Your Stock Picks Keep Powering Ahead…

Nicholas Vardy

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

U.S. and global stock markets were broadly flat over the past week. The Dow Jones was up 0.12% and the S&P 500 rose 0.76%. The MCSI Emerging Markets Index ended the week 0.30% higher.

Overall, your Alpha Investor Letter portfolio had a much stronger week. Your best performer was Berkshire Hathaway (BRK-B), up 3.4%. Real estate play Two Harbors (TWO) rose 2.73%. Private equity continued its relentless run, with PowerShares Global Listed Private Equity Portfolio ETF (PSP) up 1.90%. Timber found its footing with S&P Global Timber & Forestry Index Fund (WOOD).

On the down side, you were stopped out of Stratasys (SSYS) at a loss. The volatile 3D printing sector has been hit hard recently. With the sector breaking down technically, I’m going to put this theme on the back burner for a while.

The generally strong performance of your current Alpha Investor Letter holdings has been encouraging. Much to my surprise, the U.S. market has clawed its way back to being one of the top-performing markets in 2013, after a period of underperformance in Q4 of 2012. But you have plenty of exposure to the United States in both stock positions like Visa Inc. (V), Berkshire Hathaway (BRK-B) and Lennar (LEN), up 63.34%, 32.94%, and 32.59%, respectively. Your sectorial bets on Private Equity (PSP) and Timber (WOOD) also have significant U.S. weightings, as well, which has helped their performance.

Nevertheless, I am concerned that market volatility, as measured by the VIX, continues to hover near record lows. That indicates to me that the market remains remarkably complacent, and oblivious to the fiscal cliff coming in a scant 10 days. Perhaps the markets are cynical enough to believe that Congress will pull back from the brink — or kick the can farther down the road — as they did in December. Whatever happens, technically, the market is as overbought as it has been in years, and a correction is a question of “when” and not “if.” Until then, enjoy the ride and stick to your stops.

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Finally, I want to give a special thanks to those of you who have signed up for my new premium trading service, Triple Digit Trader, set to launch on March 1. The response has been overwhelming, so thank you for that. I’ve been hard at work on the three special bonus picks which I’ll be sending out to new Triple Digit Trader members prior to the launch — including recommendations that would profit from any coming market correction.

Portfolio Update

Berkshire Hathaway (BRK-B) rose 3.40% last week. Warren Buffett announced a partnership with 3G to acquire Heinz last week — one of his biggest transactions ever. This reflected positively in the stock over the week. Mr. Buffett will also release his “annual letter” to shareholders on Friday, March 1, which the Buffett faithful look forward to each year. It’s always a good read. BRK-B is a BUY.

Visa Inc. (V) rose 0.52%. Payment processor Total Systems Services Inc. (TSS) announced that it is buying prepaid debit card provider NetSpend Holdings Inc. (NTSP). This will create a digital payments powerhouse that will market to the 60 million Americans without checking accounts. Their cards will have the Visa or MasterCard logo on them and will handle the electronic payments — a business expected to grow from $210 billion in 2012 to $411 billion by 2016. V is a BUY.

WisdomTree Japan SmallCap Dividend ETF (DFJ) gained 0.41% last week. Although opening the week with a tough downward move, DFJ jumped back yesterday to close the week with a gain. With Japan’s Nikkei 225 Index jumping 32% from its November lows, the sun is set to rise once again in the “Land of the Rising Sun.” DFJ is a BUY.

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PowerShares Global Listed Private Equity Portfolio ETF (PSP) added another 1.90% last week and hit a 52-week high. This winner in your portfolio has risen eight straight weeks now. With the private equity bulls running, PSP remains a BUY.

Lennar Corp (LEN) gave back 2.35% last week. Lennar revealed plans at its recent earnings conference call to pursue a lucrative new multi-family housing construction undertaking destined to provide high returns in future years. Slipping below its 50-day moving average (MA), LEN is a HOLD.

iShares MSCI Mexico Investable Market Index (EWW) was flat for the week as it formed a convincing turnaround directly on the 50-day MA on tremendous buying volume. This may signal a great buying opportunity, and the end of investor selling on a negative earnings report from America Movil (AMX). EWW holds a 21.55% weighting in AMX, and this can cause some unexpected volatility to the fund. EWW is a BUY.

Vanguard Global ex-U.S. Real Estate Index Fund (VNQI) rose 0.67% last week. VNQI has been taking a rest along with many of the overheated real estate plays. However, VNQI has been holding the 50-day MA like a champion and readying for its next move up through the strong $56 resistance level. As real estate comes back into favor, VNQI will test, and likely breach, this line and continue higher. VNQI is a BUY.

S&P Global Timber & Forestry Index Fund (WOOD) gained 1.71%. WOOD is another of the “housing recovery” plays in your portfolio that has taken a breather lately. And, like the others, WOOD is finally showing signs of life as it moves up off of the 20-day MA and makes another run at the $48 price resistance level. A sustained break above $48 means to buy more. WOOD is a BUY.

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Two Harbors (TWO) hit yet another new 52-week high and rose 2.73%. Investors are still feeling the glow from TWO’s recent positive earnings report and are continuing to take the stock higher, above its significant support point at $12.50. Brian Taylor, chief executive officer and chief investment officer of Pine River Capital Management, a large real estate investment company, sees tremendous broad-based gains in the U.S. real estate markets. Demographics are improving, inventory absorption is picking up, and a lot of institutional capital is coming in to the market. TWO is a BUY.

Wisdom Tree Japan Hedged Equity (DXJ) rose 1.21% in its first week in the portfolio, as the Japanese yen resumed its relentless decline. To give you an idea how much the “hedged” aspect of this ETF matters, consider that DXJ is up 10.79% this year, while the unhedged Japan Index MSCI iShares (EWJ) is up a mere 3.18%. DXJ is a BUY.

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