Barron's Saturday summary: positive on KSS, WAG, FRM; cautious on MCD
Cover story: In Americas snail economy, government wrangling over deficits is pointless unless Washington confronts a bigger threat: the coming decline in economic growth. The new slow-growth era could have broad repercussions that will affect not only the pugilists in Washington but businesses and investors. Weaker growth will make it harder for companies to improve earnings, fatten dividends, or garner better stock returns. It also threatens to fan social inequality and class tensions and limit the ability of government to fund various entitlement programs.
1) Positive on KSS: Stock has remained in a holding pattern for some time, but could rally to the mid-$60s as management works to spur store traffic, boost profits, and reward shareholders with extra cash.
2) Positive on WAG: Company is transforming itself into a global chain with Alliance Boots partnership, which should help it lift sales, enhance drug purchasing clout, slash costs, and boost earnings and margins.
3) Summary of Barrons Art of Successful Investing conference, where panelists top picks include ORCL, SNDK, SWKS, ATLS, SD, NOV, AET, AAPL, JDSU, Orkla, PARR, BERY, Daiwa Securities, CS, gold, SATS, SIA Engineering, ST Engineering).
Small Caps: Positive on FRM: Company has undergone a major transformation under CEO Charles Cox, centralizing its previously disparate global operations, and should benefit as refineries catch up on deferred maintenance.
Tech Trader: Tiernan Ray says AAPL should not heed Carl Icahns call for a massive share repurchase, noting the move isnt likely to benefit the company and that good corporate governance doesnt require managing the stock price to constantly drive it higher.
Trader: Cautious on MCD: Food chain appears to have lost its way, with more complex menus and no new hits, P/E ratio is likely to keep dropping until a turnaround effort succeeds; Companies in the top ten percent of those with both highest dividend yields and highest dividend covers include CVX, ESV, and AGU; Negative on STP: Chinese solar panel maker is in deep trouble, and rising share price suggests many investors are ignoring the company's rapid and fundamental deterioration.
Follow-Up: Positive on BLK: Though shares are up and another big gain isnt likely in the next 12 months, they still have room to climb, and could see another 15% boost based on firms diverse lineup of active and passive funds, strong cash flow, and good management; Cautious on GIS: Though company faces growing competition in its yogurt and cereal divisions, commodity costs have eased, overseas sales are strong, and new products are being released.
Hedge Funds: Interview with Gregg Winter, Co-Founder, W Financial Fund, which makes bridge loans to well-established real estate owners, operators, and developers primarily in solid New York City neighborhoods.
European Trader: Spains economy is showing signs of emerging from its prolonged slump, and though investors should exercise caution, now could be a good time for investors to pick up bargains (Positive on Amadeus IT Holdings, Ebro Foods, Repsol).
Asian Trader: Gaming sector in Macau continues to be strong, with shares up an average of 22% in past month and 45% over past three months (Positive on Melco Crown, Galaxy Entertainment, MCM China, Sands China, SJM Holdings, Wynn Macau).
Emerging Markets: China has been undergoing a transition to a consumer economy for some time, but with rally mostly over, investors need to be more discerning about picks; strong sectors include cosmetics and overseas travel (Positive on Sa Sa International Holdings).
Commodities: Zinc futures are likely to see a boost because of booming construction in China combined with mine closures, which could propel prices about 20% higher over the next couple of years.
Streetwise: Cautious on GIB: Though shares are down for lead contractor of governments new healthcare website, that isnt a buying opportunity, as they are near their all-time high and Canadian tech company is likely to face more blowback from turmoil surrounding Obamacare.