Barrons weekend summary: Positive on RHT, FDC; cautious on BA
Cover story: Profile of BX strategist Byron Wien, who for the past few months has been bearish on the U.S. stock market, which he thinks may have a down year in 2016, after which investors will be lucky to get a 5-7% annual return; Wien thinks the global economy will grow at just 2% this year, and is cautiously optimistic on China and worried about Japan.
1) Cautious on BA: Aerospace giant, which turns 100 this year, faces turbulence because of a glut of planes and lower demand for its fuel-efficient models, a sign carriers are using fleets longer before they order new aircraft;
2) Positive on RHT: Relative to the free cash it generates, company trades in line with the broad stock market, despite much faster growth; shares could see a gain of 30% within a year;
3) Positive on FDC: Shares are down amid waning investor interest in tech-related stocks, but firm is making progress cleaning up its balance sheet and rebuilding its payment processing system; shares could rise 70% or more in the next year or two.
Tech Trader: Cautious on AAPL: Berkshire Hathaway's $900M stake comes as Apple's business grows increasingly complex, following the paring down that came when Steve Jobs returned in 1997, and it needs to resolve the inherent conflict between iTunes and its streaming music service.
Trader: That the market was able to recover from the FOMC news indicates investors are "coming to grips with the fact that rates will have to go higher," says Chris Gaffney of EverBank World Markets; Positive on JCI: Company, whose merger with TYC may face extra scrutiny from the Obama administration, has a strong track record of growing profitability, making shares attractive for long-term investors; The difference between two- and 10-year Treasuries can be a useful indicator signaling caution, but only when it hits zero, or when short-term rates rise above long-term.
Interview: Laszlo Birinyi, founder of Birinyi Associates, says the firm has always made more money in up markets than in down markets (picks: KHC, AZO, NVR; pans: AAPL, MO, NKE).
Profile: Michael Fredericks, head of income investing for BLK's Multi-Asset Strategies group and portfolio manager of BAICX, will invest in anything that produces income (top 10 assets: high-yield debt, mortgage-backed securities, bank loans, investment grade debt, international equity, preferred stock, emerging market debt, global REITs, U.S. equity).
Small Caps: Positive on AWI: Company is the largest player in the ceiling market for commercial buildings, a business with a high barrier to entry; lately the construction market has picked up, and shares look attractive.
Follow-Up: Cautious on R: Near-term risks remain for trucking company, but over the long haul shares look likely to recover, and they offer a 2.4% dividend yield; Cautious on FRAN: Disappointing results and the announcement its chief executive Michael Barnes is leaving amid other executive departures should give investors pause; Positive on PEP: Trian Fund Management has sold its large stake in the food and beverage giant, but the improvements it pushed for should endure, and the company continues to boost shareholder value.
European Trader: Positive on AXA: Shares of the firm "appear inexpensive and could get a shot of momentum when the French insurer and asset manager unveils a new five-year strategic plan next month."
Asian Trader: Manufacturers in AAPL's iPhone supply chain-including Samsung, AAC Technology, Japan Display, and Sharp-could take a hit because of slower iPhone sales, though the wider adoption of dual-lens cameras should benefit supplier Largan Precision.
Emerging Markets: Positive on PBR: Shares of Brazilian state-controlled oil giant have more than doubled from their recent lows; they remain undervalued and are likely to rise.
Commodities: "Propane prices that have been painfully low for U.S. producers are poised to take off as exports surge."
Streetwise: Cautious on WMT: The retailer's situation seems to be improving, but with its shares so pricey, investors should proceed cautiously.