Cover story: Members of Barron’s policy roundtable looked at what a shift in power in Washington after the midterms could mean for investors and concluded that a scenario in which Democrats take the House and Republicans keep the Senate “could lead to potentially fruitful horse trading that allows both parties to claim victory and the citizenry to win”; Sectors such as infrastructure and healthcare might especially benefit.
Features: 1) Potential electoral results could favor the outlook for policies beneficial to a wide range of hospital, pharmaceutical, and other health-care-related companies; a big Democratic win would allow for greater Medicaid expansion in populous states, and boost opportunities for Affordable Care Act expansion; 2) The S&P 500 has typically risen the least in years when voters head to polls, and the most in off years, but it hasn’t followed the pattern this year—as a result, the good times that normally follow an election might not be as good after November’s midterms; 3) Positive on HAS: If Hasbro is successful at transforming itself into a diversified toy, movie, and videogame company, its stock could rise 50%-plus over the next two years—because while shares of toy companies tend to trade at market-average valuations, those of gaming companies go for premiums; 4) Positive on DWSH: The fund, launched in July, is one of just four actively managed bear-market ETFs that don’t seek to invert an index’s return; sub-advisor Nasdaq Dorsey Wright employs a proprietary stock-ranking system based on the strength or weakness of price moves relative to the market.
Tech Trader: Positive on CRM: The appointment of Keith Block as co-chief executive is a clear signal that founder and co-CEO Marc Benioff will eventually step back from management, in the pattern of Bill Gates and other tech founders, and leave Block to manage day-to-day operations.
Trader: Investors worry that tariffs will suppress trade and bring on another Great Depression, but Michael Shaoul of Marketfield Asset Management says it’s more likely companies will be forced to quickly rebuild supply chains without Chinese goods, while China does the same; Cautious on TSLA: The bull case for the company is based on the notion that it is more than just a car company, given its battery and self-driving car technology, but rivals are catching up in both these areas, and its advantage may not be a strong as many think; Positive on HSIC: Company’s plan to spin off its animal-health business into a startup to help veterinarians recapture the prescription sales lost to online pet pharmacies could unlock enough shareholder value to lift Schein shares by 30% to 50%.
Profile: Rick Gable, manager of MFS Global Real Estate fund, takes a contrarian approach and has 24% of his portfolio in retail REITs, more than any other real estate sector (top 10 holdings: SPG, Unibail-Rodamco-Westfield, PSA, WELL, Link REIT, BRX, Mitsui Fudosan, Hang Lung Properties, MAA, SUI).
Follow-Up: Cautious on IBM: A bear case for the company might be based on the idea that much of its recent revenue declines were the result of currency fluctuations, and as companies shift computing to the public cloud, they will want to do much of their machine-learning work in-house, which bodes well for IBM.
European Trader: “The euro looks set to bounce—the rebound will come once investors perceive that the European Central Bank is becoming more assertive in managing the common currency area’s monetary policy.”
Emerging Markets: Emerging markets assets have firmed after the panic selling of late August and early September, but caution prevails on expecting a larger rally.
Commodities: “The price of palladium has had an impressive climb of nearly 30% over the past six weeks, and could become more valuable than gold for the first time in 16 years.”
Streetwise: As religious groups prove they can activist-invest with the best, stocks are unexpectedly being enlisted as instruments of morality, which can end up having a ripple effect throughout the market.
