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Don’t Worry About The World Ending Today

It was another down week in markets with the Dow Jones dropping 3.03%, the S&P 500 falling 2.96% and the NASDAQ sliding 4.46%. The MCSI Emerging Markets Index also fell 2.30%. And U.S. futures suggested another big down day in the markets Wednesday. Big gainers in our portfolio included Illumina, Inc. (NASDAQ: ILMN ) , up 0.56%, and last week’s Alpha Investor Letter recommendation, Apple Inc. (NASDAQ: AAPL ) , which rose 0.48%. Well, so far 2016 has been all about markets hitting new lows. U.S. crude oil has hit its lowest level since 2003 with U.S. futures falling below $28 a barrel. MSCI’s index of Asia-Pacific shares ex Japan sank to lows not seen since late 2011. Japan’s market itself has fallen 20% below last year’s peak, thereby meeting the technical definition of a bear market. Chinese A-shares have fallen 14.83% in 2016 alone. Not a single one of the 47 global stock markets I track is up this year. With global stock markets off to their worst start in history – and yes, that includes 2008 – it’s no wonder that RBC Capital Markets noted that its polls of investors showed they were more bearish on Wall Street than at any time since mid-1987. That’s the year of the famous stock market crash when Ronald Reagan was still President. That’s quite a statement, as this period covers the emerging market meltdown of 1998, the dotcom bust and the global financial crisis of 2008. Frankly, I think these fears are overblown. Investors are throwing out the baby with the bathwater. Yes, commodity prices are slumping and global growth is more anemic than expected. But the financial system isn’t nearly as leveraged as it was in 2008. What about the months ahead? History has shown that market sentiment is always darkest before the dawn. RBS notes that every time investor pessimism reached current levels outside of an economic recession, the market was higher one quarter later by an average of 6.4%. Other studies by sentimentrader.com suggest strongly that if we do continue to fall, then the fall could be sharp – another 5-10%. Still, over the next six months and longer, stocks have an exceptionally high probability of showing a positive return. The bottom line? Strap yourself in for some further market turbulence, but don’t worry about the world ending today. It’s already tomorrow in Australia. Portfolio Update Berkshire Hathaway (NYSE: BRK.B ) dipped 0.81% over four days of trading in the past week. Reports of Warren Buffett buying into the weakened oil sector continue to surface, confirming that Mr. Buffett likes to buy low. Berkshire Hathaway acquired nearly six million shares ($450 million) of Phillips 66 in early January, bringing his total stake to 13%. This is the sixth-largest position in Mr. Buffett’s portfolio. BRK-B is a HOLD . Markel Corp. (NYSE: MKL ) was also flat in the past week, giving back just 0.18% as it spent the week trading sideways. Looking at the chart, MKL’s pullback appears to have halted directly on the mighty 200-day moving average (MA) – and for MKL, this is a price level not to be trifled with. MKL last touched down to this level in early 2014 only to go on an 18-month bull run, touch the 200-day MA once again, and move even higher. When the dust clears from the current market correction, this will be one of the first stocks to buy. MKL is a HOLD for now. Cambria Global Value ETF (NYSEARCA: GVAL ) fell 4.51% over the past week. Even the “cheapest” markets in the world became cheaper in the face of the latest global sell-off. As I have noted, not a single one of the 47 global stock markets I track are up in 2016. GVAL is a HOLD . Guggenheim S&P 500 Equal Weight ETF (NYSEARCA: RSP ) gave back 3.36%. This equally weighted take on the S&P 500 is down nearly 1% more than the S&P 500 Index (SPX) since the beginning of 2016, likely due to its higher weighting in small caps. When markets finally do turn higher, the opposite should hold true, and RSP should rebound quicker than its market-cap-weighted rival. RSP is a HOLD . PayPal Holdings (NASDAQ: PYPL ) pulled back 2.66% in the past week. PayPal will report earnings next week on Jan. 27. Although this relatively new stock has been driven lower by market forces, the outlook for PayPal remains positive among the community of analysts covering the stock. PayPal is an excellent long-term candidate in your Alpha Investor Letter portfolio, and possibly a good takeover candidate, as well. PYPL is a HOLD . Biotech ETF Market Vectors (NYSEARCA: BBH ) fell 5.75%. The bullish case for biotech remains intact, and BBH casts a diversified net to capture gains from this sector. An increasing population of aging folks, a growing demand for new drugs and growing healthcare costs should keep this sector on the rise. Mergers and acquisitions were also a major factor last year, and this trend should continue as well. BBH is a HOLD . Illumina Inc. ( ILMN ) bucked the negative trend last week to move 0.56% higher. Illumina is the global leader in DNA sequencing, and associated technologies, for applications in the life sciences, oncology, reproductive health and agriculture industries – just to name a few. ILMN will report earnings on Feb. 2 after markets close. ILMN is currently trading just under its 50-day MA and is a HOLD . Apple Inc. ( AAPL ) rose 0.48% over its first few days in the Alpha Investor Letter portfolio. Goldman Sachs recently released positive commentary regarding future AAPL pricing and set a price target of $155 – a potential 60% jump from yesterday’s close. That’s a huge number. Goldman Sachs further noted that any weakness is likely priced in at this time, making the recent sell-off even more of a positive entry point. AAPL will report earnings on Jan. 26 after markets close. AAPL is a BUY .

