Sunday, February 14, 2016

Barron's Saturday summary: Positive on DWN.DE, CUB, ESL, KEY, BMY; Cautious on VIA, LNKD, JPM, RACE, CS 

Cover story: The rise of Donald Trump and Bernie Sanders in the presidential race "could be one more reason why stock markets are under pressure and could remain so for awhile"; Investors, who are generally more comfortable with establishment candidates, have reason to be nervous about the campaign's direction. 

Tech Trader: Amid the recent rout in the tech sector, mega-cap companies such as AAPL, CSCO, GOOGL, and FB remain powerful in their markets, while smaller players such as QLIK, DATA, and LNKD are feeling the pain, partly because of high valuations and expectations. 

Trader: When the Chinese market gets back in the swing of things next week after the Asian New Year break, there could be volatility if growth slowdown fears return; Cautious on VIA: Nothing much is likely to change at the company as long as Sumner Redstone remains a presence, and long-term oriented investors who find the shares attractive because they're undervalued may have to wait some time for a payoff; Cautious on LNKD: Amid skepticism and worry in the tech market, company's growth is likely to keep decelerating, shares remain overvalued, and margins are declining. 

Profile: Mammen Chally, lead manager, Hartford Core Equity fund, looks for three traits in a company: improving quality via capital structure or competitive situation; business momentum; and lower-than-average valuation (top 10 holdings: GOOGL, MSFT, CVS, JPM, COST, MDLZ, AAPL, AGN, MO, PNC). 

Interview: Don Morgan, chief investment officer at Brigade Capital, says the risk/return ratio in the bond market is favorable relative to other asset classes, and that high-yield bond prices could rise sharply (picks: Albertson's 7.45% due 2029, AMD 7.75% due 2020, Consol Energy 5.875% due 2022, Savine Pass (Cheniere) 5.75% due 2024, Puerto Rico 5% GO due 2041). 

1) Positive on BMY: Company's cancer-fighting medicine Opdivo has earned FDA approval and has the potential for $8-9B in annual sales, making the pharma giant's shares a good bet for long-term investors; 
2) Positive on KEY: Shares of bank look cheap by historical standards, and its acquisition of FNFG could prove more lucrative than investors expect; firm's 2.9% dividend payout could go up this year, and shares could return 30% or more; 
3) Positive on CORE: Wholesale distributor is benefiting as the stores it serves see more foot traffic, but its customers remain vulnerable to growing competition from WMT and DG, and to the severity of tobacco-sale restrictions. 

Small Caps: Positive on CUB: Shares of the maker of fare-collections systems for transit services have fallen, but the resultant selloff looks like an overreaction, and a buying opportunity for investors; Positive on ESL: Selloff following a poor earnings report in February offers an opening for investors; company has an attractive franchise, and an activist investor could take interest. 

Follow-Up: Cautious on JPM: Chief Jamie Dimon's decision to buy shares gave them a boost, but investors in the banking sector still worry about potential problems in the global economy and trouble with European firms; Cautious on CS: Despite a plunge in shares, bargain hunters should take a pass and seek safer firms that trade cheaply; the bank continues to face heat from regulators related to tax evaders; Cautious on RACE: Shares are selling far below their IPO price, and are likely to stay there until the bull market returns. 

European Trader: "Bloodletting in the European banking sector may not be over despite last week's brutal selloff," and uncertainty remains amid negative interest rates and other issues in the eurozone; Positive on Deutsche Wohnen: German property stock is worth a look for investors. 

Asian Trader: Some investors wonder if all the bad news in Thailand is already reflected in the market, paving the way for bargain hunting, but that view is premature. 

Emerging Markets: Venezuela's "political disarray and shortage of dollars have put its bonds in a tinderbox," and though default may not be imminent, many observers see it as an eventuality. 

Commodities: Orange juice is no longer the consumer staple it once was, and a case can be made that its futures market "will go the way of the dodo." 

CEO Spotlight: UA founder and chief executive Kevin Plank says the "athleisure" trend is here to stay, and that the company plans to expand internationally to ease its dependence on North America and gain ground on rival NKE