Taking Some Profits, Locking in Gains

Nicholas Vardy

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

Last week, global markets continued their recent consolidation, with the Dow Jones down 0.08% and the S&P 500 up 0.12%. The MCSI Emerging Markets Index ended the week 0.32% higher.

Big gainers in your Bull Market Alert portfolio included Chinese Internet portal Qihoo 360 Technology (QIHU), up 5.43%, and PowerShares Listed Private Equity (PSP), which rose 2.10%. With QIHU reporting earnings this week, you may see some big moves in this stock.

Although the U.S. stock market has been up seven weeks in a row, it has been looking tired over the past couple of weeks. And although the correction I have been anticipating hasn’t come in the major indices, it has come to a number of stocks and sectors.

By the technical measures I look at, the market is very overbought. And with the volatility index (VIX) matching record lows hit in late January, the level of complacency is high. That does not mean the market can’t go further. But I’ve found the longer the market keeps going, the more violent the inevitable correction. With the fiscal cliff set to kick in on March 1, less than two weeks away — there is good reason to think that sentiment may turn negative over the next week or so.

So this week, I am again recommending that you take some risk off of the table in your Bull Market Alert portfolio by closing some positions and tightening your stops.

Specifically:

  1. Sell your position in Plum Creek Timber Co. Inc. (PCL) for a 4.64% gain. This includes a $0.42 per share dividend payable on March 1, if you were a shareholder of record on Feb. 15.
  2. Tighten your stop in PowerShares Listed Private Equity (PSP) to $11.10. If PSP hits this very tight stop, you will have booked a solid 14.67% gain.
  3. Tighten your stop in Qihoo 360 Technology (QIHU) to $28.50. On the off chance the stock hits this level after the company reports earnings this Wednesday, it will have broken out of a long-term trading range to the downside. Your money would be better off in the next opportunity.
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I’ll be back next week with another Bull Market Alert recommendation.

Portfolio Update

Bank of Ireland (IRE) dipped 2.57% over the past five trading days. “Operating margin” is a percentage measurement of a bank’s “left over revenue,” before taxes and after paying costs. The higher the operating margin, the less financial risk a company has. The number one mid-cap foreign bank stock on both the New York Stock Exchange (NYSE) and the NASDAQ, with a whopping 246.31% trailing 12-month operating margin, is Bank of Ireland. IRE will report earnings on March 4, before the markets open. IRE is a BUY.

National Bank of Greece SA (NBG) fell 11.04% last week. Greek Prime Minister Antonis Samaras said last Saturday that “Greece is fulfilling its obligations and there will be no need for further austerity measures.” These words of confidence seem to hold weight as Greece is finally projecting a budget surplus of 0.03% of gross domestic product in 2013. NBG is a HOLD.

PowerShares Listed Private Equity (PSP) rose 2.10% last week after traders pushed decisively up through the $11 resistance level. PSP closed its seventh winning week in a row and hit yet another 52-week high. The private equity bulls are running and show no signs of tiring yet. PSP is a BUY.

Qihoo 360 Technology (QIHU) gained 5.43%. QIHU will report earnings Wednesday, after the markets close. Analysts are optimistic on QIHU as six currently rank it as a buy, one a hold, and none a sell. QIHU is a BUY.

Fomento Economico Mexicano SAB (FMX) added 1.29% last week. A company’s dividend history can be one good window into its financial health, especially when dividend payments consistently arrive over many years, and in increasing amounts. FMX has been paying a dividend since 1998, beginning near $0.107 per share, and increasing nearly every year to its current hefty $0.704 per share dividend. FMX will report earnings on Feb. 27, before markets open. FMX is a BUY.

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Banco Santander, S.A. (SAN) fell 1.88% over the past five trading days. SAN has leveled off at its 100-day moving average, as sellers seem to be quite exhausted. Falling below its 50-day moving average (MA), SAN is now a HOLD.

Market Vectors Vietnam ETF (VNM) gained 1.35% and hit a new 52-week high last week. Vietnam is quickly becoming another “China” for companies looking for cheaper production costs. With wages less than a third of the average in China, plenty of available natural resources, and 97% of the population able to read and write, Vietnam has become a booming center for outsourced production. VNM is a BUY.

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