As far as the major market indices were concerned, last week’s Hurricane Sandy-shortened week ended pretty much where it started. The Dow Jones was down 0.11% and the S&P 500 dropped 0.19%. The MCSI Emerging Markets Index (EEM) rose 0.95%.
Big gainers in your Bull Market Alert portfolio included Bank of Ireland (IRE), up 4.48%; Michael Kors Holdings Ltd. (KORS), rising 3.14%; and CVR Partners LP (UAN), climbing 2.00%. Both Bank of Ireland (IRE) and Seadrill Limited (SDRL) crossed back above their 50-day moving averages (MA) and are back to a BUY.
On the flip side, you had some major pullbacks in National Bank of Greece SA (NBG), Stratasys, Inc. (SSYS) and Medivation Inc. (MDVN), with both NBG and SSYS moving to a HOLD. Novo Nordisk A/S (NVO) also dipped back below its 50-day MA and is now a HOLD.
This week’s Bull Market Alert recommendation is a bet on the sector that made Mitt Romney rich through the PowerShares Listed Private Equity (PSP) exchange-traded fund (ETF). Private equity is also a sector that I expect to outperform strongly if Mitt Romney wins the U.S.presidential election tomorrow, Nov. 6.
Let’s start by defining “private equity.” Private equity is essentially the equivalent of “private investment.” That investment focuses on companies that are not publicly traded on a stock exchange. While mutual funds and hedge funds buy and sell “publicly traded” stocks, commodities, and currencies, “private equity” firms are the dealmakers of the financial world. They make their money by investing in companies, restructuring them and then by “exiting” their investments — often through a sale to other investors or an initial public offering on a stock exchange.
Investing in “private equity” through a publicly traded ETF may seem like a contradiction in terms. But thanks to an increase in the number of publicly listed private equity firms, today you can profit from the success of private equity firms without the need to buy millions of dollars in private partnerships or to lock up your money for long periods.
Specifically, the PowerShares Listed Private Equity (PSP) tracks the Global Listed Private Equity Index, a benchmark composed of 40 to 60 publicly listed private equity firms around the world. While many of its list of top holdings are not known to the general public, you may be familiar with high-profile private equity firms like Carlyle Group (CG) and KKR & Co. (KFN). Geographically, PSP maintains a 34.66% allocation in U.S.-listed companies. Its largest allocations outside of the United States include the United Kingdom, France and Sweden.
The “bottom line” is that I believe that the private equity sector would thrive under a more pro-business tenor of a Romney administration as both deal-making and the economy pick up.
So buy the PowerShares Listed Private Equity (PSP) at market today and place your stop at $9.05. There are no liquid options on this one.
Portfolio Update
Bank of Ireland (IRE) rose 4.48% over the last three trading days. German Chancellor Angela Merkel last week praised the progress that Ireland was making under its bailout agreements. Enda Kenny, the Irish prime minister, also stated that he expected the Irish economy to grow by more than the 1.4% figure from 2011. IRE rose above the 50-day MA and is now a BUY.
National Bank of Greece SA (NBG) fell 25.81% last week, along with several other large Greek banks, after an unnamed Greek banking official said that the country’s banks would delay the announcement of six-month results by one more month. This delay was the second one in recent months affecting bank results, and these delays are not sitting well at all with the market. NBG continues to trade more like an option than a stock and is now a HOLD.
Novo Nordisk A/S (NVO) fell 1.85% last week. NVO reported great Q3 earnings on Oct. 31 with net profit rising DKK4.20 billion ($722.8 million) to DKK5.67 billion ($975.8 million) vs. consensus estimates of DKK5.27 billion ($907 million). Novo also raised its full-year 2012 earnings forecast, citing strong sales for its insulin drugs. NVO is now a HOLD.
Seadrill Limited (SDRL) rose 1.50%. Investors added SDRL to their portfolios last week as the company acquired another 12,883 shares of Asia Offshore Drilling Limited on Nov. 1 — upping SDRL’s total ownership to 26.35 million shares. This represents a 65.89% total ownership stake. SDRL rose above its 50-day MA and is now a BUY.
Michael Kors Holdings Ltd. (KORS) gained 3.14% last week as it rose from its 50-day moving average (MA) to hit a new 52-week high. With the support of the 50-day MA, KORS also seems to be breaking out of its sideways trading range of the past two months. KORS is scheduled to report earnings on Nov. 13. KORS is a BUY.
CVR Partners LP (UAN) added an even 2.00% for the week. UAN reports earnings today, after the markets close. Analysts expect a gain of $0.42 earnings per share. The company declared a cash distribution of 49.6 cents per common unit for the third quarter of 2012, to be paid Nov. 14, to unit holders of record on Nov. 7. UAN is a BUY.
Medivation Inc. (MDVN) dropped 9.02% over the past three trading days. MDVN announced Friday that it would report earnings on Nov. 9 after markets close. Shares of competitor Dendreon (DNDN) jumped 18% last Friday after it reported better-than-expected earnings. MDVN is a HOLD.
Stratasys, Inc. (SSYS) dropped 13.35% last week as it reported record earnings on Friday before markets opened. 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. Dropping below its 50-day MA, SSYS is now technically a HOLD.
United States Natural Gas Fund LP (UNG) gave back 4.75% last week. UNG touched its 50-day MA last Friday as the natural gas inventory report came in better-than-expected. UNG is a BUY.
P.S. With the U.S. presidential election tomorrow, your investments and personal wealth depend greatly on who wins. That’s why my colleagues and I have prepared a special investment report for you, absolutely FREE of charge. It’s called “Eagle’s 2012 Election Guide: 4 Winning Picks for the Next President.” You’ll learn of four investment recommendations for a Mitt Romney win and four plays for a second Obama term. I invite you to sign up to receive the free special report. But that’s not all we’re offering you. Join me for a FREE online Post-Election Investing Summit on the day after the election, Wednesday, Nov. 7, 2012, at 2:00 p.m. ET.
