Strong End to a Strong Year

Nicholas Vardy

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

Both U.S. and global markets ended the year on a positive note, with the Dow Jones up 1.29% and the S&P 500 rising 0.72% over the past five trading days. Global markets also finally found their footing with the MCSI Emerging Markets Index jumping 1.72%.

Big gainers in your Alpha Investor Letter portfolio included the iShares S&P Global Timber & Forestry Idx (WOOD) up 3.30%, the ProShares Ultra-Short 20+ Year Treasury (TBT) adding 1.71% and The Blackstone Group (BX) gaining 1.39%.

Three positions — Berkshire Hathaway (BRK-B), WisdomTree Japan SmallCap Dividend (DFJ), iShares S&P Global Timber & Forestry ETF (WOOD) — moved back above their 50-day moving averages and moved to a BUY.

You were stopped out your position in the iShares MSCI Singapore Small-Cap (EWSS). You should, however, still collect the 80.3-cent-per-ETF dividend declared on Dec. 18.

Also keep your eye on Icahn Enterprises, L.P. (IEP) which is now treading dangerously close to its stop price of $102.50. This has been a wild ride over the past few weeks, with the stock pulling back substantially from its recent highs.

In the worst case scenario, you will have still locked in a gain of over 15% just since Oct. 18. Even if you do end up stopping out, I will keep this on our watch list. Icahn may have a better track record than Warren Buffett over the past two decades. But he hardly offers the slow and steady ride of the Oracle of Omaha.

Global stocks closed out 2013 sitting on sizable gains courtesy of easy monetary policies and an improving U.S. and European economic outlook. That said, former investor favorites like emerging markets, commodities and real estate all had a lousy year, as most gains have come from developed markets. Safe-haven gold has lost over 30% in 2013, testing the will of the most iron-fisted gold bugs.

With 2013 in the record books, I want to share with you the top five global stock markets of 2013 among the 40 that I follow on a daily basis — and how you have profited from them this past year in the Alpha Investor Letter.

1. Ireland +42.29% — EIRL
2. Germany +33.67%
3. U.S.A. +30.42% — BRK-B, V, GOOG, CSD, PKW, FPX, BBH, IEP, GURU, BX
4. Spain +27.42%
5. Japan +24.31% — DFJ, DXJ

Finally, I want to highlight something about the investment philosophy behind The Alpha Investor Letter. If you are a long-time subscriber, you know that I am an advocate of a flexible style of investing.

When they asked Willy Sutton why he robbed banks, he said, “That’s where the money is!” That’s the same reason I pride myself on being flexible in my investment recommendations.

A couple of years ago, the BRICs were all the rage. And your Alpha Investor Letter portfolio was chock full of BRIC-related positions. In 2013, you had none. That’s because the “China Miracle” and BRIC story had come and gone. Sure enough, in 2013, Brazil was down 20.68%, Russia 4.82%, India 10.74% and China 6.13%. Yet, I have clients at my firm Global Guru Capital who have literally lost 50% of their retirement savings by investing and sticking with these markets, because their advisors were unwilling to adapt to changing realities.

The underlying lesson is that you have to be flexible and adapt. At the start of 2013, I thought Turkey would continue its big run of the past two years. Unfortunately, political instability intervened. And no one anticipated the big run in the U.S. stock market last year.

But how did we react? We sold out of Turkey and loaded up on specialist strategies like Guggenheim Spin-Off (CSD), PowerShares Buyback Achievers (PKW) and First Trust US IPO Index (FPX), as well as stuck with big U.S.-based winners like Visa (V) and Berkshire Hathaway (BRK-B).

Looking ahead to 2014, I continue to believe that emerging markets are way overdue for big rally — and that both Europe and Japan will be a good place to be.

But even if I’m wrong, you can be sure that I will adapt and make sure that you will put your money to work in some the best investment opportunities on the planet — wherever they may be.

I wish you and yours a prosperous and Happy New Year!

Portfolio Update

Berkshire Hathaway (BRK-B) gained 0.85% last week. Berkshire Hathaway will acquire Phillips Specialty Products Inc. from Phillips 66 (PSX) in early 2014. BRK-B is above its 50-day moving average (MA) and is a BUY.

Visa Inc. (V) added 1.32%, continuing a strong three-week run that has moved the stock upwards more than 10%. Visa’s future continues to brighten as Nomura Securities estimates a 3% drop in the use of cash and check payments during the course of 2014. Nomura also predicts this same metric falling to just 21% in the next ten years. This adds up to many years of increasing profits for Visa and the few firms competing in their market niche. V is a BUY.

iShares MSCI Ireland Capped Investable Market Index (EIRL) rose 1.31%. The rising 50-day MA finally broke EIRL’s multi-week sideways trading pattern, pushing the stock upwards to a new 52-week high. Ireland continues to be one of the strongest markets in the world today. With its economic recovery firmly in place, EIRL has the potential to produce gains well into the future. EIRL is a BUY.

