Investing in 2013 Top Global Stock Markets

I would garner a wager that most investors have been missing out on the best performing stock markets in the world in 2013. Not only are they smaller countries that are often overlooked, a few of them are in regions of the world that many consider hotbeds for geopolitical turmoil.

The fourth best performer is Kuwait, with a gain of 23% year-to-date. The country is expected to finish 2013 with growth of 4.5% before accelerating to 5% growth in 2014. The stock index has been boosted by shares of small cap companies as well as plans to continue upgrading their infrastructure system. The Kuwait stock market recently traded at the best level in nearly 3 years.

The second top performer in 2013 is the United Arab Emirates (UAE) with a gain of 28%. The country is expected to grow by 3.3% in 2013 and tick up to 3.4% one year later. A boost to the country’s economy and stock market has been a rebound in the real estate market after a drop during the 2008 global recession.

So how does a US investor play the surge in the Middle East stock market prices?

One option is the WisdomTree Middle East Dividend Fund (GULF). The ETF invests in the UAE (35%), Qatar (28%), Kuwait (18%), Morocco (9%), Egypt (6%), Oman (3%), and Jordan (1%). The sectors most heavily weighted are the financials (48%), telecom services (31%), and industrials (17%).

Along with the Kuwait and UAE as top countries, Qatar also makes up a sizable portion of the allocation. Qatar is expected to grow by 5.0% in both 2013 and 2014 as it plans to spend $140 billion to upgrade its infrastructure before they host the 2022 World Cup soccer tournament.

The ETF is currently up 18% in 2013 and is trading at the best level since 2008. On top of strong capital gains are the quarterly dividend payouts to investors. The payouts can be erratic at best, however the last quarterly dividend payout was $0.21/share. Annualized out this is a yield of 4.8% if the dividend was to remain constant for the next 3 quarters and based on today’s price of $17.60.

The chart below shows the 1-year performance of GULF (+16%). I would look for a pullback in the $17 area for an opportunity to buy at a more attractive entry price.

Morning Market Outlook: New Highs, Asia, Technology

Market Easing off Highs:

The S&P 500 is down slightly premarket after closing at yet another all-time high yesterday. Investors are digesting a number of earnings reports from overseas and have decided to slow down the buying this morning. Remember that the market will not hit all-time highs everyday and that you must be prepared for pullbacks as buying opportunities. RELATED ETFs: SPDR S&P 500 ETF (SPY)

Southeast Asia Concerns:

The IMF is sounding the horn again about concerns over the potential bubble that could be forming in Southeast Asia. I find the entire situation comical because all the IMF and other agencies do these days is attempt to put a negative spin on everything. The region has been the strongest in the world recently with markets hitting highs and the economies growing at a robust pace. If the numbers were bad and the market was falling the IMF would also be concerned. So ignore the headlines and concentrate on the real story – Southeast Asia is strong and you should continue to ride the uptrend. RELATED ETFs: Global X FTSE ASEAN ETF (ASEA), iShares Thailand ETF (THD), iShares Philippines ETF (EPHE), iShares Singapore ETF (EWS), Market Vectors Indonesia ETF (IDX), iShares Malaysia ETF (EWM)

Technology Stocks Lead Rally:

The large-cap Technology stocks led the market rally yesterday with the SPDR Technology ETF (XLK) up 1.4% on the session and it is now up 4% from a mid-April low. Apple (AAPL) tagged on 3.1% and IBM (IBM) rallied 2.5% to lead the sector. The move in AAPL was significant because it closed above the $420 resistance level and if it can continue the rally and close above $433.50, the 50-day moving average, it will trigger more buying interest. Apple is currently trading at $432.50 in premarket action. RELATED ETFs: Apple (AAPL), IBM (IBM), SPDR Technology ETF (XLK)

Pre-Market Outlook Video

Highlights of today's 5-minute market primer:

• Analyzing the SPY
• UK GDP growth and EWU
• Spanish Unemployment and EWP
• Upcoming earnings: AMZN and SBUX
• 3 Stocks added to WatchList: BEN, NMR, IP

Morning Market Outlook

Today's 5-minute video includes:

• Analysis of S&P 500
• A look at two earnings plays: AAPL and BA
• 5 high income plays: HYEM, OAK, BX, INF, DPO

McCall's Call: Morning Maket Video

McCall's Call - Tuesday Morning Video

• The S&P 500
• Netflix Earnings
• Apple Earnings
• China, Germany PMI
• Italian Bond Yields
• Philippines ETF
• Gold ETF
• Today's favorite ETF

Market Recap: Commodities Rally, Indices Hold Support

The Dow and S&P 500 were able to close above their 50-day moving averages for the second consecutive session, calming fears of a major market sell-off on the horizon.

