Barrons Saturday summary Barrons Saturday summary: positive on GM, PAH, HPQ; cautious on NUS
Cover story: For people facing retirement, long-term care "is the elephant in the room than can upend an otherwise meticulously crafted retirement plan"; Story delves into the pros and cons of aging at home, one-stop senior living facilities, and assisted living facilities.
1) Positive on GM: The automaker continues to boost profitability; the recent 2% boost in shares simply corrects an undeserved midyear selloff; shares could hit $48, or eight times earnings, for a return of about 40%, including the dividend yield of nearly 5%;
2) Cautious on NUS: Company's charitable program to provide VitaMeals to kids in poor nations brings some risk and poses a number of questions for investors;
3) Positive on PAH: Shares have fallen 60% over concerns about leveraged options, but chief executive and founder Martin Franklin has an strong track record of making roll-ups work, and the stock could see a rebound;
4) Positive on HPQ: Printer and PC half of newly split Hewlett-Packard should be able to maintain the profitability of its leading businesses despite volume declines, and return money to shareholders via buybacks and dividends;
5) A look at picks from the investors who attended the Invest for Kids conference in Chicago (HZNP, CPN, GMCR, ZNGA, GSK, BIDU, RBS, CF, EROS, crude oil, commercial and foreign real estate, Manhattan real estate, junk debt).
Tech Trader: Tech startups are increasingly taking their time going public, creating a growing divide between public and private technology investors; "Popular private start-ups continue to attract cash at higher valuations, but the public has all but turned its back on them"; Underwriters are facing some pushback over valuations during the roadshows that occur between IPO filings and final pricing.
Trader: "The market assessment of the probability of a rate hike has increased markedly since the last FOMC meeting," says J.J. Kinahan of AMTD; Positive on MCD: Howard Penney of Hedgeye Risk says the fast-food chain is successfully managing a turnaround that should continue and send shares up; VRX: A further drop in the pharma company's share price "could have an unpleasant spillover effect on the entire market."
Follow-Up: NSC: Shares have taken a hit because of falling oil prices, but the company has been restructuring, furloughing crews, and taking locomotives out of service, and shares could see 18% upside; RL: With incoming chief Stefan Larsson about to take the reins, investors should hold on to shares, which could have 15% upside, not counting the 1.5% dividend yield; ATVI: The KING acquisition will make the company a leader in the fast-growing casual-gaming segment and give it access to King's $900M cash flow on reasonable terms.
Profile: Gary Miller of the Victory Sycamore Established Value fund says a selling discipline is as important as the buying process (top 10 holdings: UNM, DG, XYL, CFG, Y, DDR, STI, XRAY, ATO, XEL).
European Trader: Armundi: "Europe's biggest asset manager could reward investors with quick profits when its shares begin trading in Paris next week."
Asian Trader: A look at how to beat the MSCI Emerging Markets index, more than two-thirds of which consists of Asian stocks (long on Samsung Electronics, TSM, Tencent Holdings; short China Mobile; avoid China Construction Bank, ICBC, and Bank of China).
Emerging Markets: With presidential elections on the horizon in Argentina, the country's stocks and bonds are already rallying on prospects for fiscal and monetary reform.
Commodities: "Big cuts in copper production may have given prices a bump, but any gains will be fleeting until demand returns."
Streetwise: An interest-rate hike will allow banks to earn more money on loans and realize better returns on their investments, boosting earnings--but new regulations could lessen the effect.