The negative news of the government shutdown weighed on the major U.S. indices last week, as the Dow Jones tumbled 1.22% and the S&P 500 fell 0.07%.
However, both the NASDAQ and the MCSI Emerging Markets Index bucked the trend and ended the week 0.69% and 2.12% higher, respectively.
The big story in your Bull Market Alert portfolio was Krispy Kreme Doughnuts (KKD), which soared 14.43%. With your February $20 calls now up 73.91%, sell half of your options here to lock in some solid gains. Hold on to the stock and your remaining options for potentially bigger gains ahead. Raise your stop to $21.70 to lock in a gain of at least 10% in the stock.
There were other solid gainers in your portfolio as well. Priceline (PCLN) jumped 4.65%; Bank of Ireland (IRE) added 4.39%; and WellPoint, Inc. (WLP) rose 3.88%.
Your Celgene (CELG) options are also currently up 78.66%. But hold on to these for now as I am looking to eke out a triple-digit percentage gainer with this one.
This week’s Bull Market Alert recommendation takes us back to Macau — Asia’s Las Vegas — with Melco Crown Entertainment Limited (MPEL). We’ve made big short-term gains with Melco in the past and I think we’ll do so this time around as well.
Back in 2007, revenues for Las Vegas and Macau were pretty much equal. Today, Macau’s gambling revenues have soared to six times those of Las Vegas. That means Macau generated more revenues in 2012 ($35.6 billion) than the entire U.S. gaming industry. That includes Las Vegas, Atlantic City and Indian casinos — combined. Analysts at CLSA expect Macau’s revenue to double to $77 billion by 2017. Put another way, Macau’s growth alone is adding a new Las Vegas every year.
Melco operates two casinos in Macau: a mass-market casino called City of Dreams in Cotai, and Altira, a VIP-focused casino. MPEL also owns 60% of Studio City in Cotai, which is scheduled to open in 2015.
Earlier this year, I thought that the economic slowdown in China might impair Macau’s long-term growth. But any impact has been muted. And with Cotai’s casinos opening up next year, annual growth rates approaching 25% per year are back in the cards.
And Melco is spreading its wings. In the Philippines, it is developing a $1-billion casino resort in Manila. It is also investing $630 million in two Russian casino resorts. In its biggest project outside of Macau, Melco plans to invest more than $5 billion in Japanese casino resorts once it receives permission to build resorts in Tokyo and Osaka. If Japan opens up the market, it could easily grow to $10 billion to $15 billion or more and quickly become the world’s second-largest gambling market.
No wonder HSBC Bank just upped its target on MPEL to $43 — 30.74% higher from its closing price on Friday.
So buy Melco Crown Entertainment Limited (MPEL) today and place your initial stop at $28.50. Be aware that Melco is a super-volatile stock with a beta of 2.85. That means it is almost three times as volatile as the S&P 500. For potentially bigger gains, I recommend the January $35 calls (MPEL140118C00035000).
With markets wracked by uncertainty this week, I am recommending that we keep last week’s recommendation — MercadoLibre (MELI) — in the “watch list.”
Bank of Ireland (IRE) added 4.39% last week. As I had noted, Moody’s recently reaffirmed its ratings on Ireland and raised its outlook from “negative” to “stable.” Last Thursday, Fitch followed suit, affirming its “BBB+” rating on Ireland and moving its outlook to “stable.” This combination provides an excellent tail wind for future Irish gains. IRE remains a BUY.
WellPoint, Inc. (WLP) rose another 3.88%. A recent report by HealthLeaders-InterStudy reveals that WellPoint is making significant changes to its insurance models to better position itself in the new landscape of Obamacare. WLP is creating “narrow networks” — entities that group lower-cost offerings together, ultimately resulting in lower premiums to insured parties. WLP will report earnings on Oct. 23, before markets open. WLP moved above its 50-day moving average (MA) and is now a BUY.
Celgene Corporation (CELG) added 1.72% last week and hit a new 52-week high. Celgene revealed excellent phase III testing results for its new ESTEEM 1 drug. ESTEEM 1 tests showed marked “health and quality-of-life” improvements for psoriasis suffers. Psoriasis is notoriously difficult to treat and affects a large number of patients around the world. Drugs such as ESTEEM 1 have enormous potential to tap into global drug markets. CELG will report earnings on Oct. 24, before markets open. CELG is a BUY.
Gentherm (THRM) gained 2.21%. Gentherm shareholders break down into groups of 85% institutional and 12% insiders. This reflects positively on the stock as these are typically buyers who are well informed on the direction a stock may be heading. THRM will report earnings on Oct. 31, before markets open. THRM is a BUY.
Google Inc. (GOOG) ended the week nearly flat. Several weeks ago, I told you about Google’s new Chromecast product — a small $35 device that seamlessly “beams” content from nearly any mobile device (including Apple products) to a living room TV. Online television-streaming behemoth Hulu released an updated “Hulu Plus” mobile app last Wednesday that included support for the Chromecast device. Getting major players like Hulu on-board, as well as the already-available Netflix app, advances Google’s “Internet Television” effort by another major step. Industry experts predict several other major content providers to integrate support in the months ahead. The simple, seamless, and inexpensive nature of the Chromecast device gives Google massive potential to compete against the previous-generation AppleTV and Roku devices. GOOG will report earnings on Oct. 17, after markets close. GOOG is just below its 50-day MA and is a HOLD.
Priceline.com Incorporated (PCLN) continued its unrelenting charge higher, rising 4.65% and hitting another new 52-week high. Analyst Jake Fuller of Lazard Capital has been an outspoken force on Priceline for quite some time, frequently moving the stock with his comments. Mr. Fuller recently released positive comments in a research note, supercharging PCLN’s move last week. PCLN is scheduled to report earnings on Oct. 31. PCLN is a BUY.
AutoNation (AN) lost 3.34% during the past five trading days. AutoNation released a third-quarter, new-vehicle retail sales report last Wednesday, notching a 13% rise. This was the best quarterly gain since 2007. AN will report earnings on Oct. 24, before markets open. AN is a BUY.
Krispy Kreme Doughnuts (KKD) launched a whopping 14.43% on huge volume. Last week, I told you about KKD’s recent announcement to enter the South American markets. In an apparent delayed reaction, and much to our benefit, traders finally woke up and smelled the Columbian coffee, buying up KKD with a caffeine-enhanced frenzy. KKD is a BUY. Raise your stop to $21.70 to lock in at least a 10% gain in the stock.
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