The Dow closed up 19 points (+0.1%) and the S&P 500 gained 7 points (0.5%).

The leading sectors were the commodity- related stocks. The iShares Natural Resources ETF (IGE) closed up 1.2%, the SPDRs Energy ETF (XLE) up 1.1%, and the Market Vectors Gold Miners ETF (GDX) up 1.4%.

Gold was able to rally as well with the SPDR Gold ETF (GLD) up 1.8%, logging its fifth consecutive up session after the thrashing last Monday. Even though the winning streak is at five, GLD has only recouped half of Monday's loss. We continue to look for a potential exit point for Gold and made the correct decision not to panic on Monday with the majority of helpless investors. GLD is up 5% from the close on Monday.

Other Notable Movers Today:

• USB E-Tracs Business Development Companies ETF (BDCS) - Up 1.7% after a mention in Barron's over the weekend comparing them to junk bonds and favoring BDCs.
• Intel (INTC) - Up 2.0% today to close at the best level since late September 2012. The breakout with a dividend over 4%, the stock is an interesting investment to watch.
• Biogen Idec (BIIB) - Up 5.9% to a new all-time high. The stock and its peers have pushed the entire biotech sector to the best levels ever.

Biotech ETF Outperforms

As the market suffered with a bought of anxiety disorder last week the shares of the iShares NASDAQ Biotech ETF (IBB) continued its climb higher and finished the week at the best level ever.

The ETF is now up over 26% in 2013 after a gain of 4% on Friday. The basket of 120 stocks has been a solid outperformer of the market since it began its lastest uptrend in November 2012.

The top ten holdings make up 60% of the portfolio, suggesting there is a concentration in the top stocks. Regeneron Pharmaceuticals (REGN) is the number one holding, making up 9% of the portfolio. Gilead Sciences (GILD) and Amgen (AMGN) round out the top three that account for 25% of the ETF. The fact all three are hitting new all-time highs this month is a big factor behind the performance of IBB.

The ETF could be considered overvalued in the short-term, however the outlook remains bullish for the biotech stocks and the overall health care sector. Potential buyers should wait for a pullback to the $165 area to increase the odds of a good reward-to-risk setup.

Chart of the Day - S&P 500

Today's chart of the day is one of the most important indices for investors - the S&P 500.

For the last three trading sessions the index has been teetering along the important 50-day moving average. On Thursday the index breached the trend line on the close, but was able to bounce back above it on Friday. This morning the index is down 0.2% and remains above the moving average by a few points. The last trade is 1553 and the 50-day simple moving average is at 1544.

As important as the moving average is to the index, there is a price support area at 1530, that is equally important. The green horizontal line represents the price support investors need to watch.

As long as the index can hold above 1530 in the short-term during any pullback it will bode well for the future of US stocks. With that being said we may become more aggressive buyers if the index continues to consolidate near the support zone of 1530-1544 throughout the next two weeks. Buying there represents a high reward-to-risk ratio.

Below is the daily chart of the S&P 500 over the last year.

Monday Morning Outlook

 

·      US Stock futures are set to open higher by about 0.3% after a rally in Asia and a bounce in Europe. The market will be attempting a successful rebound from one of the worst weeks in years and so far Monday morning it is off to a good start.

·      Gold has been able to move higher for four consecutive sessions after the beating it took early last week. The SPDR Gold ETF (GLD) finished the week at $135.47 and is rallying premarket to $138.06. The overreaction last Monday was evident, what is not so clear is how long the dead cat bounce can last. I am looking for the $141 area as a time to sell.

·      Southeast Asia remains a hotspot for the market. The Philippines market hit a new all-time high last night and the iShares Philippines ETF (EPHE) is set to break out of a bullish ascending triangle. Keep an eye on the ETF. The ETF that covers the entire region, Global X ASEAN 40 ETF (ASEA) closed at a new high on Friday.

·      Investors need to watch the 50-day moving averages on the S&P 500 and Dow this week as they continue to hold just above the trend lines. The level on the S&P 500 is 1543 and 14,354 on the Dow.

ETF of the Day - Malaysia EWM

The Malaysian stock market hit a new all-time high yesterday ahead of elections next month that appear to be heading in the direction of keeping the robust growth going.

The stock market really in the country has been boosted by large inflows of foreign cash. On Thursday alone the market saw a net inflow of $63.5 million and year-to-date the number stands at $3.6 billion.

The iShares Malaysia ETF (EWM) is also trading at a new all-time high and is up 4% in 2013, lagging many major markets. But in the last month the ETF is up 10% after some turmoil earlier in the year.

