Sunday, October 28, 2018

Barrons weekend summary

Barrons weekend summary: Cover story looks at investing in China; positive features on BAC, HOME 
Cover story: China is trying to eliminate its shadow banking system and move from an export-oriented economy to a consumer-oriented one, a task made more difficult amid rising U.S. interest rates and a strong dollar; policy missteps could lead to a repeat of 2015 and 2016, when China contributed to a $5T market rout; Is it time to invest more in China? Barron’s says “the answer is a resounding maybe.” 

Features: 1) Third-quarter earnings for S&P 500 companies are on track to rise 22.5%, yet investors have given companies virtually no credit for outperforming Wall Street expectations; 2) Positive on BAC: Bank is a standout among its peers, with a strong earnings outlook, a leading consumer franchise, a lucrative wealth-management platform, modest international exposure, strong expense controls, and aggressive buybacks; 3) Positive on HOME: Upstart retailer with a purely bricks-and-mortar strategy could be worth a look for investors after a recent selloff, which has created an opportunity to “get in on the bottom floor of a compelling growth story”; 4) There is little sign of an economic recession on the horizon, which is good for stocks, but ongoing Fed interest-rate hikes may create uncertainty; 5) Investors could initially ignore the U.S.-China trade war because it hadn’t hit corporate profits—but that is beginning to change, and companies are spelling out tariff impacts on earnings calls. 

Tech Trader: Earnings from semiconductors may hold more keys to where the market is going than earnings from tech giants like TSLA, AMZN, and GOOGL; “Veteran traders who correctly anticipated the chip weakness now see the dynamic as a red flag for the stock market and the economy.” 

Trader: Despite recent market turmoil, “it may not be the end of the world—or at least not the end of the bull market”; “Whether the easing of buybacks will continue is difficult to predict, but it’s interesting that such heretofore bullish activity has slowed considerably just when the stock market has had a nasty downturn”; Positive on ST: For long-term investors, the stock’s recent slump could provide a relatively inexpensive point to buy into a business whose products will be increasingly in use. 

Profile: Tyler Rosenlicht, co-manager the Cohen & Steers MLP & Energy Opportunity fund, says the industry is in the midst of a “tectonic shift” that includes a major reshaping of the North American energy infrastructure. 

Interview: Howard Marks of OAK, known for his ability to look beyond daily market shifts, talks about the recent market upheaval, and says almost every boom is marked by too much optimism, not enough risk aversion, and too much money. 

European Trader: Positive on BP, Royal Dutch Shell, Eni, Total: “Favorable valuations, a change in investor outlook, and a surge in oil prices could lift the stocks of major European oil producers.” 

Emerging Markets: Investors are more likely to see the recent run-up in Turkish stocks as a short-term bounce rather than the dawn of a sustained rally. 

Commodities: The first yearly decline in copper prices since 2015 has prompted investors to raise questions about other global markets, and many are expressing economic concerns. 

Streetwise: Despite talk of lower drug prices among politicians, investors appear to be betting that a divided Congress will maintain the status quo, making some healthcare stocks worth considering.-