Barron's Saturday summary: positive on CTRP and on the banking sector
Cover story: With the recent selloff, the banking sector looks like one of the best bargains in the market, and with strong balance sheets and low share prices, bank stocks probably have 20% upside (Positive on BAC, C, JPM, WFC, GS, MS, BBT, PNC, STI, USB).
Features:
1) Positive on ADSK, AKAM, WDC, SNADK, LRCX: The tech sector has taken a hit during the recent market turmoil, creating a number of bargains, of which these five stocks present good opportunities;
2) Positive on CTRP: Chinese online travel company is more dominant in the country-where travel spending is up despite trouble in some parts of the economy-than PCLN and EXPE; Ctrip's acquisition of rival QUNR should give it a major boost;
3) Brian Davis of Davis Capital Management, who won Barron's 2015 forecasting challenge, thinks we're in transition from a bull market to a bear market.
Tech Trader: Cautious on AAPL: Company "is up against the law of large numbers," such that even a strong business like the iPhone "is challenged to add to the top line year after year"; Despite clamor from pundits, Apple should resist "engaging in dubious M&A" to appease impatient investors; Apple lags peers in cloud computing, and needs to make more meaningful progress in that area.
Trader: "Some investors might see two up weeks in a row as a turning point, but if that were true, then why did defensive sectors-such as telecom, utilities, and consumer staples-make up three of the top four sectors last week?"; Cautious on VIA: Media company faces problems, including stagnant revenue growth and high debt, but some of its unique assets are undervalued, and it has plenty of content to counter cord-cutting; Positive on VRTU: Electronic market-maker "benefits in the short term from big market gyrations," but its long-term potential is strong as more international asset classes move towards electronic trading.
Barron's Roundtable, Part 3: Picks from Scott Black of Delphi Management (TSQ, FL, LRCX, MYL, USB); William Priest of Epoch Investment Partners (CVS, SYF, NRE, VOD); and Meryl Witmer of Eagle Capital Partners (AXTA, Tessenderlo Chemie, NVGS). Profile: Sharat Shroff, portfolio manager, Matthews Pacific Tiger fund, looks for opportunities tied to consumer strength in healthcare, insurance, and the Internet, while steering clear of exporters and commodities (top 10 holdings: Naver, BIDU, Orion, Dongbu Insurance, Kotak Mahindra Bank, DKSH Holding, Central Pattana Public, Ping An Insurance Group, Tata Power, Amorepacific).
Small Caps: Cautious on FELE: Manufacturer of water-pump systems has seen a drop in demand and taken a hit in international markets because of the strong dollar, but things aren't likely to get worse, and a rebound could be in the works.
Follow-Up: AIG chief Peter Hancock says he wants to create a sustainable business model, but he needs to deliver returns to shareholders sooner rather than later; YHOO is under growing pressure to solicit bids for its Internet business, and investors who hold on have "a nice margin of safety" as they wait for a breakup or sale.
European Trader: "January's market downturn offers an opportunity to shop for European bargains in February"; Good values include Ryanair Holdings, easyJet, Barratt Development, Persimmon, Berkeley Group Holdings, NN Group, Direct Line Insurance Group, VOD, Royal KPN, and Deutsche Telekom.
Asian Trader: Cautious on Softbank: Company is worth less than its 32% stake in Chinese online retailer BABA, with its holdings in S causing much of the trouble.
Emerging Markets: "As the Fed raises rates, boosting the dollar, currencies in many commodity-driven economies will remain vulnerable," though the Mexican peso and the Russian ruble could be exceptions.
Commodities: Platinum continues to lose its luster after peaking in 2008, and doesn't appear poised for a good year because production hasn't slowed down.
Streetwise: Retailers like CONN that do business in energy-dependent states such as Wyoming, North Dakota, and Texas face growing concerns; Conn's also depends heavily on providing financing to customers, making its situation more precarious.