The growth expectation for the country this year is between 4.5% and 5.0% and with inflation near 2.4% the country is well positioned to continue attracting foreign investments. The election is on May 5 and if all goes well I expect Malaysia to continue hitting highs into the second half of 2013.

If you would like to know my alternative to investing in EWM you can email info@pennfinancialgroup.com. The ETF not only give investors exposure to Malaysia, but other high growth countries in the region!!

ETF of the Day - Playing Japan Rally with Financials

Interested in the Japanese market as the country's stocks break out to new highs amid more Central Bank intervention?

Other than the 2 ETFs that have been discussed in the news: iShares Japan ETF (EWJ) and WisdomTree Japan Hedged Equity ETF (DXJ), there is another option for investors willing to think outside the box.

The iShares MSCI Far East Financials Sector ETF (FEFN) has high exposure to the Japanese financials (63%) and the top holdings are Japanese banks. There is a total of 82 stocks in the ETF and the current 12-month yield is 3.12%.

I believe Japan will keep the pressure on the Yen and push their currency even lower and in turn it will be a positive for Japanese equities and in particular the financials.

The one issue I have with FEFN is the low volume and larger than average bid/ask spread, but as a longer-term play I feel it could be an option for investors willing to take above average risk for the devaluation of the Yen investment play.

Sector Watch - Market Breakout

The market is breaking out to new highs once again today on the back of the early release of the Fed meeting minutes and the start of the first quarter earnings season.

Leading the market higher are the technology stocks with the SPDR Technology ETF (XLK) up 1.8%, logging its best gain since early January. The stocks leading the way are Facebook (FB) +4.3% and Apple (AAPL) +2.1%. A close above $30.50 for XLK (currently at $30.60) would be a significant breakout for the technology sector that has been lagging.

The large semiconductor stock, Intel (INTC), is also breaking out today with a gain of 2.8% and could be a catalyst to lead the sector higher and help propel the entire market to more new highs.

The iShares NASDAQ Biotech ETF (IBB) is rallying 2.4% and is at a new all-time high. This has been a sector that has quietly been putting in big gains - up 20% in 2013!

The SPDR S&P Retail ETF (XRT) is breaking out of a one-month consolidation pattern to also hit a new all-time high. The media bashes the retail sector and consumers, yet the sector continues to outperform.

ETF of the Day - The Sun and Fun

When I think of a beautiful island and the best sunset I have ever witnessed one place comes to mind - the Greek Isles.

Today 2 ETFs with direct links to this image are rallying from lows.

The Guggenheim Solar ETF (TAN) is up 16% after First Solar (FSLR) reported better than expected earnings projections for the year. As great as it sounds to use the sun to power everything in the world, I do not look at it as an investment opportunity. The sector has been crushed the last few years and TAN is trading down over 90% from the 2008 high. So a pop today is nothing more than a chance for investors who never sold to get out. I would not get sucked into the one-day rally.

The Global X FTSE Greece 20 ETF (GREK) is up 8% today as the fears over Cyprus and the continued bailout of Greece subsides for a day. Similar to TAN, the Greek ETF is bouncing off lows and I would not be chasing the one-day rally. The situation in Greece is far from over and could be a solid long-term play at some point in the future, just not yet.

Beyond the Headline: JCP CEO Out - More to the Story

J.C. Penney (JCP) ousted CEO Ron Johnson after less than 2 years into his turnaround plan for the ailing retailer. This is a big story, but there is a bigger story here.

Bill Ackman, the big hedge fund manager, which has been pushing JCP for the last couple of years as one of the best investments in the market is looking worse and worse every day. In July 2012 at a conference the fund manager said that JCP was the only stock he owned that could go up by 20 to 15 times its value in the next 5,6, to 7 years. How did that work out for you Ackman??

He is also the infamous guy that has been shorting Herbalife (HLF) and bashing the company publicly calling it a ponzi scheme. The stock has been holding up even though Ackman believes the company should be trading much lower.

The point here is not to bash Ackman, but to show that even the best of the best make bad calls. Remember Bill Miller the mutual fund manager that had a streak of a decade of gains and beating the market? Well in 2007 his fund lost nearly half its value.

I pick stocks and ETFs for a living and know how difficult it can be. So as an individual investor you need to set realistic goals for your portfolio. Whether doing it yourself or with a paid advisor like myself. Without goals that are attainable or realistic you will continue to chase your tail and never achieve your financial goals.

Breaking Down the Ugly Jobs Report

You can read the headline numbers for the March Jobs Report and depending on where you get your news it could lean towards the positive or negative side of the fence. Unfortunately the numbers were not good and it is very difficult to find a silver lining to the report.

