Saturday, February 6, 2016

Barron's Saturday summary: Cover predicts oil could drop to $20/bbl and then rebound sharply; positive on CELG, GILD

Cover story: "Oil could fall as low as $20 a barrel in the first half of this year, recovering to $55 by year end. That could help drive stocks, which have closely followed oil prices, much higher"; Stock traders "may be subscribing to the misguided belief that low oil prices are signaling imminent global recession."

1) The Barron's/Lipper Fund Family ranking for 2015 is topped by Sit Investment Associates, Eaton Vance, and Thrivent Financial;
2) Positive on CELG, GILD: Companies rely on a few closely related medicines for the bulk of their income, but they are profitable and the recent drop in the sector creates a buying opportunity; shares of each could trade 30% higher during the next year;
3) Kevin Kaiser of Hedgeeye, whose short bets on KMI, LINE, and CHK have paid off, says the worst may not be over for master limited partnerships, which continue to face a number of challenges.

Technology Trader: The plunge in tech shares such as CRM, WDAY, and NOW shows that cloud-computing companies aren't immune to macroeconomic conditions, which are weighing on corporate budgets, though even after Friday's drubbing their shares remain high; Cautious on INFN, ANET, FNSR, CIEN, AVGO: It's unclear whether companies that supply the infrastructure for cloud computing will suffer as the market loses faith in that sector's growth.

Tech Trader: Non-cyclical companies, including staples and utilities, are on track to show 4.3% earnings growth this year, and domestic companies are vastly outperforming international ones; Cautious on CHD: Maker of Arm & Hammer and other consumer brands is vulnerable to competitive pressure in its core markets from rivals such as PG, and share remain pricey; Positive on TMO: Shares of world's largest scientific equipment maker are down, but a boom in research funding and smart acquisitions could lift them 25% in the next year.

Interview: Ed Yardeni of Yardeni Research says the Fed "is focused on just two mandates-the unemployment and inflation rates-but is averse to thinking about foreign exchange and global credit markets."

Profile: Raman Srivastava, portfolio manager, Dreyfus/Standish Global Fixed Income fund, which has benefited from a hefty weighting of developed-country government bonds and a low quotient of riskier high-yield and emerging-market bonds (top 10 government bond holdings: Australia 2018, Italy 2024, Australia 2025, Japan 2044, Canada 2024, Australia 2019, Italy 2019, Korea 2025, Australia 2024, Germany 2046).

Small Caps: Positive on TOWN, SBCF: Though shares are down, small banks are benefiting from industry consolidation, and with a rebound their stock should generate healthy returns.

Follow-Up: Positive on AMZN: Share price "looks reasonable relative to the profits analysts expect Amazon to make by the end of the decade"; Cautious on GPRO: Barron's continues its contrarian stance on the camera maker; an acquisition by AAPL is unlikely, but SNE or UA could bite, though there's a good change once acquired the brand would cease to exist; Positive on VNTV: Payment processor should continue to benefit as more merchants embrace the EMV standard, and shares could have 15% upside.

European Trader: Positive on ITV: London-based broadcaster should see increased ad revenue, and it has several potential avenues for growth; EPS could climb this year at a double-digit rate.

Asian Trader: Hong Kong continues to face problems, and as a global financial center, it imports volatility from the U.S. and China, two largely uncorrelated stock markets.

Emerging Markets: Argentina's problems are far from over, but reform-minded president Mauricio Macri has devalued the peso, cut energy subsidies, and secured financing to reduce the deficit.

Commodities: Cocoa has fallen this year amid the general drop in commodities, though it managed to buck the trend until last year's third quarter, and any rebound is likely to be small.

Streetwise: Chinese companies can't make acquisitions in "strategic" U.S. industries, but there are still a wide range of options; potential targets include JOY, TRN, GBX, EMR.