Cover story: The numbers indicate that things are going well at Fidelity, but there are potential problems: the firm isn’t as profitable as large publicly traded peers, and profit margins lag those of BLK, SCHW, and TROW; Chief Abigail Johnson faces new cost pressures and changing investor behavior, fueled by disruptive technologies. Johnson says not interested in a merger with Goldman Sachs.
1) Cautious on WU: Company has the ability to connect the digital and physical worlds of money, but unlike PYPL and SQ, it doesn’t offer exposure to the increasing digitization of shopping, a potential long-term problem;
2) “The high-yield bond market is having a good year, too good, perhaps, in the view of some analysts and investors,” though it appears to be the best option for investors who need yield and can tolerate risk;
3) Positive on ETN, TEX, IR, CONE: Among companies that stand to benefit from the major increase in capital spending on data centers by the top four U.S. cloud players: AMZN, FB, GOOGL, and MSFT;
4) Positive on BKS: Even with the jump in shares following the company’s announcement it will pursue strategic alternatives, the stock could have more upside because the company is valued cheaply relative to cash flow and sales.
Tech Trader: Positive on MA, V: Credit card networks “remain a play on the growth of e-commerce, and they’ve done a good job of insulating themselves from disruption”—fintech rivals such as SQ and PYPL couldn’t exist without them.
Trader: Investors should be taking risk out of their portfolios, says Christopher Harvey of WFC, but “it’s not time to run for cash and canned goods”; Amid a big jump in corporate stock repurchases, executives at many companies doing buybacks are dumping shares at a record clip; + RIG: Higher utilization rates are boosting the prices Transocean charges for its rigs, and could push the shares to gains of more than 15%.
Mutual Fund Quarterly: 1
) Story looks at different approaches for assessing Fidelity’s worth, a task made difficult because the firm only selectively reveals financial information;
2) The mutual fund industry faces challenges such as price wars, and a variety of industry changes could spur consolidation, a greater push overseas, and more specialization;
3) Three mutual fund chief executives—Tim Buckley of Vanguard, Timothy Armour of Capital Group, and William Stromberg of T. Rowe Price—discuss the changes and challenges that lie ahead for their firms;
4) After a decade of breakneck growth, the ETF industry is at a turning point—among other things, investors should prepare for a slew of new “index” products that resemble actively managed funds, and charge like them.
Follow-Up: AMZN’s move to raise warehouse-worker wages will have ripple effects: Blue collar workers in the U.S. should benefit as their employers scramble to keep up with the e-commerce giant.
European Trader: The political crisis in Italy is sending bond prices down and yields up, creating a contrarian opportunity for investors willing to risk buying long-dated Italian bonds at discounted prices.
Emerging Markets: China isn’t likely to agree to Washington’s demands that it cease buying Iranian crude, adding more uncertainty to an emerging markets outlook that was fragile enough before the trade clash.
Commodities: “Gold prices may already have hit bottom this year after declining for the past six months in a row, the longest street of losses in nearly three decades.”
Streetwise: TSLA may be good test case of California’s new law requiring corporate boards to have females—research shows a diversity of opinions leads to better decisions, though mercurial chief Elon Musk might choose not to listen.