Back into Japan — And Putting Risk Back on

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 volatile, if mixed, week in global markets last week. The S&P 500 rose 0.78%, and the NASDAQ recovered 0.38%. The MCSI Emerging Markets Index continued its remarkable weakness, ending the week down 1.23%.

Big gainers in your Bull Market Alert portfolio included Delphi Automotive (DLPH), up 3.26%, and Melco Crown (MPEL), jumping 2.31%. Bank of Ireland (IRE) bounced after a sharp sell-off, rising 2.21%.

Delphi Automotive (DLPH) is now up 19.63% since you bought it, while Jazz Pharmaceuticals (JAZZ) has risen 18.24%. Your current stops ensure that you will lock in at least 10%+ gains on each of these picks.

For the past couple of weeks, I recommended that you take some risk off the table as Mr. Market suffered through one of his regular mood swings. This week, I am betting that much of that risk is on its way to dissipating.

With the Japanese market down by over 20% over the past two weeks, but bouncing 4.94% overnight, this week’s Bull Market Alert gets us back into Japan through a previously profitable Bull Market Alert recommendation — Sony Corporation (SNE).

Here’s why I think Sony will bounce strongly in the coming weeks and generate a second round of strong profits for you.

First, a lot of smart money is betting on a big Japan bounce. George Soros reportedly made $1 billion on the run up in Japan this year — and, much like you, sold out at the right time to lock in much of his big gains. But by the end of last week, he returned to the market, expecting that this short-term correction was over.

Second, as an exporter, Sony is expected to benefit from weak Japanese yen in the years ahead. Yes, the yen had risen back up to around 96 yen to the U.S. dollar in the most recent rout of the Japanese market. But I expect the yen to weaken very quickly back above 100, driving Sony’s profit forecasts ever higher. Remember, the yen has been as low as 200 to the dollar during your investment lifetime. So, there is plenty of room below.

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Third, Sony is the target of hedge-fund maven Dan Loeb’s effort to get corporate restructuring started in Japan. By dint of his 6% stake in the company, he is pushing for the break-up of the company. This has the potential of not only unlocking long-term value but also generating the kind of news that can send a stock — and its options — soaring at the drop of a hat. And that makes Sony a perfect trading stock.

So buy Sony Corporation (SNE) at market today, and place your stop at a tight $15.50. If you want to play the options, I recommend the October $20.00 calls.


In addition, I am recommending some options on your existing positions:

1) Buy the September $70 call options (JAZZ130921C00070000) on Jazz Pharmaceuticals (JAZZ).

2) Buy the November $52.50 call options (DLPH131116C00052500) on Delphi Automotive (DLPH).

Portfolio Update

Bank of Ireland (IRE) gained 2.21% last week. Tom Hayes, chief executive of Bank of Ireland Corporate Banking, announced the launch of a new corporate escrow service last week. This new effort represents one more move by IRE to extend its reach into the pot of gold at the end of the Irish recovery rainbow. IRE is a BUY.

Melco Crown Entertainment Limited (MPEL) gained 2.31%. MPEL jumped last Friday on a report released by Reuters highlighting a 13.5% year-over-year rise in Macau gambling revenue for May. Reuters also reported that this trend is expected to continue to produce higher year-over-year figures in future months. MPEL is a BUY.

Delphi Automotive (DLPH) gained 3.26% over the past five trading days, hitting a new 52-week high and breaking above the all-time high $50.00 resistance level. This positive technical move likely indicates a higher future for DLPH. DLPH is a BUY.

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Stratasys Ltd. (SSYS) dropped 6.63% last week. CNBC’s “Mad Money” host Jim Cramer went on the air last Monday and called for a “Sell” on Stratasys competitor 3D Systems (DDD). This, of course, affected SSYS price action as well, sending retail investors into a selling frenzy. Cramer went on to say, “I think you’ve got a better opportunity with Stratasys (SSYS), which is not only cheaper, but has positives from its Objet merger.” For all the noise, the fundamental story for SSYS is unchanged, even as technically, the stock is oversold and due for a bounce. Trading just below its 50-day moving average, Stratasys is now a HOLD.

Jazz Pharmaceuticals (JAZZ) added 0.88% last week as it took a breather from its recent stellar run. Since its recommendation just four weeks ago, JAZZ has added 17.5% — and you have been on board for all of it. JAZZ is just off its 52-week high and is a BUY.

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