Barrons Saturday summary: Positive on XL and retailers; cautious on KMI
Cover story: Ten market strategists surveyed by Barron's see moderate gains for the market in the year ahead; Based on their mean forecast, the S&P 500 will end next year at 2220, up 10 percent from Friday's close of 2012; Overall, the group was more cautious than in recent years past; Top picks include AVGO, GILD, V, GOOGL, COF, ROST, DIS, MMM.
Features:
1) Positive on M, JWN, RL, BURL: Shares of retailers have been marked down as the sector struggles, but they are likely to rebound next year because of strong long-term prospects;
2) Cautious on KMI: Oil- and gas-pipeline operator has long been considered the industry bellwether, but now that its business model has been proved flawed, industry bulls argue it is an outlier because of its high level of debt;
3) Positive on OAK, FMC, EQC, TRCO, HRG, ENR, CVA, ATU, KRNY, CKEC: Companies are Barron's favorite small- and mid-cap picks for 2016, with some on the list having potential upside of as much as 40-50%;
4) Positive on XL: Shares of global insurer, which has pared down its operations and raised fresh capital in the wake of the financial crisis, could rise by as much as 25% next year.
Tech Trader: Tiernan Ray looks at activist investing in the tech sector, noting that such investors "have no real ideas to contribute with regard to the development of great products and services, only tactics for creating noise to boost stock prices."
Trader: The cost of capital is going up for corporate America, says Peter Boockvar of The Lindsey Group, along with tightening credit and monetary policy, and weaker earnings; Cautious on MW: Debt is a problem for clothing retailer following its acquisition of struggling Jos. A Bank, but the core Men's Wearhouse brand remains strong, and spinning off or shrinking Jos. A Bank could improve the balance sheet; Cautious on TEVA: Company still has to prove that asthma drug Reslizumab is safe for teenagers, but with a strong pipeline and the growing focus in the U.S. on price-friendly generics, shares could rise; - Anglo American: Shares have plunged by more than 70% since last spring amid an overall commodities rout, but more near-term risk means investors should stay away despite the low price.
Interview: Ayako Hirota Weissman, co-manager, Horizon Asia Opportunity, likes Minor International, Genting Hong Kong, and Internet Initiative Japan.
Profile: Chuck Bath, portfolio manager, Diamond Hill Large Cap fund, uses a forecasting technique to determine a company's intrinsic value (top 10 holdings: AIG, ABT, C, PFE, PG, UTX, JPM, MS, SYY, MDT).
Follow-Up: Cautious on DIS: Company's new Star Wars movie is expected to be a major hit, but anything short of a stellar opening weekend could send the shares down; Cautious on JNS: The departure of head of fundamental fixed income Gibson Smith is a huge blow to the firm, where bond outflows could begin just as the equities division has turned a corner.
European Trader: Positive on Unipol Group: Investors could see a windfall if financial-services holding company completes the simplification of its shareholding structure, while a tie-up with UnipolSai Assicurazioni could also boost shares.
Asian Trader: Cautious on Lufax, Yirendai: Chinese peer-to-peer lending firms are "unicorns," and the sector has huge potential in China, but investors should be wary because they are managed with the same opacity that has created concerns about other Chinese companies.
Emerging Markets: "Market-friendly political change may be happening fast in Latin America, but earnings at many companies won't catch up for a while in Argentina and Brazil."
Commodities: Copper prices are already down because of lower demand in China, but some industry observers say a flood of new supply will drive prices down even further.
Streetwise: GMCR's announcement it would be acquired by JAB Holding is good news for shareholders, but continues a ten-plus-year trend of stock market shrinkage.
