The sharp drop in the markets after the Fed’s rate cuts yesterday distorted what was fundamentally a strong week for our Global Stock Investor picks.
Investors sold off the market because they were unhappy that the Federal Reserve did not lower rates more aggressively. This overreaction ignores the reality that the Fed’s interest rate cuts add to global liquidity — and strengthen the investment case for all of our global megatrends.
Prior to yesterday’s sell off, most of our holdings were back up to near record highs after several of our Global Stock Investor holdings — including Canada’s Potash (POT) and the Brazilian ETF, iShares MSCI Brazil Index (EWZ) — hit record highs this past week. It is best to look at the recent sell off as an opportunity to add to your positions.
PORTFOLIO UPDATE
Anglo American (AAUK)‘s CEO Cynthia Carroll met last week with her counterpart at Xstrata, the world’s sixth-biggest mining company. That started rumors that Anglo American could eventually make a bid for Xstrata. According to analysts, Anglo American and Xstrata would make a good combination. Anglo American could benefit from Xstrata’s many projects, and it would have synergies with Anglo American’s coal business in South Africa and Australia. Stay tuned as our play on the commodities supercycle remains a BUY.
ABB Ltd. (ABB) won an order worth more than $86 million from Eni SpA to design and construct a new oil processing plant in an onshore oil field in Italy. The plant is scheduled for completion in 2010 and will process almost 7,000 barrels of crude oil and 6.7 million cubic feet of gas per day. With global infrastructure projects roaring ahead, ABB is a BUY.
Barrick Gold (ABX) continues to bounce around with the gold price. Think long term and ignore the noise. The stock remains a BUY.
America Movil (AMX) management said the company will bid for more Brazilian high-speed wireless licenses in a government auction beginning this week. Investment bank HSBC also initiated coverage of America Movil and gave the stock an “overweight” rating. The sharp drop in the stock’s price yesterday is a terrific entry point. America Movil is a BUY.
iShares MSCI Sweden Index (EWD) continues to lag. It stays a HOLD.
iShares MSCI Brazil Index (EWZ) hit record highs last Friday as the Brazilian market surpassed its previous record that was reached on Oct. 31 before selling off sharply yesterday. It remains a good time to BUY this Brazilian ETF.
CurrencyShares Japanese Yen Trust (FXY) crept back above $90 after the sell off in the markets yesterday. Our bet on the unwinding of the carry trade remains a defensive BUY.
ICICI Bank (IBN) jumped this week as the Indian stock market breached the psychologically important 20,000 mark. India’s economy expanded 8.9% from July to September, compared with the same period a year earlier, according to data released last week by the Central Statistical Organization. “India’s Citibank” is one of my favorite long-term picks and is a BUY.
Millicom International (MICC) was featured in a cover story on African cell phone markets in Investor’s Business Daily this week. Based on the acquisition price paid by France Telecom for a Kenyan cell phone company, Millicom could be worth up to $38 billion. Today, Millicom’s market cap is closer to $12 billion. It’s easy to see why Millicom is a BUY.
ArcelorMittal (MT) continues its relentless expansion. It recently announced plans to build a $380 million beam mill in Canada. The company also acquired a Buenos Aires producer of flat stainless-steel products. ArcelorMittal is a BUY.
Potash (POT) dropped 3.1% from Monday’s record close. Just prior to the Fed announcement, Potash rose as much as 2.6%. This is a volatile stock but Potash remains a BUY.
Tesco (TSCDY) led market-share gains among British grocery chains in the past three months. Tesco’s market share in the United Kingdom rose 0.2 percentage points to 31.7% in the 12 weeks ended Dec. 2. Tesco is a BUY.
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