The Bull Continues to Run

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 broadly flat for global stock markets. The Dow Jones was up 0.57%, S&P 500 rose 0.76% and NASDAQ jumped 1.12%. In contrast, the MCSI Emerging Markets Index rose 1.46%.

The big gainers in your Alpha Investor Letter portfolio included Skyworks Solutions Inc. (SWKS), up 2.46%; Union Pacific Corporation (UNP), rising 2.37%; and Global X Guru Index ETF (GURU), jumping 2.04%.

With the market in a solid uptrend, several of your positions hit new 52-week highs, yet again. These include Berkshire Hathaway (BRK-B), WisdomTree Japan Hedged Equity (DXJ), PowerShares DB US Dollar Bullish ETF (UUP) and Skyworks Solutions Inc. (SWKS).

The U.S. market rally is unfolding pretty much according to script. Market sentiment has shifted over the past month from terror to slightly greedy.

There are a lot of portfolio managers who have lagged the market in the past 11 months and need to have a strong December to make up for their underperformance. So I expect there to be lots of buying in the next couple of weeks.

The one asset class that has disappointed this year is emerging markets. The traditional Q4 rally in emerging markets has gone missing in action in 2014.

Between the rising U.S. dollar and the continued collapse in commodity prices, emerging markets are getting hammered from all sides. Last Friday’s lowering of interest rates by the Chinese central bank did launch a bit of a rally. But the impact of that kick-start already seems to be fading.

Your exposure to emerging markets is restricted to the top-performing market of 2014, India, through ICICI Bank (IBN) and the Market Vectors Gulf States ETF (MES). Although value in emerging markets abounds, I expect this to stay this way in the coming months.

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Portfolio Update

Berkshire Hathaway (BRK-B) gained 1.37% over the last week to hit yet another a new 52-week high. Berkshire announced the acquisition of Duracell, the premier battery brand. Aside from the brand, the brilliant stock-swap nature of the deal notwithstanding, it would appear Buffett’s decision to buy was all about the cash flow. BRK-B is a BUY.

Union Pacific Corporation (UNP) rose 2.37% last week, hitting a new 52-week high. Ever since the company announced robust third-quarter 2014 results on Oct. 23, shares have jumped nearly 10%. UNP remains a BUY.

The Guggenheim Spin-Off ETF (CSD) rose 1.75% last week. CSD has made a legacy of out-performance over the broader market, beating the S&P 500 every year since 2009, usually by wide margins. This year has been an exception, but with its small-cap bias, it is showing signs of perking up. CSD is a BUY.

Vanguard Russell 2000 ETF (WTO) gained 1.49% as small caps continued to recover on improving news from the U.S. economy. Small caps had hit two-year lows versus large caps in September and have plenty of catching up to do to their large-cap counterparts. VTWO is a BUY.

WisdomTree Japan Hedged Equity (DXJ) rose 1.13% and hit yet another new 52-week high last week. A bet on Japan and against the yen is the still the fattest pitch in the world for investors. DXJ is a BUY.

Global X Guru Index ETF (GURU) jumped 2.04%. The SEC Form 13F, or Information Required of Institutional Investment Managers Form, is a quarterly filing required of institutional managers with over $100 million in qualifying assets. With its small-cap bias, GURU has lagged but is coming back. GURU is a BUY.

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Skyworks Solutions Inc. (SWKS) soared another 2.46% last week. Skyworks has been a rocket in your portfolio and is up 19.19% over the past month. SWKS is a BUY.

Nicholas Vardy

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