3 Utility Mutual Funds For Steady Returns Amid Volatility

These are trying times for the markets, with most of the benchmarks striving to finish their trading days in the green and the mutual funds are not being spared either. While most of the sectors have been failing to attract investors’ attentions since the start of this year, the safe-haven appeal of the utility sector has bucked the trend to some extent. So buying utility mutual funds with strong fundamentals could help investors avoid this negative tone in a less risky manner. According to Lipper, net outflows for all equity funds came in at around $12 billion for the week ending Jan 6, indicating the market downturn. As a result, the demand for safe haven securities – such as those from the utility sector – is growing among investors. The broader S&P 500 utility sector – the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) – has attracted nearly $294.6 million of net inflow so far this year. Though the sector is only up 0.3% in the year-to-date frame, it is the only sector among major S&P 500 domains that finished in the positive territory during this period. Meanwhile, the sector gained nearly 2.6% in the past one-month period when the other major sectors registered a minimum loss of 4%. Before suggesting the appropriate utility mutual funds for your portfolio, let’s find out what is propelling the demand of securities from the utility sector. Why Utility? Concerns over China-led global growth issues and a persistent slump in oil prices dampened investor sentiment from the start of 2016, and have dragged down the major benchmarks into negative territory. Rising expectations about the lift-off of Iranian sanctions, which happened yesterday, dragged down the energy sector, which in turn weighed on the benchmarks on Friday. While WTI crude plunged by 6.1% to a 12-year low level of $29.42 per barrel, Brent crude declined nearly 0.1% to $31.01 a barrel. The VOLATILITY S&P 500 (VIX) – an important indicator of volatility level – jumped 12.2% on Friday and surged 6.3% in the year-to-date frame. In this volatile environment, the utility sector provides safety to investors due to its higher immunity against market peaks and troughs. Though the utility sector, which requires a high level of debt, was initially affected by the rate hike, its safe haven appeal gradually offset the impact. Also, after declining significantly in 2015, utility stocks are now offering attractive entry points. Meanwhile, the sector is also popular among investors for generally offering stable and healthy yields. Additionally, demand for essential services such as those provided by utilities is believed to remain unchanged even during difficult times. This is also an important factor behind the stability of the sector even during a market downturn. 3 Mutual Funds to Buy Given the safety and yields that are latent in the sector under discussion, below we present 3 utility mutual funds that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). We expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify the potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. These funds have encouraging 4-week, and 3- and 5-year annualized returns. The minimum initial investment is within $5000. These funds also have a low expense ratio. American Century Utilities Fund Investor (MUTF: BULIX ) invests a large portion of its assets in equities related to the utility industry. BULIX’s portfolio is constructed on qualitative and quantitative management techniques. In the quantitative process, stocks are ranked on their growth and valuation features. BULIX currently carries a Zacks Mutual Fund Rank #1. It boasts a 4-week return of 3.2%. The 3- and 5-year annualized returns are 9.2% and 8.6%, respectively. The annual expense ratio of 0.67% is significantly lower than the category average of 1.25%. BULIX has a yield of 2.87%. Franklin Utilities Fund A (MUTF: FKUTX ) seeks capital appreciation and current income. FKUTX invests a large chunk of its assets in common stocks of public utilities that are involved in providing electricity, natural gas, water, and communications services. FKUTX currently carries a Zacks Mutual Fund Rank #2. It has a 4-week return of 4.1%. The 3- and 5-year annualized returns are 9.2% and 10.5%, respectively. The annual expense ratio of 0.73% is also lower than the category average. FKUTX provides a yield of 2.77%. Fidelity Telecom and Utilities (MUTF: FIUIX ) focuses on acquiring common stocks, investing heavily in telecom and utility companies. FIUIX may purchase both foreign and domestic securities. FIUIX utilizes fundamental analysis to select its holdings, studying both firm-specific and broader market and economic factors. FIUIX currently carries a Zacks Mutual Fund Rank #2. It boasts a 4-week return of 3.3%. The 3- and 5-year annualized returns are a respective 7.7% and 9.2%. The annual expense ratio of 0.79% is lower than the category average. FIUIX provides a yield of 2.06%. Original Post

