Barrons weekend summary; Positive on FFIV, JCP, HON; Negative on TWTR, SUNE
Cover story: Barrons expects the Islamic State to see its power and territory greatly diminished by the end of next year following a string of territorial losses, including key cities in Iraq and Syria;
Tech Trader: Traditional tech companies such as WDC and STX are likely to continue to suffer because of the growth of cloud computing, which is displacing sales of traditional equipment and software;
Trader: The energy sector should be less of a drag on earnings in the future, says John Amato of Neuberger Berman, but investors shouldnt chase the market at current levels until theres greater clarity on earnings; Positive FFIV: Shares of the tech company look cheap, but with favorable long-term prospects, they could rise 30% within 24 months; Positive on JCP: Struggling retailer has made big progress during the past year and remains below the markets radar, though it isnt out of the woods yet;
Profile: Matt McLennan and Kimball Brooker of First Eagle Global Fund look for companies with hard-to-replicate businesses or assets, trading for less than what a buyer would pay for the business (top 10 holdings: gold bullion, ORCL, Comcast, MSFT, KDDI, OMC, WY, Secom, AXP, HeidelbergCement);
Interview: Sam Isaly, chief executive of OrbiMed Advisors, talks about last summers biotech bust and M&A in the healthcare sector (picks: BMY, Ono Pharmaceutical, VRTX, LLY, ISRG, HCA);
Features:
1) The Barrons 500 ranking of the largest publicly traded companies measured by reported sales in the latest fiscal year is topped by ABC, GILD, MO, MAR, RAI;
2) The performance of spinoffs has begun to decline, though MSG, FRGI, and ENR are still attractive and should see gains of at least 15% during the next year;
3) A list of the cheapest stocks in the Barrons 500, topped by GNW, SC, GM, UAL, and AAL, some of which should have upside in the coming year;
Small Caps: Positive on HCHC: Company run by hedge-fund mogul Phil Falcone is less known than some of his bigger plays, but with a market value of just $135M it has great potential;
Follow-Up: Negative on TWTR: Company is the poster child for tech firms that want massive stock compensation to be excluded from profit analysis; Positive on HON: As company improves its operations and profitability, investors will likely reward it with a higher price/earnings ratio; Negative on SUNE: Solar companys shareholders will likely walk away with very little following its bankruptcy reorganization, which gives creditors most of the shares of the restructured business;
European Trader: Positive Hermes: Shares of the maker of Kelly and Birkin bags is seeing improved earnings and cash-flow growth, which could drive its shares even higher; A
sian Trader: Chinas commodities futures markets are looking like its stock markets a year ago, when hordes of investors bet huge sums, setting the stage for a painful crash;
Emerging Markets: Russian stocks are in the midst of a rebound, but the case for the country rests on its stoic endurance in the face of the global oil crash and Western sanctions, and investors must be prepared to bail if the rally sags;
Commodities: The coal market has been strong lately, but investors shouldnt expect the rally to last too long;
Streetwise: U.S. investors shouldnt put too much faith in Chinas turnaround story, and the nation seems to be drowning in too much debt.
