A Bet on the Internet of Everything

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 negative week for both U.S. and global markets, with the Dow Jones down 0.60%, the S&P 500 falling 0.86% and NASDAQ tumbling 1.13%. The MCSI Emerging Markets Index also ended the week in the red 2.45%, hit by the continuing rally in the U.S. dollar.

Big gainers in your Bull Market Alert portfolio included the Bank of Ireland (IREBY), up 4.35%; the WisdomTree Europe Hedged Equity Fund (HEDJ), gaining 2.35%; and the ProShares Ultra Nasdaq Biotechnology ETF (BIB) and WisdomTree Japan Hedged Equity ETF (DXJ), each rising 1.65%.

Two positions — the ProShares Ultra Nasdaq Biotechnology ETF (BIB) and WisdomTree Europe Hedged Equity Fund (HEDJ) — hit new 52-week highs.

This week’s Bull Market Alert recommendation — Ambarella Inc. (AMBA) — is another bet on one of the biggest trends in technology — wearable devices and the “Internet of Everything.”

Ambarella designs system-on-a-chip (SOC) semiconductor technology used in cameras for the sports, surveillance, automotive and security markets. The company has gotten a lot of attention thanks to its relationship with GoPro (GPRO), the action camera maker that uses Ambarella chips for cameras that let people take shots while surfing or snowboarding.

Here’s why I expect Ambarella stock to continue its relentless rise in the coming weeks and months.

First, Ambarella’s business encompasses much more than just supplying chips to GoPro. It also has a rapidly growing IP (Internet protocol) security camera business. And truth be told, the growth opportunities in security cameras, wearable police cameras, television broadcasting, automobiles and even drones is much higher than in niche extreme-sport cameras. Ambarella chips today are already found in the security cameras of AT&T’s (T) home video security systems. Ambarella has already established itself as “best in breed” in video/image processors.

Second, Ambarella’s success has been reflected in its quarter after quarter of robust financial growth. It has recorded year-over-year sales and earnings of at least 19% in the last 12 quarters, and this trend is expected to continue through the first half of the current fiscal year.

During its fiscal 2015 fourth quarter, which ended in January, Ambarella posted earnings of 68 cents a share, more than double the prior year’s figure. Revenue rose 62% to $64.7 million. Both results beat consensus analysts’ views by a comfortable margin.

Ambarella is a hot stock in a hot sector — and one that has defied sustained pullbacks in the broader market. And there is plenty of good reason for this to continue.

So buy Ambarella Inc. (AMBA) at market today, and place your stop at $53.00. If you want to play the options, I recommend the May $70 calls (AMBA150515C00070000), which last traded at $3.90 and expire on May 15.

Portfolio Update

ProShares Ultra Nasdaq Biotechnology ETF (BIB) gained 1.65%. BIB managed to defy the general pullback in the markets last week as it moved upwards to touch a new 52-week high. This exchange-traded fund (ETF) not only benefits from the seemingly endless strength of the biotech bull market, but also benefits from diversification thanks to its breadth of holdings. This sector has been in a long-term uptrend and the future outlook remains positive. BIB remains a BUY.

WisdomTree Japan Hedged Equity ETF (DXJ) also rose 1.65%. Although the pullback in the U.S. markets has been significant over the past few weeks, this bet on the U.S. market has been generating solid gains. The currency hedging aspect of this ETF also helped last week as the U.S. dollar continued its rise. DXJ is a BUY.

HDFC Bank Ltd. (HDB) dipped 1.33% over the past week. The International Monetary Fund (IMF) raised its gross domestic product (GDP) forecast for India’s current fiscal year from 5.6% to 7.2%. In addition, projections for India’s next-year GDP have been increased from 6.3% to 7.5%. HDB is a BUY.

WisdomTree Europe Hedged Equity Fund (HEDJ) gained 2.35% and hit a new 52-week high. HEDJ has continued to gain since its Bull Market Alert recommendation last month. This fund capitalizes on the bullishness in European markets. U.S. funds have experienced $47 billion in outflows in 2015 while European funds have experienced inflows of $36 billion. The currency-hedging aspect that this fund employs also capitalizes on the upward trend of the dollar. HEDJ is a BUY.

JA Solar Holdings Co. Ltd. (JASO) gained 0.33% last week. JASO reported fourth-quarter adjusted earnings per share of $0.28 last Thursday, beating the $0.26 consensus estimate. Earnings were $0.15 for the same period one year earlier. Revenue came in at $576.4 million, beating estimates of $539 million. I’m surprised the stock did not move more to the upside. JASO is a BUY.

Newly Updated Special Report

As a courtesy, I invite you to view the newly updated version of The Top 12 Stocks for 2015, which features three of my top investment recommendations from the recent Orlando MoneyShow, as well as bonus picks from each of my fellow investment newsletter editors at Eagle. This report and others are available FREE on my website to you.

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