Barrons weekend update: positive on TOL, STX, AAPL
Cover story: Pimco co-founder Bill Gross, who now runs JUCAX at Janus Capital, "doesn't think much of the central-bank policies that have repressed rates, punished savers, and failed to ignite economic growth, and says the Fed must begin to raise rates in coming years to keep the economy on track."
1) Positive on TOL: Homebuilder's expansion into the luxury condominium sector in cities such as New York during recent years has paid off, but recent concern on Wall Street is overdone, and shares could offer 40% upside;
2) Positive on STX: Shares of hard-drive maker are down by 38% during the past 12 months, but the growth of cloud storage should create greater demand, the dividend looks safe, and the stock could return 20%;
3) Positive on AAPL: Slow growth, primarily tied to the iPhone, has sent shares down, but at $108 they're undervalued and could hit $150 in a year for a return of 40% because of strong recurring revenue from the company's growing services business.
Tech Trader: Cautious on MU: Things aren't likely to improve anytime soon for maker of DRAM chips, with Samsung boosting production even as prices fall, much like the Saudis have done with oil; Micron won't decrease production as it moves to a new manufacturing technology that should bring down costs and help profits.
Trader: "Macroeconomic factors have influenced the market over the past few weeks," says David Lefkowitz of UBS Wealth Management Americas, "but when Q1 earnings start flowing this week, there will be more stock-specific activity"; Cautious on WWE: Company is profitable, has little debt, and a 3% dividend, but it isn't growing as fast as many investors believe, and shares have a high valuation; Cautious on BHI: It's remains uncertain whether the merger with HAL will proceed, even though both companies say they will "vigorously content" the Justice Department antitrust suit seeking to halt it.
Mutual Fund Quarterly: Story says investors should avoid "smart beta" exchange traded funds, because their strategies have grown more expensive and risk crashing if they return to historical valuations; Profile of Primecap Management, a $100B firm with six mutual funds that have beat at least 86% of their peers during the past decade; A look at how to choose the best dividend ETFs, which offer a variety of yields and returns; "In a quarter that saw one of the biggest market reversals in the history of the S&P 500, actively managed mutual funds failed to keep up with the index. Value, commodity, and emerging-markets funds did best."
Small Caps: Positive on OI: Shares of the world's largest maker of glass bottles are down 50% from a June 2014 high, making them attractive for investors, who could see 25% upside and expanded profit margins.
Follow-Up: Positive on DIS: Problems arising from the planned departure of chief operating officer Tom Staggs should be manageable, and are more than offset by good news elsewhere in the company; Cautious on NEM: Stock has risen 62% on a jump of more than 15% in the price of gold, but despite signs of promise, shares aren't cheap, and investors should consider taking profits now.
European Trader: Positive on Carrefour: Shares of French retailer "have been marked down in 2016, but worries about its growth prospects may be overblown, and the stock could offer a 20% upside."
Asian Trader: The recent influx of money into Asia, and rising share prices there, present a challenge for investors, especially bargain-hunters.
Emerging Markets: Emerging-market corporate bonds in countries such as India and Indonesia offer 5% annual returns and little risk (Positive on MercadoLibre, Naspers, Bharti Airtel, EMB, DBLEX).
Commodities: Despite heavy production in the U.S., Canada, and Kurdish-controlled Iraq and a weak global economy, it's likely crude supplies will tighten, driving prices higher.
Streetwise: Companies that will benefit from the government's newly imposed fiduciary rules for advisors include firms such as SCHW and AMTD that were already profiting from low fees.