Barron's weekend summary: positive on GT, DVA, JNJ
Cover story: The Dow Jones Industrial Average has risen by 8% since Donald Trump won the presidential election, and the index is up 13% for the year, topping the S&P 500 and the Nasdaq-and is rapidly approaching the historic 20,000 mark, which it could soon hit; The rally has been led by GS, UNH, and CAT.
1) Positive on GT: Key concerns about the stock seem overstated and more than priced in, and while low materials costs are helping the company, efficiency gains are the key driver; shares could rise by 25%;
2) Positive on JNJ: Company has a diverse range of businesses, steady earnings growth, and a dividend yield near 3%-and shares could rally by 20% as operating improvements spark earnings growth;
3) Stock picks from the Sohn Investment Conference include CHTR, MBLY, ALV, Leonardo-Finmeccanica, Ferrrovial, and Euro Disney, all of which should see gains next year;
4) Positive on DVA: Shares of kidney dialysis machine maker are down on worries its operating income will be cut by new CMS guidelines, making them cheap for a company that continues to spin out cash.
Tech Trader: Positive on CSCO: With company's traditional networking gear business slowing, Cisco is focusing on the security sector, where it has sizable revenue and sales growth; its subscription-based network-security software could give shares a 25% boost.
Trader: If Donald Trump's tax cuts and spending plans become reality, a virtuous cycle could result in which "the gain in animal spirits could amplify the boost to the economy from fiscal stimulus," says BAC's Michelle Meyer; When markets are moving fast, some stocks become mispriced, says Societe Generale strategist Alain Bokobza, meaning next year "will be the kingdom of stockpickers"; "Without something new to propel the stocks higher, banks remain at risk of a sharp pullback"; among those with $50M or more in total assets, KWB analyst Frederick Cannon recommends JPM, BK, COF, and CFG.
Interview: Value investor Mohnish Pabrai of Pabrai Investment Funds likes autos and airlines, including GM, FCAU, and LUV.
Profile: Nick Kaiser and Scott Klimo of shariah-focused Saturna Capital won't hold stocks that derive more than 5% of sales from alcohol, tobacco, gambling, pornography, or pork processing (top 10 holdings: ADBE, AAPL, CHD, INTU, AMGN, TJX, LOW, EL, QCOM, LLY). Penta: Profile of Fiduciary Trust's new chief executive, John Dowd, who wants to double the number of clients and assets under management during the next five years through tapping next-gen clients, digitization, global expansion, and rebranding; The IRS is closing wealthy families' biggest tax break, the ability to pass on shares of family-owned businesses, LLCs, and/or limited partnerships to heirs at a discounted value.
Follow-Up: Cautious on X: Earnings estimates are widely scattered, and investors may want to take profits now and wait until the anticipated infrastructure steel boom turns into something realistic.
European Trader: Italy's rejection of proposed constitutional reforms hasn't sparked a crisis, mainly because pollsters predicted the outcome and because of the country's improving economic prospects.
Asian Trader: Positive on Samsung: South Korea's presidential corruption scandal could be a blessing in disguise for the electronics giant, pushing it further toward the restructuring called for by Elliott Management.
Emerging Markets: The key focus for growth at a revamped AVP is mostly in emerging markets such as Brazil, Mexico, Russia, Colombia, and Turkey-and a turnaround effort is already showing promising signs.
Commodities: "Silver may have been clobbered in recent months, but the price of the widely used metal is likely to strengthen gradually over the next year or two."
Streetwise: "Rates are rising from extraordinarily low levels," says JPM chief global strategist David Kelly, "and fixed-income investors will not have the buffer of juicy yields" to protect against capital depreciation of falling bond prices.