Summer of 2013: Out with a Whimper

Nicholas Vardy

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

The summer of 2013 ended last week with a whimper, with the Dow Jones dropping 1.33% and the S&P 500 falling by 1.84%. Global markets continued to struggle as the MCSI Emerging Markets Index dropped another 1.63%.

Most of your Bull Market Alert positions pulled back along with the market. The sole exception was your bet on a bounce in biotech, as Celgene (CELG) rose 1.24%.

Overall, it has been a tough summer for global stock markets. With the combination of the Fed’s tapering, the uncertainty surrounding Syria and continuing rout in emerging markets, it’s no wonder stock markets around the world — and investor sentiment — is in a funk.

That all said, you’ve had a much better summer in your Bull Market Alert portfolio, having clocked some solid gains over the past two months.

In the month of August alone, you booked two double-digit and two triple-digit percentage option gains. In Bank of Ireland (IRE), you booked option gains of 81.33% and 120%. Bank of Ireland (IRE) stock ended the month 28% higher. With Jazz Pharmaceuticals (JAZZ), you collected 57.54% and 101.64% gains. You also exited your position in JAZZ stock with a 40% gain.

You saw some solid winners in July, too. You booked gains of 62.06% and 105.53% in Delphi (DLPH) options; 59.55% option gains in Stratasys (SSYS); 57.59% in ProShares Ultra Gold (UGL) options; and 65.52% in iShares Dow Jones US Home Construction (ITB) options — the latter in just 14 days.

So where does the market stand today?

First, it’s worth keeping the current market pullback in perspective. Despite all of the current negative headlines, the S&P 500 has been basically flat between Memorial Day and Labor Day. And that’s during what is seasonally the weakest time of the year. Despite the negative headlines, the market has held up quite well.

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Second, the U.S. stock market is oversold, both technically and in terms of market sentiment. That makes the current pullback one of the best times of the year to re-enter the market.

Finally, the coming days’ headlines will be chock full of negatives about Syria and about the impact of the Fed’s tapering.

Yet, I am broadly optimistic about the prospects for market gains over next four months. The U.S. economy is steadily expanding. I don’t expect the United States will be getting involved in Syria in any major way. And although September tends to be choppy, we are also entering Q4 — traditionally the strongest time of the year for the stock market.

I’ll be back next week with another Bull Market Alert recommendation to take advantage of that coming rebound.

Portfolio Update

Bank of Ireland (IRE) gave back 5.83% last week. IRE completed two nearly duplicate rise-fall patterns in August, gaining a whopping 28% for the month. With investors bullish on the Irish recovery, chances are good that this healthy trading pattern may continue going forward. IRE remains a BUY.

WellPoint, Inc. (WLP) dipped 1.66%. WLP continued to trade sideways last week, holding the seemingly rock-solid $85 support level. With the 50-day moving average just below, upward pressure continues to build. Owners of record as of Sept. 6 (this coming Friday) will receive a $0.375 per share dividend on Sept. 25. WLP is a BUY.

Celgene Corporation (CELG) added 1.24%. CELG is up over 70% for 2013, and this trend is likely to continue since CELG is not yet overvalued. Strong sales of its drug Revlimid, coupled with a positive outlook on several other pipeline drugs, leaves Celgene with plenty of upside. CELG is a BUY.

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Gentherm (THRM) dropped 4.29% over the past five trading days. THRM fell victim to the recent negative news surrounding the Syrian crisis and pulled back in tandem with the broader markets. Analysts at Zacks currently have a $22 price target on THRM, 31.5% above its Friday close, with the median analysts’ price target coming in at $24. There is good upside waiting, once THRM gains its footing. Seriously oversold, THRM is a HOLD.

Google Inc. (GOOG) also took some collateral damage from the news on Syria, falling 2.68%. GOOG held fast to its well-defined $850 support level last week as the NASDAQ Composite average turned out a particularly bad week. Google may, quite literally, have yet another new trick up its sleeve. Google announced last Friday that it recently (and secretly) acquired a team from WIMM Labs, a pioneer in the “smart watch” market. Although this conjures up images of Dick Tracy’s radio watch, it’s a sure bet that Google has quite a bit more amazing functionality in mind for its version of Dick Tracy’s ground-breaking technology. GOOG is a BUY.

Priceline.com Incorporated (PCLN) dipped 1.65% last week. Although the popular, and well-promoted, online travel site Expedia holds on as the industry leader, Priceline is in the number two spot and is hot on Expedia’s heels. With Expedia down 24% this year, and PCLN up a whopping 51%, the tables look to be turning. PCLN is a BUY.

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