Suffering From Mr. Market’s Moodswings

Nicholas Vardy

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

It was another tough week for stock markets around the globe, as the S&P 500 dipped 1.32%, while the MSCI Emerging Markets Index tumbled 2.94%.

Only two positions in your Alpha Investor Letter portfolio eked out gains — Visa Inc. (V) and last month’s bet on biotechnology through the Market Vectors Biotech ETF (BBH), which was boosted by news of Amgen Inc.’s $10 billion bid for Onyx. One position, First Trust US IPO Index (FPX), essentially traded flat.

Several of your Alpha Investor Letter positions moved to a HOLD as they dipped below their 50-day moving averages. Among all of your positions, only three — iShares MSCI Ireland Capped Investable Market Index (EIRL), PowerShares Buyback Achievers (PKW) and First Trust US IPO Index (FPX) — are trading above their 50-day moving averages and remain BUYS at current levels.

Global markets sold off this week on concerns surrounding probable military strikes by the United States against Syria. The strikes have already begun from the other side, as Twitter and the Huffington Post were hacked by the Syrian government.

From a technical standpoint, the market remains oversold and due for a bounce. As hard as it is to do, it’s when you add to positions during one of Mr. Market’s Moodswings that you tend to place the most profitable bets. But for now, it looks like August is ending on a negative note, which confirms the weak seasonality of this time of the year.

Your most resilient bets in the Alpha Investor Letter portfolio remain your bets on Ireland and biotechnology, as well as the “specialist strategy” bets on the U.S. stock market. There also is a set of surprisingly resilient markets that I discussed in yesterday’s edition of The Global Guru that may offer interesting opportunities for future Alpha Investor Letter recommendations.

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Portfolio Update

Berkshire Hathaway (BRK-B) tumbled 3.02% last week. This broad-based bet on U.S. economic recovery pulled back along with the rest of the market. That said, there is always a floor under Buffett’s bet, as he’s committed to repurchasing stock if it hits 120% of book value. Now trading below its 50-day moving average (MA), BRK-B is a HOLD.

Visa Inc. (V) gained 0.55% over the past five trading days. The fact that Visa managed to eke out a gain during such a lousy week is evidence of how the top-performing stock in your Alpha Investor Letter portfolio has been oversold. Trading below its 50-day MA, V is a HOLD.

iShares MSCI Ireland Capped Investable Market Index (EIRL) dipped 1.38% last week. Ireland held up better than most and remains the top-performing market in the world in 2013. EIRL is a BUY.

iShares MSCI Singapore Small Cap Fund (EWSS) fell 2.97%. This high-yielding position is now flirting with its stop price of $27.00, as Asian markets have been hit hard by the recent pullback. EWSS is now a HOLD.

Google Inc. (GOOG) dipped 1.76% last week. Google announced that it is cutting the price of the Nexus 4 phone it introduced last fall, as a response to increasing competition from both Samsung and Apple’s new product launches in September. GOOG is a HOLD.

WisdomTree Japan Hedged Equity (DXJ) fell 1.27%. Your yen-hedged bet on the recovery in the Japanese stock market moved below its 50-day MA, and DXJ is now a HOLD.

Guggenheim Spin-Off (CSD) lost 1.28% over the previous week. CSD has touched the 50-day MA three times in 2013, rallying an average 15% higher after each occurrence. From a technical standpoint, the stock appears poised to do it once again. CSD is a HOLD.

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PowerShares Buyback Achievers (PKW) gave back 1.32% last week. PKW tracks the Buyback Achievers Index, which invests in companies that repurchase at least 5% or more of their outstanding shares over the past year. PKW is a BUY.

First Trust US IPO Index (FPX) lost just 0.05%. FPX — your bet on the performance of high-flying initial public offerings — held up remarkably well during last week’s pullback and remains a BUY.

WisdomTree Japan SmallCap Dividend (DFJ) dipped 1.44% over the previous five trading days. Your bet on what is still the cheapest asset class in the world is now trading below its 50-day MA and DFJ is a HOLD.

Vanguard Global ex-US Real Estate ETF (VNQI) closed the week down 2.69%. Global real estate fell along with all other global markets this past week. Trading below its 50-day MA last week, the ETF is now a HOLD.

iShares S&P Global Timber & Forestry Idx (WOOD) dipped 1.51%. Jeremy Grantham’s #1 asset class of the next seven years remains a HOLD.

PowerShares Global Listed Private Eq (PSP) dipped 2.00% last week. Paying a 6.3% dividend, while betting on the asset class that made Romney rich, PSP is now a HOLD.

Market Vectors Biotech ETF (BBH) gained 1.62% last week, boosted by news of Amgen Inc.’s $10 billion takeover of Onyx, both of which are holdings in BBH. Bucking the market’s bearish trend, BBH is a BUY.

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