Here is a bullet point breakdown:

• 88,000 jobs created in March - well below the estimates and smallest gain in 10 months

• February and January were revised higher by a total of 61k jobs - possibly a tiny silver lining

• Civilian Labor Force fell by 496k – at lowest level in 9 months

• Unemployment Rate dropping to 7.6% from 7.7% - This is laughable because the only reason it fell was because another 496k workers dropped out of the work force.

• The labor participation rate, which is a true number of how the jobs market is fell to 63.3%, the lowest since May 1979! The number has now spent 15 consecutive months under 64%: longest streak since 78-79

• Retailers lost 24k jobs - this could be directly affected the the payroll tax change in the beginning of the year

• The only silver lining is that it could lead to continued quantitative easing from the Fed for many more months.

• Sector Breakdown: Transports -27k, Postal -12k, Temp +20, Gov -7 (not sequester), Construction +18k, Health Care +23

• Only creating 169k jobs per month over the last 12 months

• March 2013 unemployment rate would be 10.9% if the labor force participation rate was the same as it was in January 2009 (65.7%)

• March's job gains were half the pace of the previous six months, when the economy added an average of 196,000 jobs a month.

Morning Market Update - Japan, France, Jobs

The futures are up slightly after a worse than expected weekly jobs number and a big rally overnight in Japan.

Stocks are looking to bounce on the open this morning after a sell-off yesterday that was fueled by fears out of North Korea and San Francisco Fed President Williams suggesting that the quantitative easing (QE) efforts by the Fed could end at some point this year.

Morning Notable Headlines

• The yield on a bond auction in France came in at a record low for their 10-year paper. The 2 billion Euro auction yielded 1.94%, down from 2.1% in the previous sale. This is surprising considering the French economy has yet to turn around. 
• Related ETFs: iShares France ETF ($EWQ)
• The Nikkei was last up over 3% after the BOJ meeting in which they are set on fighting deflation. The open-ended plan to buy government bonds of all maturities has the Yen falling and stocks rallying.
• Related ETFs: WisdomTree Japan Hedge Equity ETF ($DXJ) and Rydex CurrencyShares Japanese Yen ETF ($FXY)

ETF of the Day - ITA Defense Stocks

The market began selling off after the noon hour as rumors started circulating about North Korea and what their next move may be. I am sure most of it is pure rumors, but what isn't rumor is that the US is sending land-based missile defense systems to Guam to protect against a North Korean attack.

The fears were enough to give investors a reason to sell and take profits after one of the best quarters in a decade. But one sector was able to dodge the bullet (no pun intended) of heavy selling.

The iShares Dow Jones US Aerospace & Defense ETF (ITA) was last up 0.6% as money was going into the true defensive companies. The top three holdings in the ETF were all up with 30 minutes left in trading: United Technologies (UTX), Boeing (BA), and Lockheed Martin (LMT).

ETF Facts

• 34 stocks in ETF
• Expense ratio of 0.46%
• Dividend yield = 1.95%
• P/E ratio = 16.58
• Beta vs. S&P 500 = 0.79
• 12-month Return: +9.4%

ETF of the Day - IHF

Shares of U.S. health insurers rallied Tuesday, after the Center for Medicare and Medicaid Services announced plans to increase the amount the government pays to insurance firms for its Medicare Advantage plan.

The payments to insurers will increase by 3.3% in 2014 versus the original proposal of cutting the payments by 2.2%. This sent the stock soaring the last 2 days.

Big winners include Humana ($HUM), UnitedHealth Group ($UNH), and Cigna ($CI).

An ETF that concentrates on the health insurers is the iShares Dow Jones US Health Care Providers Index ETF ($IHF). The ETF is up 2.6% today and 6% in the last week.

IHF Notes:

• Total of 47 stocks
• Largest Holdings are $UNH, Express Scripts Holding ($ESRX), and Wellpoint ($WLP) and they make up 32% of the ETF.
• Expense ratio = 0.46%
• Dividend Yield = 0.86%
• Beta vs S&P 500 = 1.1
• P/E Ratio = 18.61
• 12 month return = 18% 

The chart below is $IHF over the last year. Clearly you do not want to chase after a 6% rally in one week, but a pullback to the $78 area could be the time to get in.

Midday Market Update: New Highs, Health Care ETFs, Apple

Today midday market update.

• Stocks at new highs
• Health care ETFs breaking out
• KBWD (dividend ETF) gapping higher
• Apple stock bottoming?

Morning Market Video - 6 ETFs to Watch

Monday morning video with 6 ETFs we are watching closely.