Betting on 2014’s ‘Secret’ Bull Market

Nicholas Vardy

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

It was a mixed week for U.S. stock markets, with the Dow Jones down 0.55%, the S&P 500 flat and the NASDAQ up 0.46%. The MCSI Emerging Markets Index resumed its rally and ended the week 3.17% higher.

Big gainers in your Bull Market Alert portfolio included Tata Motors Limited (TTM), which jumped 5.83% and hit a new 52-week high, on the back of the election of a more business-friendly government of Prime Minister Modi in India. Your holding in Spanish pharma Grifols, S.A. (GRFS) moved back above its 50-day moving average and is now a BUY.

Bull Market Alert is all about identifying bull markets in whatever markets and sectors they may be.

This week’s Bull Market Alert recommendation is the ProShares Ultra Real Estate (URE) exchange-traded fund (ETF) — a 2x leveraged bet on the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones U.S. Real Estate Index includes companies that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings and housing developments, as well as real estate investment trusts (REITs) that invest in apartments, office and retail properties.

The strong performance of U.S. real estate stocks this year just might be the most underreported investment theme of 2014.

U.S. real estate is the single best-performing asset class in my firm Global Guru Capital’s “Ivy Plus” Investment program. With the allocation to U.S. real estate up 16.36% year to date, no other asset class comes close.

All of this comes even as headlines about U.S. real estate aren’t nearly as positive as in the past few years. Scratch the surface, though, and you see that real estate companies are enjoying better cash flow growth as economic data — a reliable long-term indicator of tenant demand — are steadily improving.

I also suspect this year’s strong performance has as much to do with catching up to the rest of the market as anything else. After all, U.S. real estate had a tough 2013, barely eking out a 2.13% gain even as the broader market soared over 30%.

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Today, the entire real estate sector is in a technically bullish phase, even as former high flyers in biotech and healthcare have fallen out of favor.

So buy the ProShares Ultra Real Estate (URE) ETF at market today and place your initial stop at $78.00. If you want to play the options on the real estate theme, I recommend the September $75 calls on the related (but unleveraged) Vanguard REIT Index (VNQ) (VNQ140920C00075000).

Here’s a word of warning. This ProShares Ultra Real Estate ETF generates 2x the return of the index for a single day. Due to the compounding of daily returns, the ETF’s returns over periods other than one day will likely differ from the target return for the same period.

Portfolio Update

The Bank of Ireland (IRE) fell 9.25%. The Bank of Ireland continued its correction last week and touched down to its 200-day moving average (MA). IRE last touched this level back in late June 2013, then proceeded to rise 193% to its February 2014 52-week high. With many of my favorite technical indicators showing IRE as oversold, and IRE’s 200-day MA 103% higher than it was in February 2013, IRE may be nearing a point to repeat this cycle once again. IRE is a HOLD.

AbbVie Inc. (ABBV) added 1.28% last week. ABBV named biotech heavy-hitter Michael Severino M.D. late last week as its new executive vice president of research and development (R&D) and chief scientific officer. Dr. Severino brings considerable experience to ABBV’s ability to innovate. This personnel addition further realizes AbbVie’s pursuit to expand its new-drug pipeline. Trading above its 50-day MA, ABBV is a BUY.

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Grifols, S.A. (GRFS) rose 1.53% over the past five trading days. Your bet on the expansion of this Spain-based biotech name rose above the 50-day MA early last week — consistent with an upturn in the broader biotech sector. GRFS is now a BUY.

Tata Motors Limited (TTM) gained 5.83% last week and hit a new 52-week high, as the Indian market soared upon the election of the Bharatiya Janata Party (BJP) and Prime Minister Modi. Tata Motors itself announced that it was hiring more than 3,000 sales staff in India to support two large new product launches. TTM will soon begin selling its highly anticipated new compact sedan named Zest and hatchback named Bolt. TTM is a BUY.

iShares MSCI Philippines (EPHE) moved 1.41% higher during its first week in your Bull Market Alert portfolio. The Philippines’ market is on a firm path higher since forming a compelling bottom at the $29 price level. With last year’s $43.50 all-time May high set as a potential target in the coming months, EPHE has plenty of room to recover. EPHE is a BUY.

NOTE: Global Guru Capital is a Securities and Exchange Commission-registered investment adviser, and is not affiliated with Eagle Financial Publications.

Nicholas Vardy

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Following yesterday's worst session in a month, stocks rebounded today, led by a better-than-expected rise in the pace of home construction.

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