A Short-Term Bet on a Cashless World

The weak start to 2015 continued last week, with the Dow Jones falling 1.27%, the S&P 500 dropping 1.24% and the NASDAQ tumbling 1.48%. The MCSI Emerging Markets Index eked out a 0.56% gain.

The big gainers in your Bull Market Alert portfolio included the ProShares Ultra Nasdaq Biotechnology ETF (BIB), up 2.76%, and WisdomTree Japan Hedged Equity ETF (DXJ), which added 1.08%. Two positions — the ProShares Ultra Nasdaq Biotechnology ETF (BIB) and Halyard Health Inc. (HYH) — hit new 52-week highs.

You were stopped out of cybersecurity play LifeLock, Inc. (LOCK) at a loss. Recall, though, you had scored a triple-digit percentage gain in LifeLock options back in December. Your January $17 call options in Bank of Ireland (IRE) expired worthless.

This week’s Bull Market Alert recommendation revisits MasterCard (MA), a recommendation I have made in the past.

Here’s why I expect MasterCard to fare well in the coming weeks.

First, both MasterCard’s price performance and fundamentals remain strong. The company grew earnings per share by 19.7% in the most recent quarter, compared to the same quarter a year ago. This year, the market expects earnings to grow from $2.57 to $3.08. That’s another 19.8% gain. MasterCard’s gross profit margin stands at a high of 60.05%, increasing substantially from the same quarter the previous year. Its net profit margin of 40.55% also significantly outperformed against the industry average.

Second, MasterCard stock is technically oversold, according to my favorite technical indicators, and due for a bounce. It also just bounced off of the bottom end of a trading range that has stretched back to November.

Finally, Deutsche Bank just raised its price target on MasterCard from $91 to $105, citing accelerating revenue growth in the second half of 2015. With MasterCard closing at $83.80 on Friday, that represents an upside of 25.3%.

With 85% of all the world’s transactions still made by cash, there is plenty of growth ahead for companies like MasterCard.

So buy MasterCard (MA) as soon as the market opens tomorrow (due to today’s holiday) and place your stop at $75.50. If you want to play the options, I recommend the April $85 calls (MA150417C00085000), which last traded at $3.59 and expire April 17.

Portfolio Update

The Bank of Ireland (IRE) closed flat last week. IRE has been in a sustained pullback from its significant $17.25 resistance level since early December 2014. Fast forward to today, and IRE now rests on its even stronger $14.00 price level — and appears to be consolidating. This is good news, as IRE has rallied higher from this level each time it has touched it since mid-October of 2013. IRE is below the 50-day moving average (MA) and remains a HOLD.

PowerShares DB Commodity Tracking ETF (DBC) fell 1.02% last week, hitting a new 52-week low. This represents yet another winning week for this short bet on commodities — a position that has not posted a losing week in your portfolio to date. Although the downward spiral in oil prices has been a high-profile driver behind this position’s winning streak, the decline in copper made the news last week. Copper plunged on weak global demand and oversupply concerns and now stands at a 5 ½-year low. DBC remains a SHORT SELL.

ProShares Ultra Nasdaq Biotechnology ETF (BIB) gained 2.76% last week. The biotech sector has taken a bit of a breather these past few weeks. However, biotech as a whole remains a strong buy and BIB made an excellent gain last week to hit a new 52-week high. BIB is a BUY.

Palo Alto Networks, Inc. (PANW) dipped 0.64% last week. Dougherty & Co. reiterated its “Buy” rating on PANW recently, joining a growing group of analyst firms calling for a buy on this stock. Dougherty also raised its price target to $150 — a potential 20% gain from last Friday’s close. PANW is a BUY.

The Rubicon Project, Inc. (RUBI) fell 6.33% for in its first week in the Bull Market Alert portfolio. RUBI dipped closer to its 50-day MA last week as it took a bit of a tumble on Thursday. I’m expecting buying support at the 50-day MA on this position and will continue to hold my option recommendation for now. RUBI is a BUY.

Latest Special Report

As a courtesy, I want to bring to your attention the newest version of The Top 12 Stocks for 2015, which features three of my top investment recommendations, 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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