Saturday, November 5, 2016

Barrons weekend update

Barrons weekend update: Positive on MJN, Cautious on NKE, NFLX 
Cover story: Though passive investing has grown in popularity and delivered strong returns, active management is back, and a rise in interest rates should begin to lift the smaller companies that stock pickers prefer, while increased volatility will give these investors more opportunities. 

Tech Trader: Cautious on Comcast, NFLX: Despite being at odds on a number of issues, companies are launching a joint beta test that allows Netflix to flow into Comcast cable boxes, a move meant to counter the growing strength of AMZN, Hulu, TWX, and other content providers. 

Trader: The market wants a Clinton win in the presidential race with Republicans holding onto Congress to rein in spending, but a problem will arise if the race is extremely close and sentiment is unanimous that the market will be in trouble if Trump wins; Cautious on NKE: Growing short interest is a sign some investors think things may get worse before they get better, and the company needs a game-changing product to return to form; Positive on MJN: The stocks low valuation seems to discount most of the headwinds its faces, and shares could see a 25% total return over the next two to three years.

Profile: Scott St. John and Michael Reckmeyer, co-managers of the Hartford Balanced Income fund, hold 46% of assets in stocks, 50% in bonds, and the rest in cashand only stray from the strategy if the markets hit extremes (top 10 equity holdings: MSFT, JPM, WFC, JNJ, CSCO, PFE, MRK, PM, GE, VZ). 

1) Picks from the four panelists at Barrons Emerging Market Roundtable, including Michael Kass of Baron Emerging Markets (Haitong Securities, Bid Corp., Amara Raja Batteries, Zee Entertainment Enterprises, Mr Price Group, PVR, Bank Mandiri, Bank Negara Indonesia; Andrew Foster of Seafarer Overseas Growth & Income (Sanlam, INFY); Arjun Divecha of GMO Emerging Markets (CX, Yes Bank, Sberbank of Russia); and Matthew Benkendorf of Virtus Emerging Markets Opportunities (ABEV, FMX HDB, BABA, Tencent Holdings, Matahara Department Store); 
2) Positive on EQR, MAC, SPG, PSA: Shares of these notable REITs are at or near 52-week lows, part of an overall pullback in the sector thats created an attractive opportunity for investors; 
3) China has relied on mindless monetary stimulus since 2008 to muscle its way to continued output growth, leading debt levels to surge and creating a borrowing spree that could have global repercussions. 

Small Caps: Positive on ALSN: Worlds largest maker of fully automatic transmissions for medium and heavy commercial trucks and defensive vehicles has dedicated customers, few competitors, and pricing power. 

Follow-Up: If Donald Trump wins the election, investors expect a swift selloff in stocks, though sectors such as energy and steel could be winners based on Trumps campaign proposals. 

European Trader: The reaction in the U.K. to a high court ruling that Parliament must approve a move to start the Brexit is indicative of what would happen if Britain doesnt leave the EU: sterling could retrace its losses, and the U.K. stock market could fall. 

Asian Trader: Cautious on Samsung Biologic: Biopharmaceutical arm of SamsungGroup raised $2B in an IPO last week, but though it has an interesting strategy, the stocks pricing is too aggressive. 

Emerging Markets: The Russian ruble is stronger by 13% this year against the dollar, reflecting the central banks market-friendly policies, while the economy is stronger and shares are up 24% this year (Positive on Magnit, Yandex, VanEck Vectors Russia). 

Commodities: As zinc mines close, supply has fallen, pushing prices up, but the rally will likely run out of steam before long. 

Streetwise: Should the proposed BATS-RAI deal go through, its likely MO and PM would recombine to create a global tobacco giant with more stable cash flows and would make it easier to launch the IQOS smokeless cigarette.