Google Inc. (GOOG) closed the week flat after pulling back from a new all-time high early this week. Google’s latest push finds it teaming up with German automaker Audi in an effort to put Google’s unique and robust technology into automobiles. Although details are still forthcoming, this effort will likely add in-car hardware that runs such services and apps as Google Maps, Google Navigation, and Google Music. This brings Google into direct competition with Apple’s recent “iOS in the Car” effort, as well as services such as SiriusXM Satellite Radio. Simply put, Google is adding even more eyeballs (and eardrums) to their already massive advertising audience. GOOG is a BUY.

Wisdom Tree Japan Hedged Equity (DXJ) gained 0.62% over the holiday-shortened trading week. DXJ hit a new high last week, the highest level DXJ has attained since its collapse back in May. My June “Buy” recommendation returned more than 16% in 2013, and I expect Japan’s economic stimulus and weakening yen policies to drive more growth into 2014. DXJ is a BUY.

Guggenheim Spin-Off (CSD) gained 0.49%. CSD has been rising steadily over the past three weeks, maintaining its position above the 50-day MA. Although companies spin off subsidiaries for a myriad of reasons, corporate tax savings is one of the more common strategies employed. With U.S. corporations constantly on the lookout for tax breaks, there is plenty of upside in CSD. CSD is a BUY.

PowerShares Buyback Achievers (PKW) added 1.16% last week. After briefly touching the 50-day MA two weeks ago, PKW hit a new 52-week high last week closing out back-to-back profitable weeks. PKW is a BUY.

First Trust US IPO Index (FPX) ended the week flat, also joining several other positions hitting a new 52-week high. FPX has been gaining steadily on a robust bull run after touching its own 50-day MA seven weeks ago. FPX is up over 20% since my July recommendation. FPX is a BUY.

WisdomTree Japan SmallCap Dividend (DFJ) added 1.68% last week to regain its position back above the 50-day MA and return to a “Buy.” Looking forward, Japan will soon begin the long process of readying for the coming 2020 Summer Olympics, scheduled for late July in Tokyo. This will see $150 billion flow into the economy — much of it going to small cap companies that will each play their own small role in the Olympic preparations. DFJ is a BUY.

Vanguard Global ex-US Real Estate ETF (VNQI) gained 1.48%. As VNQI nears its $53.00 price level, this exchange-traded fund should find the considerable support it needs to begin a sustained turnaround. VNQI has a long history with this price level, managing to recover twice and move higher. VNQI is a HOLD.

iShares S&P Global Timber & Forestry ETF (WOOD) rose 3.30% over the past four trading days. It appears that recent positive forecasts for timber are coming to fruition, as WOOD seems to have regained its footing and is heading higher. WOOD also made a concerted move above the 50-day MA two weeks ago to become a BUY.

Market Vectors Biotech ETF (BBH) ended the week flat, after managing a new 52-week high last week. At 14.25% of BBH’s total assets, Gilead Sciences, Inc. (GILD) represents the top holding in BBH — and with good reason. GILD was up 100% in 2013 and has 23 analysts backing the symbol with “Buys.” Gilead’s strength comes from its highly successful, high-profile drug pipeline that includes 15 drugs in phase-two testing and five drugs in the final approval stage. GILD will see its profits turbocharged this year as these drugs gain approval throughout 2014. BBH is a BUY.

ProShares Ultra-Short 20+ Year Treasury (TBT) rose 1.71% last week. TBT continued its sideways trading pattern last week, maintaining its position above the 50-day MA and remaining a BUY.

Icahn Enterprises, L.P. (IEP) lost 9.45%. IEP has been somewhat of a wild ride lately as investors overreact to news reports. Your position is up 18% in just under two months and your stop remains intact should cooler heads fail to prevail. IEP dipped below the 50-day MA last week and is now a HOLD.

Global X Guru Index ETF (GURU) inched 0.28% higher last week as it managed a new 52-week high. GURU represents a conglomeration of the best investment minds in the business, all neatly packaged for retail investor consumption. Up nearly 47% for the year, I expect GURU’s stellar performance to continue reaping gains throughout 2014. GURU is a BUY.

The Blackstone Group (BX) added 1.39%, adding one more to the group of positions in your portfolio making new 52-week highs last week. BX recently announced a $200 million investment in shoemaker Crocs. Blackstone will also pick up two board seats along with the purchase, giving BX some say in the future of this investment. BX is a BUY.

Latest Special Reports

In addition, as a courtesy, read my new special report, Top 4 Keys to Profiting in the Q4/Q1 Wildfire Rally, which includes time-critical information you can use  as 2014 begins. Also, take a look at the latest version of The Top 12 Stocks You Should Buy Right Now, which features three of my top investment recommendations, as well as bonus picks from each of my fellow investment newsletter editors at Eagle. These special reports and others are accessible FREE on my website.

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