‘Ride An Elephant’ In 2016

By Carl Delfeld In the 19th century, there was a common expression used to describe the early intrepid explorers of the American West. They were said to be “seeing the elephant” – that is, they were seeing “all that could be seen.” On Wall Street today, brokers looking for 10-bagger stocks, and portfolio managers seeking big gains, are similarly said to be “hunting for elephants.” In the 21st century, the best chance of finding these elephants is by looking for them in emerging and frontier markets. These markets have growth that may be up to three times that of America and Europe, which is fueled by a young, vibrant consumer class, as well as some of the world’s most fascinating cultures, nature, and landmarks. One great New Year’s resolution for you would be to see the elephants with your own eyes this year. I can assure you that you’ll learn a lot, have great fun, and uncover some big opportunities that you would otherwise miss sitting in your living room. Investing With the Big Shots I’ve been fortunate enough to have on-the-ground experience in many of these markets, particularly in Asia and Latin America. Last year I teamed up with Global Frontiers, which organizes and leads institutional research trips in these dynamic markets. On these trips we meet with the insiders and heavy hitters that help shape a country’s power structure, stock market, and foreign policy. I’ve also developed friendships with a small circle of tycoons – sometimes referred to as “Taipans ” – a term which roughly translates to “big shots.” If you meet and spend any time with such tycoons, a light bulb could go off in your head. You’re better educated and have much better circumstances compared to most new tycoons. So what gives them their edge? Why do they see opportunities that elude the rest of us? The answer is, they think big and are very attentive to what’s happening on the ground in other countries and markets. They have great personal and professional networks that feed them valuable intelligence. Add a pinch of imagination, and a shot of courage, and you have a potential tycoon. If you wish to become a Taipan, I suggest you look beyond China and India in the coming year to a story that’s being completely missed by even the most sophisticated investors. Ten Southeast Asian nations will move ahead in 2016 as part of an ambitious, America-backed initiative to join their economies in a common market. The goal is to increase their common influence, form a counterweight to China, and boost prosperity for the region’s 622 million citizens. These countries share more than geography. They have a young tech-savvy population with a rising middle class and booming consumer markets. For example, Indonesian consumer spending has more than doubled in the last decade as it nears a $1 trillion economy. Singapore is already the world’s richest nation on a per capita basis. And Vietnam has the fastest-growing economy in the world and is projected to do even better this year. There are country ETFs for almost all of these countries, but for one-stop shopping, consider the Global X Southeast Asia ETF (NYSEARCA: ASEA ). This basket of 40 stocks was off 20% in 2015, giving you a nice value entry point. If Asia is too far and too exotic for your tastes, visit Latin America. The Brazilian market has suffered both major losses and a plummeting currency, so your U.S. dollar will go far whether you spend it or invest it in Brazil. I visited Panama last year and was astonished at the progress it’s made as a regional trade and financial center. Getting to see the project aimed at doubling the size of the Panama Canal made the trip worth-while. Other ideas? The energy-driven iShares MSCI Colombia Capped ETF (NYSEARCA: ICOL ) was down over 40% last year, while the iShares MSCI Mexico Capped ETF (NYSEARCA: EWW ) held up extremely well on a relative basis, even as Mexico becomes a favorite base for global manufacturing. Mexican wages are now actually below those in China. I encourage you to get going and see these opportunities for yourself. Then consider investing in a blend of these markets that are trading at bargain basement prices, and offer some of the best hedges on the U.S. dollar. This is your opportunity – now go out and seize it. Link to the original post on Wall Street Daily