U.S. Markets Wobble but India Soars

Nicholas Vardy

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

U.S. markets ended the week in the red, with the Dow Jones down 2.04%, the S&P 500 dropping 1.30% and the NASDAQ pulling back 0.81%. The MCSI Emerging Markets Index bucked the downtrend and was up 0.26%.

Big gainers in your Alpha Investor Letter portfolio included ICICI Bank Ltd. (IBN), which jumped 5.16%, while also hitting a new 52-week high, and The Blackstone Group L.P. (BX), which recovered 1.90%.

Several of your positions slipped below their 50-day moving average (MA) and moved to a HOLD.

These include the WisdomTree Japan Hedged Equity (DXJ), the WisdomTree Japan SmallCap Dividend (DFJ), the iShares S&P Global Timber & Forestry Index (WOOD), the Market Vectors Gulf States Index ETF (MES) and the PowerShares Buyback Achievers (PKW).

This week, I want to provide some personal perspective on two big trends in your Alpha Investor Letter portfolio.

First, you saw your position in ICICI Bank Ltd. (IBN), “India’s Citibank,” soar to a new 52-week high after the landslide victory of the conservative BJP Party and new Prime Minister Modi in India. This position is up 15.26% since I recommended it on April 17.

I spent Saturday evening at the home of a friend who opened Goldman Sachs’ office in India a few years ago. Although he is not a personal supporter of Modi, he told me he was as optimistic about India’s prospects as he had ever been. He felt the key change in India would come from a new generation of Western-educated Indians like himself, who are gradually replacing both family-run and government bureaucrat-controlled companies in India. He agreed that your holding in ICICI Bank, a professionally managed, internationally oriented financial institution, was one of the new breed of Indian companies that fit this bill. Another former Goldman Sachs banker, Jim O’Neill, who is credited with coining the term “BRIC,” said yesterday that the Indian market is on the cusp of a bull run and can rally another 10-15% this year.

Second, yesterday saw a sharp sell-off in the Market Vectors Gulf States Index ETF (MES), as Dubai’s stock exchange tumbled to a six-week low. On Sunday, I had dinner with another friend who works at the Qatar Investment Authority (QIA). QIA is Qatar’s sovereign wealth fund, which now is accumulating trophy properties around the world that include Harrods’ department store and One Hyde Park, the world’s most expensive residential complex, both down the street from me here in London. My friend’s perch in Qatar, which has a 24.8% weighting in MES, gives him a unique perspective on the Gulf States. Overall, he was bullish on the region, saying the fundamentals were strong and that any short-term pullback in the markets was a buying opportunity.

The source of the current volatility is more technical. Index compiler MSCI is upgrading both Qatar and the UAE (United Arab Emirates) from “frontier market” to “emerging market” status, effective June 1. This is terrific news, as it will increase flows into the region’s stock markets over the medium term. However, with “frontier funds” exiting the market and “emerging markets” funds entering at the same time, markets in the Gulf States may be in for a wild ride during the next few weeks.

Finally, be sure to join me for a live quarterly update call on Tuesday, May 27 at 1:00 p.m. Eastern. I will be updating you on my outlook for rallying global stock markets, as well as answering your questions. You can listen live as I also review my current portfolios and reveal The Stock Market Rally No One’s Talking About. Click here now to register for this FREE, subscriber-only teleconference.

Portfolio Update

Berkshire Hathaway (BRK-B) dipped 1.43% for the week. Recent Berkshire Hathaway filings show that Warren Buffett increased his stake in Davita Healthcare Partners (DVA) earlier in the year by 1.1 million shares. This purchase brings this Berkshire Hathaway holding to a massive $2.6 billion, making it one of Berkshire’s largest positions. With biotech bottoming recently, this is likely a prescient call and good news for your other biotech position in Market Vectors Biotech ETF (BBH). BRK-B is a BUY.

iShares MSCI Ireland Capped Investable Market Index (EIRL) fell 5.33% last week to touch down on the 200-day moving average (MA). EIRL last touched this level back in late November 2012, then proceeded to rise 90% to its February 2014 high. With many of my favorite technical indicators showing EIRL extremely oversold, and EIRL’s 200-day MA 68% higher than it was in November 2012, EIRL may be nearing a point to repeat this cycle once again. EIRL is a HOLD.

WisdomTree Japan SmallCap Dividend (DFJ) lost 1.56% over the past five trading days. The Bank of Japan (BOJ) closed its recent two-day economic policy meeting yesterday, electing to hold steady on its current policy. This may be a short-term “all clear” signal to investors, as the BOJ forecasts that the Japanese economy is strong enough to forego any further stimulus for the time being. Your bet on Japanese small caps dipped to the 50-day MA and moved to a HOLD.

iShares S&P Global Timber & Forestry Index (WOOD) dipped 2.25% last week after a strong run higher over the past several weeks. WOOD fell slightly below the 50-day MA recently — also finding itself at the mighty 200-day MA. Having two popular moving averages such as these buoying this position likely spells higher days ahead. WOOD is now a HOLD.

Market Vectors Biotech ETF (BBH) gave back 1.39%. BBH entered its seventh week of sideways “consolidation” trading yesterday — a pattern that emerged on the heels of a very large historic correction in biotech not seen in many years. This pattern usually results in a sustained future move upwards. BBH is a HOLD.

The Blackstone Group L.P. (BX) rose 1.90% over the last five trading days. BX recently agreed to sell a large office-tower property in the Boston area for $2.1 billion. BX acquired this property back in 2007, at very favorable pricing, during a leveraged buyout. Many funds are following this same approach, pocketing outstanding recent gains, as they sell off properties at the current high real estate prices. BX appears to be trending upwards from the 200-day MA — a good sign for a future higher share price. BX remains a HOLD.

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P.S. As a valued subscriber, you’re invited to my next FREE, exclusive conference call! On Tuesday, May 27th, at 1:00p.m. EST, you’ll listen live as I discuss my outlook on the markets, review my current portfolios, and reveal The Stock Market Rally No One’s Talking About. (Note that this is an “interactive” event, so you’ll have the opportunity to ask questions and voice your opinions throughout.) Click here now to register for this FREE, subscriber-only teleconference.

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