Market Overdue for a Sustained Bounce

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 recovered somewhat over the past week, with the S&P 500 rising 1.17% and the MSCI Emerging Markets Index jumping 2.27%.

Overall, the markets have been choppy and weak since mid-September. Despite the market pullback, you have some big winners in your Alpha Investor Letter portfolio.

Visa (V) is up a whopping 49.19% since our initial recommendation. Housing builder Lennar (LEN) is up 29.20% since July 3. In addition, MSCI Malaysia Index (EWM),iShares JPMorgan USD Emerging Markets Bond (EMB), and Berkshire Hathaway (BRK-B) all boast double-digit percentage gains. Last month’s Alpha Investor Letter recommendation, Vanguard Global ex-U.S. Real Estate Index Fund (VNQI), also just hit a new 52-week high.

The good news is that with the uncertainty of the U.S. elections out of the way, markets may resume their upward momentum, especially as they are as technically oversold as they have been since the sell-off in May of this year.

That said, the upcoming political jousting to address the U.S. government’s fiscal cliff, combined with rising taxes on investors beginning on January 1, 2013, are hardly bullish signs for the stock market. The election of a more pro-business administration in the United States would have boosted the U.S. market’s prospects immeasurably, both over the medium and long term.

For more detail on my views about the impact of the U.S. elections on your portfolio, join me for our special post-election teleseminar today. It’s called “Eagle’s 2012 Election Guide: 4 Winning Picks for the Next President.” You’ll learn of four investment recommendations for a second Obama term. Join me for a FREE online Post-Election Investing Summit today at 2:00 p.m. ET. You also can sign up to receive a free special report.

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Portfolio Update

MSCI Malaysia Index (EWM) lost 0.33% this past week. Malaysia’s annual pace of economic growth strengthened to 5.4% in the second quarter of 2012 against 4.9% in the preceding quarter, led by continued expansion in the services and manufacturing sectors. EWM is a BUY.

iShares JPMorgan USD Emerg Markets Bond (EMB) dipped 0.26%. This bet on emerging markets continues to be popular, attracting approximately $48.3 million just last week. EMB is a BUY.

Berkshire Hathaway (BRK-B) rose 0.73% for the week. Berkshire reported its third-quarter results and announced earnings of $2,272 per Class A share, compared to $1,380 per share a year ago. The prior year quarter included $1.587 billion in (temporary) derivatives losses, compared to just $76 million last quarter. The company’s book value has risen 12% through the first nine months of 2012. BRK-B is a HOLD.

Visa Inc. (V) jumped another 4.01%. Visa reported strong fourth-quarter earnings and provided a bullish outlook for fiscal year 2013. Excluding the impact of one-time litigation charges, the firm earned a better-than-expected $1.54 per share, growth of 21% year-over-year. Total revenue surged 15% during the quarter to $2.7 billion, which also exceeded consensus expectations. V is a BUY.

iShares Nasdaq Biotechnology (IBB) fell 1.39%. Most analysts expect healthcare to be one of the stronger sectors in a second-term Obama economy. Extremely oversold and due for a bounce, IBB is a HOLD.

WisdomTree Japan SmallCap Dividend ETF (DFJ) rose 0.57% over the past week. Japan appears to have entered a recession for the first time in four years, as a key indicator of the current state of the economy fell for a sixth consecutive month. DFJ is a HOLD.

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Market Vectors Indonesia Index ETF (IDX) rose 0.41%. A domestic consumption boom has helped Indonesia to record annual gross domestic product growth of 6.2% in the third quarter of this year, despite a global slowdown that has ensnared other large emerging markets. IDX is a BUY.

PowerShares Global Listed Private Equity Portfolio ETF (PSP) gained 1.77%. This was one of my top picks for a Romney victory, which did not come to pass. Yet as long as this ETF remains in an uptrend, it is worth hanging onto. PSP is a BUY.

iShares Singapore Index ETF (EWS) pulled back 0.6% over the past week. Singapore has maintained its position as the world’s second-most competitive economy, missing out on top spot to Switzerland which kept the title for the fourth year running, according to the World Economic Forum. Dropping below its 50-day moving average, EWS moved back to a HOLD.

Statoil ASA (STO) fell 0.89%. Statoil ASA said Wednesday that it had drilled another successful appraisal well in the vast Johan Sverdrup oil field in the North Sea. STO remains a HOLD.

Lennar Corp. (LEN) jumped 5.05% last week. Lennar has a price-to-earnings (P/E) ratio of 14.1, below the S&P 500 P/E ratio of 17.7. Currently, there are seven analysts that rate Lennar Corporation a buy, two analysts rate it a sell, and eight analysts rate it a hold. Your bet on the U.S. housing recovery is a BUY.

iShares MSCI South Korea Index Fund ETF (EWY) jumped 2.58%. Recently, the South Korean economy saw employment and inflation stabilize and major indicators such as production, consumption and investment posted modest rebounds. Moving back above its 50-day moving average, EWY is now a BUY.

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iShares MSCI Mexico Investable Market Index (EWW) traded flat over the week. Many U.S. companies have been upping their exposure to Mexico, with Costco (COST) recently buying out its Mexican joint venture partner. Walmart (WMT) has had great success with its separately incorporated subsidiary, Walmart de Mexico. EWW is a BUY.

Sociedad Quimica y Minera de Chile S.A. (Chemical & Mining Company of Chile) (SQM) nudged up 0.26%. This bet on agriculture and lithium is severely oversold, and is now a HOLD.

Vanguard Global ex-U.S. Real Estate Index Fund (VNQI) rose another 1.86%. VNQI hit a new 52-week high as global real estate markets continue to recover. VNQI is a BUY.

Stratasys (SSYS) tumbled 8.43%, erasing much of last week’s gains. SSYS reported $0.40 earnings per share vs. an analyst estimate of $0.187, and revenue of $49.7 million — a 24% jump year-over-year. 3D printing system shipments rose 52% year-over-year, largely from the company’s new “under $10,000” Mojo 3D printer launch. Investors surprisingly sold off SSYS, based on a perceived weak increase in Q4 guidance. This is likely a big overreaction, and an opportunity, as companies tend to issue conservative guidance to make future earnings beats easier. Trading above its 50-day MA, SSYS remains a BUY.

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With Obama’s second term now assured after yesterday’s election, world markets kept on keepin’ on, virtually shrugging their shoulders at the results.

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