Betting on the Bull in Japan

Nicholas Vardy

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

It was another strong week for U.S. stocks, as they ended the week at record highs. The S&P 500 rose 2.7% to a record peak of 2,017, the
Dow Jones was up 3.48% and the NASDAQ soared 3.28%. The MCSI Emerging Markets Index rose 2.75%.

Big gainers in your Bull Market Alert portfolio included Visa Inc. (V), which jumped 13.09%; Vipshop Holdings Limited (VIPS), which added 7.35%; and the ProShares Ultra Nasdaq Biotechnology ETF (BIB), which gained 5.44%. Three positions hit new 52-week highs: Visa Inc. (V), Gilead Sciences Inc. (GILD) and ProShares Ultra Nasdaq Biotechnology ETF (BIB).

Raise your stop in Visa Inc. (V) to $239.45 to lock in at least a 20% gain. Also raise your stop in Vipshop Holdings Limited (VIPS) to $223.15 to ensure at least a 15% gain in the stock.

Finally, with VIPS options expiring in late November, I recommend that you sell your VIPS November $195 call options (VIPS141122C00195000) to lock in a solid 22.91% gain. I may make an additional option recommendation on this position once the market settles after its recent big gains.

This week’s Bull Market Alert recommendation is a way to profit from the Japanese stock market’s break out to the upside through the WisdomTree Japan Hedged Equity Fund (DXJ).

DXJ is a highly unusual exchange-traded fund (ETF) that profits from both the Japanese stock market and from any decline in the yen. As it hedges out Japanese currency risk, the ETF rises any time the yen falls. On Friday, the Nikkei 225 Average leapt 4.8% to a seven-year high, as the yen tumbled to its lowest level against the dollar since January 2008. The Japanese market also rallied in overnight trading.

Exclusive  Niche Investing in REITs can Pay Off Handsomely

Here’s why I expect this rally in the Japanese stock market — and the concomitant decline in the yen — to continue.

First, even as the Fed wound down its version of quantitative easing (QE), the Bank of Japan (BoJ) launched another round of QE of its own. To everyone’s surprise, the BoJ announced that its annual target for expanding the monetary base would rise to 80 trillion yen ($724 billion), up from 60-70 trillion yen. This both pushed the yen to a six-year low and set off a rally in the stock market.

Second, this unexpected policy shift set off a furious short covering rally in the Japanese stock market. Prior to Friday, a lot of investors were short on Japan. In fact, on Oct. 16, bearish bets made up 36.6% of all transactions on the Tokyo Stock Exchange, the highest since the exchange started keeping records. And, historically, Japanese equities have rallied 9.7% on average over the following three months after a jump in bearish bets.

Finally, Japan’s Government Pension Investment Fund, the world’s largest pension fund, holds about $1.1 trillion in assets and recently increased its allocation to stocks. Japanese and overseas stocks will now have a 25% weighting each, up from 12%. This alone puts longer-term upward pressure on the Japanese stock market.

So buy the WisdomTree Japan Hedged Equity ETF (DXJ) at market today and place your initial stop at $46.00.

Because of the big jump on Friday, I am holding off on recommending the overvalued options right now.

Portfolio Update

The Bank of Ireland (IRE) closed the week flat. Bank of Ireland released its third-quarter Interim Management Statement (IMS) last Friday. IRE’s net interest margin increased, and its loan default rate fell. IRE’s capital position was also much stronger, boding well for the bank’s overall strength. IRE is a BUY.

Exclusive  Another 10% + Yielding BDC

Visa Inc. (V) jumped 13.09% last week to hit a new 52-week high on the back of its positive Wednesday earnings report. Visa’s earnings per share (EPS) figure was $2.18 vs. an average analysts’ estimate of $2.10. Revenue came in at $3.23 billion vs. a forecast of $3.19 billion. Visa received several analysts’ upgrades and is well positioned for future growth. Raise your stop to $239.45. V is a BUY.

Vipshop Holdings Limited (VIPS) added 7.35%, stopping just short of a new 52-week high. Morgan Stanley initiated coverage on VIPS last week at “Overweight” and set a price target for $259. This represents a potential 13% move above last Friday’s close. Raise your stop to $223.15. VIPS is a BUY.

Gilead Sciences Inc. (GILD) rose 1.17% to hit a new 52-week high. GILD reported earnings last Tuesday of $1.84 earnings per share (EPS) vs. an estimated $1.92. This represents a 254% jump from the same quarter last year. Revenue was $6.04 billion vs. an estimated $6.06 billion. Sales gained 117% year over year. GILD is a BUY.

ProShares Ultra Nasdaq Biotechnology ETF (BIB) gained 5.44% since its recommendation last week. BIB touched down to the 200-day moving average just over two weeks ago. Since then, BIB has been on a nearly unbroken double-leveraged rise, rocketing 40% higher. BIB is at a new 52-week high and is a BUY.

NEW FEATURE — Receive your alerts via text! You now can receive a text message on your cell phone to inform you whenever a trading alert is sent. To add this free new benefit to your service, please send an email to CustomerService@NicholasVardy.com with the following information and mention in the email that you want your cell phone added to your account:

  • Your Name
  • Your Zip Code
  • Your Email Address
  • Your Cell Phone number

Please note that we can only deliver text messages to cell phones with U.S. or Canadian numbers. Standard text messaging rates from your provider apply.

Exclusive  Daily Data Flow: New S&P 500 High, Gold Falls, A Fed President Calls for Tapering

Nicholas Vardy

P.S. Join Me for the World MoneyShow London, Nov. 7-8

I invite you to join me for The World MoneyShow in London, Nov. 7-8, at the Queen Elizabeth II Conference Centre. I will be presenting on Saturday, Nov. 8, 3:30 – 4:30 pm. Register at no charge by calling 1-800-970-4355 and identify yourself as a Nicholas Vardy subscriber by mentioning code 036913 or by clicking this link and following the instructions.

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
previous article

Navy’s Athletic Director Chet Gladchuk seems to have been prescient when he struck an agreement with his then-counterpart Kevin White years ago to keep the academy’s football rivalry with Notre Dame intact through the 2026 season to guarantee the schools will play each other for 100 consecutive seasons.

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE