Although we will be selling MTU today, I’ve seen drops like this many times in international markets since 1995, and I am confident that once the market stabilizes it will create tremendous opportunities, particularly in the technology sector. Watch for a new Japanese pick in the coming weeks.
Moving on to this week’s Global Bull Market Alert pick…
Although British magazine The Economist dubbed it the "barbarous relic," there’s no doubt that gold plays a unique role as the ultimate store of value. As gold bugs like to point out, a single gold coin will buy you the same men’s suit that it did 100 years ago. With global stock markets swooning this week, it’s time for Global Bull Market Alert to turn to gold as a safe haven.
Gold Bulls like to point out that during its most recent rally, gold has risen not only against the U.S. dollar, but also against the Euro, the Swiss franc, and the Japanese yen. The last time that happened was in the 1970s when there was a flight out of paper currencies due to inflation.
But with gold moving from $252 to $560 during its recent rally and nudging 25-year highs, can the metal go even higher?
Here’s some perspective. Gold hit its historic high of $873 in January 1980. But that’s over $2,200 in today’s dollars. That means there is plenty of room on the upside.
This week’s Global Bull Market Alert pick — South African mining company Gold Fields Ltd. — is a play on the secular bull market in gold.
In addition to its home market of South Africa, Gold Fields Limited has mining operations in Ghana and Australia. The rise in the price of gold is already filtering through to earnings with analysts recently marking up Gold Fields earnings estimates by almost 10%.
Remember that Gold Fields is a leveraged play on the gold price, which means its share price will be more volatile than the price of gold itself. It also means that when you hear predictions that gold will rise to $850 by the end of 2006, you can expect that Gold Fields’ stock price to climb even more.
So buy Gold Fields Limited (GFI) at market today, and place your initial stop at $15.50. To play the upside in gold with even greater leverage, buy the July $22.50 call options (GFIGX.X).
PORTFOLIO UPDATE
As we noted above, to make room for Gold Fields, sell Mitsubishi Financial Group (MTU).
Yesterday, we were stopped out of Indian Internet company Sify (SIFY) at $9.90. Sify was the picture-perfect Global Bull Market Alert trade — you took profits in Sify options at 88% and 222%, and sold half your stock for a 34% gain. The gains locked in yesterday topped off a very successful run.
Elan (ELN) continues its relentless path upward with the stock up 54% since we recommended it on November 28. You’ve already locked in 70% and 128% profits on your options. Sell half your stock to lock in gains on the stock and move your stop to $13.20.
Our other holdings are heavily oversold, and are set to bounce back nicely once the markets settle.
