Markets Steady Heading into May

Nicholas Vardy

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

Global stock markets settled into a narrow trading range over the past week. Both the Dow Jones and the S&P 500 ended the week essentially flat, while the tech-heavy NASDAQ fell 1.39%. The MCSI Emerging Markets Index ended the week down 0.53%.

Big gainers in your Alpha Investor Letter portfolio included Berkshire Hathaway (BRK-B), up 1.05%, and the WisdomTree Japan SmallCap Dividend (DFJ), which rose 0.51% and moved back to a BUY.

Both Berkshire Hathaway (BRK-B) and Market Vectors Gulf States Index ETF (MES) hit new all-time highs. The Blackstone Group L.P. (BX) fell below its 50-day moving average and moved to a HOLD.

The broader market averages have been locked in a trading range for a good two months, even as we enter what has traditionally been the quietest time of the year.

As I discussed in yesterday’s issue of The Global Guru, the reasons behind the “sell in May and go away” market anomaly — that is, why U.S. stock markets tend to underperform between the start of May and the end of October — are unclear. Nevertheless, it has been one of the most persistent phenomena in markets for as long as records on these things have been kept.

Fortunately, there is a way around this.

First, some sectors of the U.S. stock markets are always stronger than others. Even as the broader U.S. market has not moved much in 2014, some sectors, such as utilities and U.S. Real Estate Investment Trusts, are having strong years.

Second, the advent of exchange-traded funds (ETFs) over the past decade now allows you to invest in a much wider range of foreign stock markets than ever before. As of yesterday’s close, 29 of the 45 stock markets I follow on a daily basis are outperforming the U.S. stock market in 2014 — including your holdings in Market Vectors Gulf States Index ETF (MES) and the iShares MSCI Ireland Capped (EIRL). There are other opportunities out there, just like these.

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Third, ETFs also allow you to invest in other asset classes — currencies, commodities and fixed income investments. As you know, I cast a wide net when a make investment recommendations in The Alpha Investor Letter. And I see profitable opportunities in some of these less traditional areas of investment in the coming months.

Between Berkshire Hathaway’s legendary annual shareholders meeting taking place this Saturday in Omaha, Neb., and my $25,000 “bet against Buffett,” I am also fielding more than my share of media inquiries this week.

As you may recall, I bet that an index of U.S. small-cap stocks would outperform Buffett over the coming 10 years — just as they have over the past 15 years. That, of course, doesn’t keep me from recommending Buffett — or from being invested personally in Berkshire Hathaway (BRK-B), as it is a remarkably steady and stable investment. Yet, others are starting to question “Berkshire without Buffett,” as well. The Economist magazine called for the breakup of Berkshire-Hathaway this past week, suggesting that any successors to Buffett won’t be able to deliver the kinds of returns the “Oracle of Omaha” has during his tenure.

Finally, I’ll be a guest on Bill Gunderson’s “Best Stocks Now” radio show today at 10:30 a.m. EST. You can listen live by clicking HERE.

Portfolio Update

Berkshire Hathaway (BRK-B) gained 1.05% last week, continuing higher after moving out of a recent sideways trading pattern. This week, Berkshire Hathaway shareholders converge on Omaha, Neb., for the annual Berkshire Hathaway (BRK-B) meeting. They will fill up the CenturyLink Center Arena, listen to Buffett and his partner Charlie Munger speak, and generally have a great time chatting, playing bridge and eating steak. BRK-B is a BUY.

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Google Inc. (GOOGL) dipped 1.68%. Google has been correcting over the past few weeks in-line with the broader tech sector. GOOGL touched the mighty 200-day moving average (MA) on Monday and took a small bounce yesterday. This, coupled with Google’s highly oversold technical indicators, makes a good case for Google to reverse course and move higher from this level. GOOGL is a HOLD.

First Trust US IPO Index (FPX) lost 1.80%. FPX affords investors access to a diversified portfolio of elusive initial public offering (IPO) stocks. And, FPX offers investors yet another leg up in the IPO game. The companies held by FPX include only those with the best performance over their first 1,000 trading days. Now trading below its 50-day MA, FPX is a HOLD.

WisdomTree Japan SmallCap Dividend (DFJ) rose 0.51% last week. The Bank of Japan announced that it would keep its monetary policies intact, adding investor confidence to its economic recovery plans. DFJ’s second recent attempt at the 50-day MA last week was successful, moving this bet on Japanese small caps back to a BUY.

Market Vectors Biotech ETF (BBH) dipped 2.57% last week as it continued to trade sideways along its 200-day MA. With the biotech sector’s correction largely over, BBH consolidating at the 200-day MA and recent biotech earnings reports showing positivity, BBH is positioned well for a comeback. BBH is a HOLD.

Market Vectors Gulf States Index ETF (MES) gave back 2.68% over the past week, after hitting a new 52-week high just one week ago. MES has been a consistent winner over the past month and was ripe for a minor pullback. As the second-best performing global market among the 45 I track on a daily basis, MES remains a BUY.

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BIG ANNOUNCEMENT: On May 1, I’ll inform you about a significant opportunity… one that could have a major impact on your portfolio, for years to come. Stay tuned.

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