Barrons weekend summary: positive on BKS, ZTS, AMG
Cover story: According to Barron's strategists, the "consensus outlook for U.S. stocks in the remainder of 2016 is mixed and even tinged with a bearish hue," a downgrade from optimism at the beginning of the year-though pundits are more upbeat on 2017.
1) Positive on BKS: "Despite the widespread perception that Barnes & Noble is getting destroyed by AMZN, the country's largest bricks-and-mortar bookseller remains solidly profitable and projects significant earnings increases in coming years";
2) Positive on ZTS: Maker of animal medications is benefiting from greater consumer spending on pets and growing demand for livestock products, and shares could rise 15%;
3) Positive on AMG: Shares of the holding company have taken a hit, but the selling appears overdone, and they have the potential for 35% upside.
Tech Trader: Positive on AVGO: Broadcom's chips are powering the growth of servers that companies such as AMZN, MSFT, and GOOGL are building at a rapid pace in multiple cities, while chipmakers such as SWKS and QRVO are tied to AAPL and other players in the slowing smartphone sector; Other players in the sector, including XLNX, CAVM, and MRVL, could be takeover targets.
Trader: Weakness in manufacturing sometimes heralds a recession, but Michael Shaoul of Marketfield Asset Management says manufacturing is stagnating because the economy is shifting toward service jobs; UAL's reputation for late flights and lousy service is hurting its standing with corporate clients and has likely contributed to weaker performance; Positive on USG, BLDR: Building-products stocks are benefiting from the boom in single-family home construction.
Profile: Bob Mitchell and Joe Monahan of Conestoga Small Cap Investors look for growth stocks with insider ownership and high returns on equity (top 10 holdings: OMCL, SPSC, BLKB, NEOG, LGND, MLAB, VASC, CNM, TYL, SSD).
Interview: Morris Mark of Mark Asset Management says the firm's funds are a vehicle for capital appreciation, and thinks AMZN could be worth up to $1,200 a share (picks: ATVI, AMZN, SCHW, TOL).
Small Caps: Positive on DSW: Disappointing second-quarter earnings and a bleak sales outlook for the second half have hurt the stock, but the company's longer-term prospects are better than many investors realize.
Follow-Up: Positive on ARMK: Shares are still attractive at 10.6 times enterprise value to earnings before interest, taxes, depreciation, and amortization, and they could push past $42 during the next 12 months.
European Trader: Positive on Valeo: French automotive supplier could grow faster than expected and see rising profits because of strength in reducing carbon emissions and intuitive driving, two hot auto segments.
Asian Trader: Cautious on CNOOC, PetroChina, Sinopec: Rather than look to OPEC to gauge the direction of oil prices, investors would do well to keep an eye on China's Big Three energy companies.
Emerging Markets: Inflows in emerging markets are up, but numbers from the private-equity sector hint that something may be wrong with the picture.
Commodities: The surge in agricultural products to feed a growing global population, along with advancing urbanization, are pressuring the world's water supply, of which only 2.5% is fresh.
Streetwise: Technology may be improving lives in many ways, but it's also a force of deflation, because tech companies require far fewer workers than traditional ones, creating a radical shift in the labor market.