Saturday, April 2, 2016

Barrons weekend update

Barrons weekend update: positive on TWX, UTX; cautious on BAM 
Cover story: Though Republican leaders are pressing Ohio governor John Kasich to drop out of the race, it's unlikely he will do so-and for investors that's a good thing; "Kasich's policy prescriptions, experience, and temperament make him the GOP's best bet to reassure a nervous marketplace," and he would be better for investors than Hillary Clinton in the White House. 

1) Picks from participants in Barron's energy roundtable, featuring Barry Kupferberg of Trilogy Capital Management (Rockies Express Pipeline, Permian Resources), Robert Thummel of Tortoise Capital Advisors (EPD, SXL, LNG, PXD), Harlan Cherniak of KKR (SLCA, DYN bonds, CPN bonds) and Richard Daskin of RSD Advisors (SEP, MMP, PSXP); 
2) Positive on TWX: Shares are up following the success of Batman v Superman, which bodes well for nine more DC Entertainment movies to be released during the next five years, while the company's TV and game production is thriving; 
3) Positive on UTX: Shares have fallen 15% over the past two years, but increased cost-cutting, stronger results in its U.S. air-conditioning business, and a new commercial jet engine could send earnings up; shares could return 20% during the next year; 
4) Cautious on BAM: Company specializes in illiquid properties whose values it calculates from "unobservable inputs," such as the discount rate applied to a property's projected cash flow, a process that raises some questions for investors. 

Tech Trader: The cloud-computing sector continues to undergo a transformation, with shares of pure-play stocks such as CRM and WDAY down, while traditional software makers like ORCL and IBM have risen because of efforts to highlight the parts of their businesses that contain cloud-computing elements. 

Trader: Investors "want to see interest-rate hikes that indicate the U.S. economic engine is revving strongly to withstand higher rates," says John DeClue of the Private Client Reserve of U.S. Bank; Positive on CELG: Shares of the managed-care health provider are down as investors lose interest in the sector, but the company stands to benefit from expansion and the ACA's push to insure more people; Positive on HAIN: Slower revenue growth is partly the result of the company growing larger and struggling to maintain momentum, but it stands to benefit from growing sales in organics and efforts to reduce expenses-and insiders have increased their holdings. 

Profile: Justin Thomson, portfolio manager of the T. Rowe Price International Discovery fund, has taken advantage of weakness in foreign markets to buy (top 10 holdings: Victrex, Eurofins Scientific, Axiare Patrimonio Socimi, Playtech, Norma Group, Partners Group Holding, Nippon Seiki, Ambu, Fisher & Paykel Healthcare, MercadoLibre). 

Small Caps: Positive on MTW: Industrial crane maker, formed only a month ago as a spinoff of parent company MFS, will undergo a restructuring that will improve margins and could lead to higher profitability. 

Follow-Up: Barron's says robo advisors are legitimate competitor-at the mass-affluent level-to traditional financial-services firms, which are weighed down by legacy software code and human advisors.

European Trader: Positive on ENDP: Specialty pharma company's shares are down, but it should undergo a recovery over the next 12 to 24 months, and shares could rebound by more than 50%. 

Asian Trader: Sinagpore's recently announced budget will boost spending by 7% this year, which could bolster stocks in banking, consumer staples, healthcare, and transport. 

Emerging Markets: Some investors in Brazil are looking to put profits elsewhere, given the country's mounting problems, and are looking to China, which has projected GDP growth of 6-7% (Positive on Kweichow Moutai, JD). 

Commodities: A seasonal shortage boosted lumber prices, but slowing U.S. housing construction and a weak Canadian dollar should bring them back down again. 

Streetwise: With the markets rallying, companies may see a window of opportunity for IPOs, but it remains unclear how eagerly investors will embrace them.