Betting on Global Tech

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 solid week for both U.S. and global stock markets, as several markets broke out to the upside. The Dow Jones rose 1.24%; the S&P 500 was up 1.34%; and the NASDAQ recovered 1.86%. The MCSI Emerging Markets Index jumped 2.37%, breaking out to a new 52-week high.

Big gainers in your Bull Market Alert portfolio included India’s Tata Motors Limited (TTM), which rocketed 6.15%, and moved back to a BUY; Mobile Telesystems OJSC (MBT), which jumped 4.54%, and the iShares MSCI Philippines (EPHE), which rose 3.91%. Note that all of these are global stock plays and confirm the new found strength in emerging market stocks.

Three of your positions — AbbVie Inc. (ABBV), EOG Resources, Inc. (EOG), ProShares Ultra Real Estate ETF (URE) — also hit new 52-week highs.

This week’s Bull Market Alert recommendation, Flextronics International (FLEX), combines two bullish themes of technology and global stock markets. Flextronics is the largest global provider of electronic manufacturing services and it cobbles together everything from the X-Box One for Microsoft to smart phones for Google.

Here’s why I think the stock is set to continue its strong upward trend.

First, both emerging markets and technology are coming back in favor. Singapore-based Flextronics offers a way to play both of those themes.

Second, Flextronics has vaulted past Wall Street’s estimates in eight of the past nine quarters. Flextronics’ most recent financial results trounced estimates both on revenue and earnings. The company now is on track to grow revenue by 9% and earnings per share (EPS) by more than 25% in fiscal 1Q ‘15.

Third, despite its recent sharp rise, Flextronics still offers solid value. The company trades at a discount to its peers on a price-to-cash flow, enterprise value-to-sales (EV/Sales) and price-to-earnings (P/E) basis. In addition, Flextronics is set to buy back more of its own shares over the next two years to help support its share price by steadily increasing earnings per share.

Technically, the stock has just broken out to the upside and is in a strong uptrend. That also means the stock is overbought over the short term and will likely endure a correction of some sort soon. That said, with a target price of $13 on the stock, there is still 18% upside in the stock, based on Friday’s closing price.

That’s why I am willing to throw caution in the wind and recommend that you buy Flextronics International (FLEX) at market today. Place your stop at $9.50. Because of the stock’s strong upward move last week, however, I am holding off on recommending options, until the stock settles a bit.

Portfolio Update

The Bank of Ireland (IRE) gained 1.60% last week as it continued trading sideways along its 200-day moving average (MA). The Standard & Poor’s (S&P) Ratings Service raised its outlook for Ireland last Friday. S&P upped its 2014-2016 gross domestic product (GDP) projection from 2.0% to 2.7%, raised its long-term sovereign credit rating from BBB+ to A-, and set its outlook at “Positive” with a one-in-three chance they may raise ratings again within the next two years. IRE remains below its 50-day MA and is a HOLD.

AbbVie Inc. (ABBV) added 1.42%, marking the eighth week of gains since taking off from its mid-April low. ABBV also broke upwards through its stubborn $54.00 resistance level last week to hit a new 52-week high. Morgan Stanley reiterated its “Overweight” rating on ABBV last Monday as well. ABBV is a BUY.

EOG Resources, Inc. (EOG) gained 3.33% last week and hit a new 52-week high. EOG is the best-of-breed pick by several measures in its class of oil and natural gas stocks. Comparing its peers’ five-year and ten-year returns, EOG beats them all with gains of 203% and 750%, respectively. EOG is a BUY.

Tata Motors Limited (TTM) added 6.15% last week after a recent quick correction to just below its 50-day MA. However, TTM took a convincing bounce last week and appears to be heading higher. TTM is now above its 50-day MA and has moved to a BUY.

ProShares Ultra Real Estate ETF (URE) rose 2.99% to hit another new 52-week high. Real estate has been on a steady and robust uptrend for many months now. This rise is reflected in URE’s price action. Gains via your leveraged bet on URE should be double that of typical real estate tracking indexes. URE is a BUY.

Mobile Telesystems OJSC (MBT) jumped 4.54% last week. MBT is currently one of nine companies with an active bid to acquire Slovenia’s main telecommunications operator Telekom Slovenije, which could go for nearly $1.9 billion. The Slovenian government currently holds a 63% stake in the company and wants to sell the company to a private operator by the end of 2014. MBT is a BUY.

Nicholas Vardy

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