Recent Global Bets Are Paying off

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 quiet week for U.S. stock markets, with the S&P 500 rising 0.58% and the NASDAQ up 0.97%. But as is often the case in Q4, emerging markets are starting to outperform developed markets as the MCSI Emerging Markets Index rose 1.48%.

The biggest gainers in your portfolio were global positions and include your most recent pick, the iShares MSCI Turkey Index Fund (TUR), up 4.93%; iShares MSCI Mexico Investable Market Index (EWW), rising 2.22%; and the Vanguard Global ex-U.S. Real Estate Index Fund (VNQI), climbing 2.04%. Visa Inc. (V) hit yet another 52-week high last week, and is now up 53.05% since you bought it just under a year ago.

3D printer Stratasys (SSYS) continued its volatile ways and ended the week down 8.79%. If history is any guide, now is a good time to add to your position. Homebuilder Lennar Corp (LEN) also fell 2.43% on the week. But with the stock up 25.51% since my initial recommendation, and U.S. housing recovery in full swing, LEN remains one of your most solid bets. Both Berkshire Hathaway (BRK-B) and Market Vectors Indonesia Index ETF (IDX) fell below their 50-day moving averages and are each now a HOLD.

Seasonally, this is very strong time of the year, especially for emerging markets, as institutional investors start making their big-picture country bets for the coming year.

Specific emerging markets go in and out of fashion. You currently have bets on two of the hottest and best-performing emerging markets, in Turkey and Mexico. But that universe of “hot markets” may be expanding. Last week, investment bank Goldman Sachs upgraded its outlook for Indian stocks, forecasting 7.2% economic growth during the next year in fiscal 2014, up from an expected 5.4% pace in the current fiscal year that ends in March. India has recently loosened restrictions on foreign investment in sectors such as finance, retail and aviation. That, in turn, means India could once again become one of the more exciting destinations for investors in emerging markets over the next few years.

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Although The Alpha Investor Letter has had a significant weighting in the United States over the past year or so, with the re-election of Barack Obama and the seemingly endless threat of the fiscal cliff in the United States, we’ve been gradually easing back into global stock markets. The U.S. stock market has outperformed global markets over the past 18 months or so. However, as the chart below comparing the S&P 500 to the MSCI Emerging Markets Index over the past three months shows, that trend seems to be shifting away from the United States.

Finally, I also wanted to highlight the new www.NicholasVardy.com website, which now features updated pricing for your current Alpha Investor Letter recommendations section with a 15-minute delay.

Portfolio Update

MSCI Malaysia Index (EWM) gained 0.90% over the past five trading days. Malaysia’s leading discount airline, AirAsia has an aggressive, $9-billion expansion plan currently in the works. This expansion is good news for EWM, as it has substantial exposure to AirAsia. EWM is a HOLD.

iShares JPMorgan USD Emerg Markets Bond (EMB) added 0.48% last week. With budget deficits and debt levels projected to soar in all of the major G7 countries over the coming years, bond funds like EMB are well positioned to reap great benefits. EMB is a BUY.

Berkshire Hathaway (BRK-B) dipped 0.92%. Berkshire Hathaway just closed a deal to purchase mail-order toy company Oriental Trading Co. for nearly $500 million. Apparently, when Warren Buffett goes Christmas shopping, he just buys the entire toy company! BRK-B moved below the 50-day moving average and is now a HOLD.

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Visa Inc. (V) rose 0.55%. Visa hit yet another 52-week high last week. An analyst for Sterne Agee sees credit card stocks soaring on the coming wave of holiday spending, with a slight preference for Visa over MasterCard. V is a BUY.

Market Vectors Indonesia Index ETF (IDX) lost 1.93% for the week. Indonesia continues to be a bright spot in Asia, and now boasts more billionaires than Japan. Although China and India may be home to more billionaires, on a per-capita basis, Indonesia beats both of those giants, as well. IDX is now a HOLD.

WisdomTree Japan SmallCap Dividend ETF (DFJ) gained 0.68% over the past week. DFJ has been struggling to break above the $43 price level for months, despite solid 200-day and 50-day moving average support from below. Now back to the $43 level once again, watch for a break above as a signal of future price appreciation. DFJ is a BUY.

PowerShares Global Listed Private Equity Portfolio ETF (PSP) gained another 1.98%. PSP moved upwards once again last week as investors continue to favor the entrepreneurial spirit of this alternative asset class. PSP is a BUY.

Lennar Corp (LEN) fell 2.43% last week. Construction spending took its biggest jump in five months as analysts reported a 1.4% increase for October 2012. CNBC also recently reported that the number of foreclosures continues to drop. All this is good news for homebuilders in the long run. LEN remains a BUY.

iShares MSCI South Korea Index Fund ETF (EWY) gained 1.27%. EWY’s recent recovery from its 200-day moving average continued last week. This is not surprising, given that some of EWY’s largest holdings are South Korea’s hottest automakers, including Hyundai and Kia. EWY is a BUY.

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iShares MSCI Mexico Investable Market Index (EWW) rose 2.22% last week. With Mexico’s similar labor costs and closer geographical proximity to the United States than China, you’ll be seeing “Made in Mexico” slowly replacing the “Made in China” at your local WalMart. EWW is a BUY.

Sociedad Quimica y Minera de Chile S.A. (Chemical & Mining Company of Chile) (SQM) dipped 0.41%. SQM traded sideways once again this past week. An analyst at S&P Capital IQ has a $63 price target and an “Outperform” recommendation on the stock. SQM is a HOLD.

Vanguard Global ex-U.S. Real Estate Index Fund (VNQI) gained 2.04%. Global real estate continued its strong move upwards from the 50-day moving average last week to hit a new 52-week high. Any U.S “fiscal cliff” induced pullback is a buying opportunity for this foreign real estate fund. VNQI is a BUY.

Stratasys (SSYS) gave back 8.79%. Stratasys pulled back last week after a sharp spike upwards the week prior on positive industry news. SSYS completed its merger with Objet over the weekend and the new company opened trading Dec. 3 under its current “SSYS” symbol. SSYS is a BUY.

iShares MSCI Turkey Index Fund (TUR) rose 4.93%. The upwards momentum in TUR gained steam last week as investors took the fund to a new 52-week high once again. Turkey is hot right now, and shows no signs of cooling off in the near term. TUR is a BUY.

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