May Starts Off With a Surprising Bang…

It was a strong week for markets across the board last week, with the Dow Jones up 1.92% and the S&P 500 rising 1.59% — both hitting new record highs. The NASDAQ also recovered 1.21%. The MCSI Emerging Markets Index rose 2.19% and broke out to a six-month high.

The biggest gainer in your Alpha Investor Letter portfolio was ICICI Bank Ltd. (IBN), which soared 9.25% — and that’s after pulling back 3.18% in yesterday’s trading. The stock hit a new 52-week high on news that the BJP party and its allies may have won enough votes to lead a coalition government, positioning BJP leader Narendra Modi as the next prime minister of India. Final results are due on Friday.

As I’ve noted in the past, ICICI Bank is a very volatile stock, and India can be a very volatile market. Certainly, ICICI Bank’s recent price movement bears this out.

Other gainers included Google Inc. (GOOGL), which added 3.48%; Berkshire Hathaway (BRK-B), which rose 2.58%; Global X Guru Index ETF (GURU), which rose 2.41%; and the WisdomTree Japan Hedged Equity (DXJ), which gained 2.16%.

Several positions crossed back above their 50-day moving averages and moved back to a BUY. These include the WisdomTree Japan Hedged Equity (DXJ), the iShares S&P Global Timber & Forestry Index (WOOD) and Global X Guru Index ETF (GURU).

Two broad themes are emerging in your Alpha Investor Letter portfolio.

First, as I have noted, the top-performing markets are shifting back to the international arena. Despite the mainstream U.S. indexes hitting record highs, the U.S. stock market still ranks only #28 among global stock markets this year.

You see this situation in two of your current Alpha Investor Letter holdings: the Market Vectors Gulf States Index ETF (MES) and ICICI Bank (IBN), up 15.15% and 9.58%, respectively, since you bought them very recently. The Gulf States rank #2 on the list, and India ranks #4. I also see this on a wider level in my “Global Gains” Investment Program at Global Guru Capital, where emerging markets are the top-performing holdings over the past three months.

Second, there is a divergence between the new heights being hit by the Dow and the S&P 500 and the small-cap sector in the U.S. stock market. It is very rare to have the S&P 500, the benchmark, reach a 52-week high, yet at the same time have the proxies for “high risk,” the Nasdaq and Russell 2000, sit so far below their own 52-week highs. Historically, of the three indexes, the S&P tended to perform the worst going forward — and even that was up an average of 8.7% a year later.

This is good news for your current Alpha Investor Letter portfolio — although I expect there will be some volatility along the way.

Finally, if any of you are coming through London this summer, please drop me a note at nvardy@globalgurucapital.com, and I’d be happy to meet for a drink in the city that is now the home to more billionaires than any other city in the world. (Moscow is #2).

Portfolio Update

Berkshire Hathaway (BRK-B) rose 2.58% last week to recover half of its recent earnings-related dip from the week before. Berkshire Hathaway reported earnings on May 5 of $2,149 per share vs. a $2,172 per share estimate. First quarter net income of $4.71 billion fell from last year’s first quarter $4.89 billion. It is a safe bet that the world’s greatest long-term investor is not too concerned over this light quarter, and neither am I. BRK-B is a BUY.

WisdomTree Japan Hedged Equity (DXJ) gained 2.16% last week. DXJ recently made an intraday move above its 50-day moving average (MA), only to dip back below. DXJ once again pressed above this line in the sand just yesterday and now appears ready to head higher. Your bet on Japan moves back to a BUY.

Google Inc. (GOOGL) added 3.48%. Your bet on Google is also experiencing some interesting technical movement. After touching, and bouncing, from its 200-day MA several weeks ago, GOOGL did the same thing once again last week. This type of price movement is usually a strong buy signal — especially given the recent prolonged correction both Google and the broader technology sector have endured. However, based on its more short-term 50-day MA, GOOGL remains a HOLD.

iShares S&P Global Timber & Forestry Index (WOOD) gained 1.70% last week. WOOD has been on a hot streak for the past month as things continue to heat up after a record-setting cold streak essentially brought the logging industry to its knees last winter. Rising nearly every day since hitting a significant low point last month, WOOD pushed aggressively above its 50-day MA yesterday to become a BUY.

Vanguard Global ex-US Real Estate ETF (VNQI) added 1.91%. It is likely not a coincidence that the strong rebound in global timber corresponds closely to a like move in global real estate. This position is up better than 11% since touching down near its 52-week low back in early February. VNQI is a BUY.

Global X Guru Index ETF (GURU) rose 2.41% over the last five trading days. GURU includes many of the top U.S. equity positions, as reported on Form 13F filed by U.S. hedge funds. Form 13F essentially forces hedge funds to periodically “tip their hands” and let it be known what these “Masters of the Universe” are investing in. GURU moved above the 50-day MA last week to become a BUY.

ICICI Bank Ltd. (IBN) jumped 9.25% last week and hit a new 52-week high. India has been counting the votes from a recent general election, and exit polls reflect that a conservative coalition government is looking at a win. Final election results are due on Friday, May 16. IBN is a BUY.

PowerShares Dynamic Energy Exploration & Production Portfolio (PXE) gained 1.31%. PXE is the latest addition to your Alpha Investor Letter portfolio. This “smart beta” play on energy exploration puts you into this fund at an excellent time, as PXE recently pulled back from its 52-week high. PXE is a BUY.

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