Locking in 87.50% and 57.14% Gains and Pulling in Your Horns

Nicholas Vardy

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

Last week, the S&P 500 closed out the month of May with a drop of 1.14%. The MCSI Emerging Markets Index continued its recent decline, falling another 2.53%.

Big gainers in your Bull Market Alert portfolio included Jazz Pharmaceuticals (JAZZ), which soared 6.62%, and Melco Crown Entertainment Limited (MPEL), which also jumped 2.5%.

Last Wednesday, May 29, I recommended that you sell your Bank of Ireland (IRE) and Jazz Pharmaceuticals (JAZZ) calls, for gains of 73.33% and 69.25%, respectively.

I further recommended that you sell half of your Jazz Pharmaceuticals (JAZZ) shares to lock in 14.99% gains. You also raised your stop to $63.80.

Last week’s strong performance in your Bull Market Alert portfolio belies the general unsteadiness that has weighed on markets since the sharp sell-off in the Japanese stock market on May 23. The relative strong performance of the U.S. stock markets is also deceptive, as global markets have had a much, much tougher time and just closed out an absolutely lousy May.

Both the Japanese stock market and European markets are sharply down in this morning’s trading, as markets have shifted back to a “risk on” mode.

So now that “sell in May and go away” season has made its last-minute appearance, I recommend that you take some risk off the table by booking your remaining big Bull Market Alert option profits.

First, sell your remaining Jazz Pharmaceuticals (JAZZ) September $65 calls to lock in an 87.50% gain.

Second, close out your position in your remaining Japanese-related options — the WisdomTree Japan Hedged Equity (DXJ) $45 and $50 August calls. Based on Friday’s closing price on these options, the 57.14% gains in the $45 August calls set off the 53.70% losses in the August $50 calls. That makes the trade essentially a wash.

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Remember, we can return to both of these investment themes when markets settle.

But for this week, your primary objective should be to minimize the negative impact of the “baby out with the bathwater” mentality of the current market pullback.

Portfolio Update

Bank of Ireland (IRE) fell 5.00% last week. The Irish government still holds a small 15% ownership stake in IRE — the smallest stake out of the three largest Irish banks bailed out by the Irish government during the heat of the Irish banking crisis. IRE also has the strongest balance sheet of the three largest Irish banks. IRE is a BUY.

Melco Crown Entertainment Limited (MPEL) gained 2.5%. Oppenheimer initiated coverage on MPEL late last week, rating the stock as an “Outperform” and setting a $30 price target — 26% above Friday’s close. Recovering quickly from last week’s dip below the 50-day moving average, MPEL is back to a BUY.

Delphi Automotive (DLPH) gained 1.58% over the past four trading days. Owning DLPH places you in the company of some of the biggest billionaire names in the investment world. Other big-name investors that currently hold DLPH include John Paulson, George Soros, Paul Singer, Dan Loeb, Jorge Paulo Lemann and David Tepper. DLPH is a BUY.

Stratasys Ltd. (SSYS) dipped 1.23% last week. China officials recently revealed that they are using 3D-printing technology in the development of their fighter jets. And these folks are not just fooling around with little plastic pieces. A chief architect of China’s J-15 fighter jet stated that the entire nose landing gear of the plane had been 3D-printed using a high-tech titanium alloy. SSYS is a BUY.

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Jazz Pharmaceuticals (JAZZ) jumped another 6.62% last week, directly on the heels of its 9.24% gain the week prior. Stifel Nicolaus initiated coverage on JAZZ last week, setting a “Buy” rating on the stock and an $80 price target. This price target represents a 17% jump from Friday’s closing price. JAZZ is a BUY.

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