Markets ended the week on a positive note with the Dow Jones up 1.09% and the S&P 500 rising 0.75%. The MCSI Emerging Markets Index outperformed both major U.S. indices and gained 1.70%.
Big gainers in your Bull Market Alert portfolio included Bank of Ireland (IRE), which jumped 5.03%, and last week’s recommendation, Melco Crown Entertainment Limited (MPEL), which rose 3.19%.
You were stopped out of Priceline (PCLN) at $1,000 on Oct. 8 for a 4.14% gain. The position served you well, as you had already booked gains of 45.21% and 164.61% on your Nov 2013 $1,000 call options.
With MercadoLibre (MELI) pulling back last week, I’m recommending that you move it from your watch list, buy the stock and place your stop at $116.00. For potentially bigger gains, I recommend December $135 call options (MELI131221C00135000).
Also, I recommend that you buy the AutoNation (AN) January $50 call options (AN140118C00050000).
Bull Market Alert is all about identifying bull markets. For most of 2013, the three best-performing markets have been Ireland, the United States and Japan.
That all changed last week, as Spain forged ahead of the United States and is now the third best-performing market in the world for 2013.
As the chart comparing the iShares MSCI Spain Capped Index to SPDR S&P 500 (SPY) below confirms, the Spanish market has been on fire over the past three months.
The iShares MSCI Spain Capped Index soared 14.01% in September alone, and it is up 5.9% so far in October.
Like many of Europe’s Club Med countries, Spain has had a rough financial crisis. Although it remains the fourth-largest economy in the euro zone after Germany, France and Italy, Spain’s economy is still 7.5% smaller than it was five years ago.
But like Ireland — the world’s top-performing stock market so far in 2013 — Spain has bitten the austerity bullet. Civil-service pay has been frozen for a fourth year in a row.
Public sector pensions have been capped. Spanish labor costs have dropped. Exports are rising and have turned the Spanish current account into a very German surplus. Spain’s prime minister is now optimistic that Spain won’t need to extend its bailout program into 2014.
The result? The Spanish economy is officially out of recession. The government estimates the economy will expand by 0.7% this year. But that’s up from its previous forecast of 0.5%.
With the euro zone returning to growth, the optimistic scenario is that Spain is entering a virtuous cycle of increased domestic consumption, expanding exports, healthy public finances and more jobs.
Savvy investors know that — as you’ve seen with Bank of Ireland’s (IRE) 95.85% gain so far this year — the biggest profits are made at the turning points of when a “bad” situation goes to “less bad.”
And the best way to profit from Spain’s recovery is to spread your risk among Spain’s blue chip stocks and buy the iShares MSCI Spain Capped Index (EWP) at market today. Set your stop at $34.00.
The bid-ask spread on the related options is too wide for me to make an option recommendation on this one.
Portfolio Update
Bank of Ireland (IRE) added 5.03% last week. When Ireland was on the brink of financial collapse after its real estate bubble burst, the Irish government was forced to choose a few “winners” — and Bank of Ireland was one of the lucky few. Today, Bank of Ireland and Allied Irish Bank stand as Ireland’s two pillar banks. With IRE managing to remain largely a privately held institution — it is in the enviable position of likely being the “strongest bank in Ireland.” IRE is a BUY.
WellPoint, Inc. (WLP) rose 1.64%. WellPoint not only benefits from the gains of the Obamacare tailwind, but also affords you a 1.8% dividend. In addition, WLP also has a strong foothold in the massive California health insurance market, giving it access to millions of perspective customers. Sweetening the deal even more, Cigna, Aetna, and United Health have all chosen to exit the California Obamacare market, leaving WellPoint with no competition from major players and able to gain market share with minimal competition. WLP will report earnings on Oct. 23, before markets open. WLP is a BUY.
Celgene Corporation (CELG) lost 2.61%. Merrill Lynch reiterated its “Buy” rating on CELG and raised its price target to $179. This target represents a 17% rise from Friday’s close. CELG will report earnings on Oct. 24, before markets open. CELG bounced upwards from its 50-day moving average last week and remains a BUY.
Gentherm (THRM) dipped 0.40%. Gentherm’s guidance from its previous earnings report shows that THRM expects strong revenue growth to continue. Gentherm also announced that it is expecting revenues to “exceed the high-end of the previous 8-10% year-over-year revenue of $555 million.” THRM will report earnings on Oct. 31, before markets open. THRM is a BUY.
Google Inc. (GOOG) ended the week flat. Google is arguably the world’s leading expert at running online advertisements. However, judging by some of GOOG’s recent actions, management appears to be getting even better at it. Over the past few months, any regular user of Google’s premiere online video service YouTube has likely noticed a marked increase of “compelled advertising” encountered during the normal course of viewing. Additionally, Google recently announced that more advertisements would soon begin appearing within Google’s wildly popular email application, Gmail. This jump in not only quantity, but also quality of advertising, may reflect quite positively in Google’s next earnings report. GOOG will report earnings on Oct. 17, after markets close. GOOG is just below its 50-day MA and is a HOLD.
AutoNation (AN) gave back 1.86% over the past five trading days. Consumers have been on an automobile buying spree over recent years due to pent-up demand stemming from the recent U.S. economic crisis. AN’s coming earnings report could be quite good as AN has experienced a rise in earnings over the past two years in response to all of the recent buying. AN will report earnings on Oct. 24, before markets open. AN is a BUY.
Krispy Kreme Doughnuts (KKD) gained 1.50%. Kripsy Kreme has not limited its global expansion to South America. KKD opened its first Singapore location on Saturday. This is the first of 15 stores opening throughout Singapore, bringing KKD’s signature coffees and doughnuts to the folks in that part of the world. KKD will report earnings on Nov. 19, after markets close. KKD is a BUY.
Melco Crown Entertainment Limited (MPEL) rose 3.19% for its first week in your portfolio, hitting a new 52-week high. This move represents a break upwards through MPEL’s short-term $32.50 resistance level, and is bullish for the days ahead. Macquarie Capital also upgraded MPEL to “Outperform” and raised its price target to $42.50 — 25.2% above Friday’s close. MPEL will report earnings on Nov. 6, before markets open. MPEL is a BUY.
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