Cover story: In the years following Black Monday on October 19, 1987, the use of algorithms to pick stocks, mitigate risk, and place trades using computer systems has grown, creating the illusion that risk can be measured and managed—but the system may be more fragile than investors expect.
Tech Trader: Positive on GOOGL: Company is seeking to catch up to rivals AMZN and MSFT in cloud computing, and could make a large acquisition—such as WDAY or CRM—to increase its footprint in the sector.
Trader: “Even though the large-stock indexes ended the week in positive territory, they didn’t make the big moves they have in recent weeks, as evidenced by gains of half a percentage point or less”; Many traditional dividend-paying stocks are pricey on a relative basis, says Jim Tierney of AB, who cites KO as an example; Canadian Tire chief financial officer disputes PAA Research’s view that AMZN will soon disrupt Canada’s bricks-and-mortar merchants.
Interview: Nobel laureate Robert Shiller talks about how narratives help shape investor sentiment, and discusses the importance of the 1890s depression.
Profile: Mark Durbiano, manager of the Federated High Yield Trust portfolio, allows up to 20% of its assets to be allotted to equities (top five equity holdings: OI, GT, BERY, NCR, GPK).
Features: 1) In Barron’s annual Big Money Poll, top money managers remain optimistic, with 61% describing their outlook as bullish; 2) Positive on JD: Investors shopping for growth stocks in China might look beyond BABA to JD.com, the country’s No. 2 online retailer, whose shares could gain 30% or more in the next year; 3) Positive on D: With a strong power portfolio, the company hopes to increase earnings by 6-8% annually during the next few years, and raise its dividend by 10% each year.
Echoes of ‘87: Wall Street investors Art Cashin, Abby Joseph Cohen, Marc Faber, and Peter Tuchman look back on Black Monday and the lessons they learned from the crash; Eight funds (OAKIX, BEXFX, VGTSX, JENRX, PRDGX, VIG, VBMFX, MWTRX) can help investors dial down risk; A look at market selloffs that transformed Wall Street, starting with the crash of 1929; Former Barron’s writer Alan Abelson’s column on Black Friday, first published on October 26, 1987.
Follow-Up: Positive on BAC, C, GS, JPM, MS, WFC: Major banks, which are benefiting from higher short-term rates, modest loan-demand growth, restrained expenses, and generous capital returns look attractive for investors.
European Trader: The British market “has too many stocks vulnerable to central bank tightening,” creating a weak spot in the market in addition to problems the Brexit process is causing.
Asian Trader: Cautious on Softbank: While some investors think the company’s strong track record and stake in BABA make it a good opportunity, others argue its huge debt load and the capital gains taxes it would face were it to sell assets pose problems.
Emerging Markets: International Monetary Fund data indicate that global growth is on track and many developing countries are fueling the economic expansion.
Commodities: Prices for gold have outpaced those for silver this year, but the latter metal should emerge as the winner amid growing demand from the solar and smartphone sectors.
Streetwise: This year has seen only eight daily moves of one percent either way in the S&P 500, so that if the market hits a bump, lower correlations should absorb some of the damage.