A Pair of Bets on the Q4 Rally

Nicholas Vardy

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

Last week was a mixed one for global stock markets. The Dow Jones was up 1.05%, the S&P 500 rose 0.69% and the NASDAQ ended the week virtually flat. The MCSI Emerging Markets Index had a bad week, falling 2.21%.

The WisdomTree Japan Hedged Equity ETF (DXJ) also hit a new 52-week high before pulling back.

You were stopped out of Vipshop Holdings Limited (VIPS) for a 15% gain. Note that the stock split 10 for 1, and the adjusted stop price was $22.32.

The Bank of Ireland (IRE) fell below its 50-day moving average and moved to a HOLD.

November, December and January are the three strongest months of the trading season. So, this is also the time of the year to step on the gas.

That’s why this week, I am making not one, but two new Bull Market Alert recommendations.

The first is a company that have been familiar with since its foundation is the unlikely location of Budapest, Hungary. When it was launched in Eastern Europe in the early 1990s by a group of entrepreneurs from St. Louis, you’d have never thought that Euronet Worldwide (EEFT) would become one of world’s leading providers of electronic payment solutions.

Processing roughly 2.3 billion transactions in 2013, Euronet today serves clients in more than 150 countries and processed $62 billion ATM transactions and money transfers last year. Euronet also operates about 665,000 airtime terminals for telecom companies and 19,808 ATMs around the globe.

Euronet recently posted strong Q3 results, with per-share earnings up 43% to $0.80, beating the consensus of $0.73. Revenue rose 26% to $453 million, also beating expectations.

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Analysts expect per share profits to surge 26% to $2.57 in 2014, with sales up 17%. Euronet has a history of beating consensus estimates, and the stock already is in a solid uptrend in 2014.

So buy Euronet Worldwide (EEFT) at market today and place your stop at $44.00.

If you want to play the options, I recommend the February 2015 $55 calls (EEFT150220C00055000), which last traded at $3.10 and expire on Feb. 20.

Second, I am recommending a name more familiar to U.S. investors, online travel company Priceline.com (PCLN).

Although it started by focusing on the U.S. market, Priceline has been steadily building a position in the international market by entering into strategic alliances and making acquisitions to boost its growth in the future. Booking.com, which Priceline acquired in July 2005, now has a larger inventory of non-hotel properties than rival Airbnb.com. Priceline also expects that its recent acquisition of OpenTable.com will help boost its growth in the United States.

Priceline recently reported a very strong quarter, with both revenue and earnings beating expectations. That said, while international bookings continued to grow strongly by double-digit percentages from the year-ago quarter, domestic bookings’ growth fell sharply. As a result, the share prices plunged 8.4% in what I believe was a massive overreaction.

I expect Priceline stock will bounce back strongly in the coming weeks. One broker has a target of $1,504 on the stock. That’s a potential gain of over 37% from Friday’s close.

So buy Priceline.com (PCLN) at market today, and place your stop at $1010.00.

If you want to play the options I recommend the January 2015 $1,100 calls (PCLN150117C01100000), which last traded at $39.40 and expire on Jan. 17.

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Portfolio Update

The Bank of Ireland (IRE) fell 6.50% last week. News of the European Central Bank (ECB) tightening its oversight on banks led to a sector-wide dip in European financials. The ECB is also expected to test the strength of the business models of banks across the region in the coming months. IRE fell below the 50-day moving average (MA) to become a HOLD.

Gilead Sciences Inc. (GILD) lost 4.96%. Gilead Sciences reported last week that it submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for an investigational, once-daily, single pill for treating Human Immunodeficiency Virus (HIV). GILD also plans to submit a similar application in the European Union by the end of 2014. GILD is a BUY.

PowerShares DB Commodity Tracking ETF (DBC) fell another 1.52% last week, hitting another new 52-week low — a bullish development for your short position in this bet. Commodities continued their months-long downward spiral as both gold and oil took it on the chin over previous weeks. Although gold and oil aren’t the only baskets of commodities within DBC, these two entities do serve as poster children for what’s happening on a broader scale. DBC remains a SHORT SELL.

WisdomTree Japan Hedged Equity ETF (DXJ) gave back 1.26% for its opening week in the Bull Market Alert portfolio. DXJ opened the week with a new 52-week high but faded slightly as days progressed. However, with the Japanese recovery still chugging along, and the tailwind of the strengthening dollar and weakening yen, DXJ has everything going for it to continue higher for quite some time to come. DXJ is a BUY.

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