financial crisis.

Harvard’s long-term investment record, once the envy of the endowment world, now has dropped to an average annual return of 5.7% over the last decade. Harvard blamed poor stock-picking for the most recent annual result, as the university’s portfolio of publicly traded stocks lost 10.2%.

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A lot of heads are now rolling at Harvard, and it will be interesting to see how the administration is handling this increasingly awkward and embarrassing crisis.

Portfolio Update

Berkshire Hathaway (BRK-B) added 0.24% over the previous week. Earnings season is now in full swing, and several of your positions are in line to report quarterly earnings results. Berkshire Hathaway will report earnings on Nov. 4, after markets close. BRK-B is a HOLD.

Vanguard Russell 2000 Index ETF (VTWO) dipped 0.83%. VTWO is your bet on domestic small caps through a widely diversified mix of 2,000 stocks. Last week, I also made a new small-cap recommendation focused on the emerging markets. Together, these give you broad exposure to one of the hottest sectors at a time when things could heat up. VTWO is a HOLD.

Markel Corp. (MKL) lost 0.84% over the past five trading days. Markel will report earnings on Nov. 1, after markets close. Consensus estimates are calling for earnings per share (EPS) of $7.68 on revenue of $1.09 billion. MKL is a HOLD.

Google Inc. (GOOGL) rose 1.47% and hit a new 52-week high. Google’s new Pixel mobile phones go on sale this week, allowing Google a unique opportunity to capitalize on Samsung’s Note 7 “bursting into flames” debacle. Google will release its latest earnings report on Oct. 27, after market’s close. EPS consensus estimates are $8.72 with revenue estimates pegged at $17.91 billion. GOOGL is a BUY.

The Walt Disney Company (DIS) dipped 0.75%. Disney’s earnings announcement is slated for Nov. 10, after markets close. Revenue estimates are calling for $13.60 billion in sales and EPS of $1.16. Currently trading above its 50-day moving average (MA), DIS is a BUY.

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PayPal Holdings (PYPL) gained 1.63%. Evercore ISI Group initiated coverage on PayPal yesterday, setting a “Buy” rating and a $46 price target. This new target represents a 15.5% upside potential from yesterday’s close. PayPal will report earnings on Oct. 20. EPS estimates are for $0.35 on revenue of $2.65 billion. PYPL is a BUY.

Guggenheim Spin-Off (CSD) remained flat last week, moving the needle just 0.05% higher. Corporate spin-offs remain a bright spot moving forward through 2016 and into the first half of 2017 — many involving large brand-name corporations. CSD is below its 50-day moving average, making it a HOLD.

Apple Inc. (AAPL) added 1.01% last week as it continued its gains in your portfolio. Apple will report earnings on Oct. 25, after markets close. Analysts are collectively calling for EPS of $1.65 on revenue of $46.55 billion. AAPL is a BUY.

Phillips 66 (PSX) dipped 1.20% as it continued its extended run and traded above its 50-day MA. Phillips 66 will report earnings on Oct. 28, before markets open. The street’s consensus estimate is $0.89 EPS with revenue coming in at $25.48 billion. PSX continues to enjoy Warren Buffett’s support and is a BUY.

Albemarle Corporation (ALB) dipped 0.07% last week to close the week nearly flat. ALB will report quarterly earnings on Nov. 7, after markets close. Consensus estimates are for $0.81 EPS and revenue estimates are $867.76 million. ALB is a BUY.

Intuitive Surgical, Inc. (ISRG) moved 1.61% higher and beat earnings estimates last night after markets closed. Third-quarter EPS was $6.19 per share on revenue of $682.9 million. The consensus estimates were for $5.09 EPS on revenue of $647.6 million. Revenue grew 15.8% on a year-over-year basis. ISRG is a BUY.

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WisdomTree Emerging Markets SmallCap Dividend Index (DGS) added 1.31% right out of the gate as this double-play on two strong investment themes entered your holdings. Although there are no “sure things” in investing, the long-term outperformance of the small-cap sector has been consistent. DGS is a BUY.

Illumina Inc. (ILMN) recovered 4.48% last week after tumbling on Oct. 10. The company cut its third-quarter revenue estimates to $607 million from a guidance of $625 million to $630 million. It also announced that Q4 revenue will likely be flat or up only slightly from the third quarter. The company said the revenue shortfall was caused by fewer-than-anticipated orders for its sequencing instruments. I will be keeping a close eye on this volatile position, which remains a HOLD.

 

 

Sincerely,

Nicholas Vardy

Nicholas A. Vardy

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