It was a down week for both U.S. and global stock markets last week, with the S&P 500 down 1.06% and the MCSI Emerging Markets Index dropping 2.00%. Interestingly, the NASDAQ actually eked out a gain of 0.18%.
You had a couple of positions in your Bull Market Alert portfolio that bucked the trend, including Celgene Corporation (CELG), which rose 3.17%, and WellPoint, Inc. (WLP), which ended the week 1.97% higher. Google (GOOG) dipped below its 50-day moving average (MA) and is now a HOLD.
With your Priceline November $1,000 call (PCLN131116C01000000) options up 70.09%, sell half of your options here to lock in your gains.
Also, sell half of your Celgene $140 (CELG140118C00140000) January call options to lock in your 55.34% gains here.
Hold on to both stocks and the remaining options for potentially bigger gains in the months ahead.
This week’s Bull Market Alert recommendation is MercadoLibre (MELI), the premier online marketplace in Latin America.
MercadoLibre’s combination of eBay-style online auction sites and Amazon-like, virtual shopping malls has turned it into Latin America’s biggest e-commerce company. And like eBay’s PayPal, MercadoLibre has its own payment system, MercadoPago. No wonder MercadoLibre is eBay’s partner in the region and eBay also owns an 18% stake in MercadoLibre.
MercadoLibre is a classic emerging markets growth story. Across Latin America, Internet penetration was only 48% last year. That means there’s plenty of room for expansion.
MercadoLibre’s impressive growth numbers back up this potential. Sales in the most recent quarter grew 26% and earnings were up 18%. Analysts expect a 21% increase in earnings this year and 25% next year. MercadoLibre’s profit margin last year was an impressive 38%. Perhaps most impressively, its return on equity — a measure of how efficiently management uses capital — is an eye-popping 40%.
That said, from our short-term trading standpoint, MercadoLibre is much more about a momentum play on emerging markets. With the Fed holding off on tapering for now, I expect emerging markets to have a big Q4. And with Mercadolibre about twice as volatile as the S&P 500, this is the kind of stock that could chalk up big short-term gains between now and the end of the year.
Nevertheless, with global stock markets set to be buffeted this week with the threat of a U.S. government shutdown, I’m placing MercadoLibre (MELI) on a “watch list.” I will indicate when you should enter this position in a future issue of Bull Market Alert.
Portfolio Update
Bank of Ireland (IRE) ended the week flat. Bank of Ireland continued to trade sideways last week as investors took a breather to digest recent moves. With a supporting 50-day moving average (MA) rising quickly from above, the outlook for IRE remains bullish and IRE still is a BUY.
WellPoint, Inc. (WLP) rose 1.97%, gaining back some of the news-induced stumble it suffered last week. With the Obamacare healthcare exchanges scheduled to go live next week (unless House Republicans get their way), WLP appears on a short list of names that stand to see a good profit bump as seven million “federally mandated customers” flock to purchase their products — or pay a penalty. Strangely enough, for the other 99% of us in business, this would be illegal. WLP remains a HOLD.
Celgene Corporation (CELG) added 3.17% last week. Celgene broke up through its extremely stubborn $150 price level to hit a new 52-week high last Friday. Celgene has been struggling against this ceiling since Aug. 1 and finally broke through, on above average volume, in a distinctly bullish move. CELG is a BUY.
Gentherm (THRM) added 0.67%. Gentherm recently featured its latest thermoelectric generator cartridge at the International Motor Show in Frankfurt, Germany. A whopping 70% of a vehicle’s fuel energy is lost out of the tailpipe as heat. Gentherm’s product captures some of this heat, transforms it into electrical energy and redistributes it back to the automobile’s electrical systems — thus increasing fuel economy. With vehicle manufacturers thirsty to wring out every mile-per-gallon, Gentherm’s product would appear poised for hefty future sales. THRM is a BUY.
Google Inc. (GOOG) fell 2.96% last week. Understanding consumer likes and habits is the essential key to truly capitalizing on their wants and needs. Although there is a considerable stash of relevant data available in Web browser “cookies,” it can be haphazard and incomplete. Google, as well as some other large competitors, have huge advantages in this arena as their users remain constantly logged into their accounts, allowing far deeper behavior collection efforts. As Google demonstrates quarter after quarter, this is truly the “holy grail” of the mobile device revolution. GOOG dipped below its 50-day MA and is a HOLD.
Priceline.com Incorporated (PCLN) added 1.19%. PCLN continued its ascension above the $1,000 mark last week, hitting yet another new 52-week high. PCLN has continued an orderly and sustained rise since the beginning of June, rising a whopping 46% to date. Moves of this breadth generally indicate robust and widespread support from large institutional buyers such as portfolio managers and hedge funds. These buyers will generally work in unison to push big name funds like Priceline up for extended runs. The big money behind Priceline will likely find little reason to stop buying as we enter the fourth quarter — and you will be along for the ride. PCLN is a BUY.
AutoNation (AN) dipped 1.14% last week. As I highlighted last week, Moody’s upgraded AN’s senior unsecured debt rating last week and assigned a rating of “stable.” Several other classes of AN’s debt also had sub-par ratings withdrawn. Moody’s went on to comment that AN held “a favorable market position and a best-in-segment credit profile.” Having a good handle on debt is one key to a successful and profitable corporation. AN is a BUY.
Krispy Kreme Doughnuts (KKD) closed out the week flat. Krispy Kreme just announced a deal to break into Latin America with plans to open 25 stores in Bogota, Medellin and Barranquilla, Columbia. This deal builds on its international efforts started in Singapore. The Latin American expansion effort marks KKD’s first foray into this part of the world, allowing locals to have a tasty Krispy Kreme doughnut to go along with their world famous local coffees. KKD is a BUY.
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