Booking 142% Gains in Energy — and ‘Back into BRICs’

Nicholas Vardy

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

Last week saw U.S. markets pull back after their recent rally, with the Dow Jones down 0.88%, the S&P 500 dropping 0.68% and the NASDAQ pulling back 0.25%. The MCSI Emerging Markets Index bucked the U.S. trend and was up 0.11%.


Big gainers in your Bull Market Alert portfolio included EOG Resources, Inc. (EOG), gaining 4.30%, and last week’s recommendation, Flextronics International (FLEX), up 3.00%. Both of these also hit new 52-week highs.

Tata Motors Limited (TTM) fell below its 50-day moving average and is now a HOLD.

With EOG Resources, Inc. (EOG) having a big week and your July $105 call options (EOG140719C00105000) up 142.48%, sell all of your options here to lock in these triple-digit percentage gains. Raise your stop to $112.85 to lock in at least a 10% gain in EOG stock.


Also this week, I am recommending that you sell your iShares MSCI Philippines (EPHE) at break even, as this Asian high flyer has lost momentum — even as other emerging markets continue to pick up the pace.

This week’s Bull Market Alert recommendation offers you an alternative route to play the recent rally in emerging markets.

The iShares MSCI BRIC (BKF) exchange-traded fund invests in each of the four BRIC nations of Brazil, Russia, India and China.

After several years in the dumps, here are two reasons why I expect the BRIC markets to perform strongly over the coming months.

First, the BRIC stock markets have resumed their strong upward momentum. I follow 46 global stock markets on a daily basis, and three out of the top five global markets over the past month are BRICs. Russia is tops, up 9.11%, India is up 8.02% and even China is up 7.54%. World Cup soccer tournament host Brazil is the only relative laggard. In my experience, once these big emerging markets get going, they tend to go on for a while.

Second, after being out of favor for so long, the BRIC markets are as cheap as they have been in recent memory. Russia trades at a price-to-earnings (P/E) ratio of 6, with China at a P/E of 7. While Brazil and India are more expensive, BKF as a whole trades at a single P/E of 9. That is about a 20% discount to the MSCI Emerging Markets index as a whole. That makes the BRICs unusually attractive to investors who are looking to profit from the rebounding popularity of emerging markets.

So buy the iShares MSCI BRIC (BKF) at market today and place your stop at $37.50.

Unfortunately, the options on BKF are too illiquid and the bid-ask spreads too wide to play the options properly.

Portfolio Update

AbbVie Inc. (ABBV) dipped 1.71%. ABBV reported last week that the U.S. Food and Drug Administration (FDA) accepted its new drug application for evaluation of its hepatitis C treatment and granted it “priority review” status. ABBV is a BUY.

EOG Resources, Inc. (EOG) shot higher last week, gaining 4.30% to hit a new 52-week high. A recent Barron’s article featuring EOG detailed several points as to why EOG could “lead the pack” among its peer stocks moving higher. Analysts’ target estimates currently range between $126 and $130, putting EOG’s possible upside at an average of 12% from Friday’s close. EOG is a BUY.

Tata Motors Limited (TTM) fell 3.39%. Two senior TTM executives left the company last week, causing a few jitters for traders. This will likely have no long-term impact on the overall performance of TTM. TTM dipped a few cents below its 50-day moving average (MA) and is now a HOLD.

Mobile Telesystems OJSC (MBT) closed flat last week, dipping 0.52%. MBT reached its 200-day MA last week after a nearly unbroken rise over the past six weeks. Many stocks will pause at this level due to the importance investors tend to place on this crucial line-in-the-sand. I expect MBT to rise above this level in the weeks ahead. MBT is a BUY.

Flextronics International (FLEX) is the latest addition to your Bull Market Alert portfolio and rose 3.00% for its first week in your holdings. FLEX also hit a new 52-week high. Although up nicely, FLEX did level its rise somewhat late last week as the latest developments in Iraq have put a damper on upwards momentum for stocks across the board. FLEX remains a BUY.

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