A Good Old-Fashioned Momentum Play

Nicholas Vardy

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

Overall, global stock markets ended the week broadly flat. The Dow Jones barely eked out a gain, and the S&P 500 fell 0.24%. The MCSI Emerging Markets Index continued its negative run, down 1.89%.

The negative run in global markets did not apply to Japan and the big gainer in your Bull Market Alert portfolio, the ProShares Ultra MSCI Japan (EZJ), which rose another 2.61%.

You did, however, hit your tight stop on Fomento Econ (FMX) for a slight gain. Remember you had already booked 68% and 44% gains on this position with some earlier, well-timed option sales.

Your positions in European banks through Santander (SAN) and Bank of Ireland (IRE) should rally strongly as it appears this morning that Cyprus averted financial disaster by shutting down its second-largest bank, Laiki Bank, and inflicted heavy losses on uninsured depositors, including wealthy Russians.

With global markets, except Japan, edging downward, and the U.S. market locked in a tight trading range, this week’s Bull Market Alert recommendation, FleetCor Technologies, Inc. (FLT), is a good, old-fashioned U.S. stock momentum play. The stock should trade higher no matter what the market does.

FleetCor provides products that let operators of vehicle fleets keep close tabs on expenditures. Fleetcor cards are used to buy fuel, food and lodging, reducing fraud, preventing misuse and allowing companies to track expenses. FleetCor keeps businesses, commercial fleets, oil companies, petroleum marketers and government entities honest all over the world, whether in North America, Latin America or Europe.

In these times of austerity and cost control, it’s little wonder that FleetCor has posted solid earnings growth (48% in Q3 and 46% in Q4) and healthy 35% after-tax profit margins.

As a long-term investment, FleetCor is a great story, trading at a forward price-to-earnings (P/E) ratio of just 18.18 with much higher growth rates. I’ve had my eye on FLT since last Wednesday and, alas, so did some others, as the stock rallied quite a bit since then, breaking out of a trading range to the upside in Friday’s trading. Recent high volumes and sharp price moves show that the stock is clearly gaining institutional support and should continue moving up in the coming weeks.

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So buy FleetCor (FLT) at market and place your stop at $67.00. With the options overvalued as a result of last week’s sharp rally, I am going to hold off on recommending options on this pick until the stock consolidates its recent, sharp gains.

Portfolio Update

Bank of Ireland (IRE) gave back 4.33% last week. Housing prices in Ireland started to fall dramatically in early 2008 and declined steadily through early 2012. Since then, however, housing prices have actually managed a slight upswing — a very positive sign of the continued Irish recovery. Coming to rest just above the 50-day moving average (MA), IRE is a BUY.

Banco Santander, S.A. (SAN) fell 5.91%. SAN touched its 200-day MA last week — yet another reason to remain bullish on this recommendation. SAN has essentially traded above this level since August of 2012 and, the last time it touched the 200-day MA (in mid-November 2012), it went straight up on a sustained bull run that lasted for ten weeks. The 200-day MA is a strong line-in-the-sand and acts as a bullish pivot point more times than not — especially with the positive news this morning on Cyprus. Below its 50-day MA, SAN is a HOLD.

Market Vectors Vietnam ETF (VNM) was flat last week. Vietnam has been a top-performing global market in 2013, and the government is continuing to make positive changes to support its markets. Vietnam has gotten tough on bad debt in its banking system, even creating a “national asset management company” to purchase non-performing loans in an attempt to keep them from causing harm. Trading below its 50-day MA, VNM is a HOLD.

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ProShares Ultra MSCI Japan (EZJ) gained another 2.61% last week and hit another new 52-week high. Investors continued the bull run on Japan for another week. Of course, when the brand new governor of Japan’s central bank tells reporters they “will do everything that they can to get the economy out of deflation,” there is good reason for investors to remain positive. EZJ remains a BUY.

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