Sunday, November 4, 2018

Barrons weekend summary

Barrons weekend summary: Cover on new arms race with China that could benefit defense contractors; Positive feature on AMZN, GOOGL and MSFT; Positive feature on IR and LII 

Cover story: China’s development of a new weapon called a hypersonic missile could render current defense systems obsolete, drive a new arms race, and keep money flowing for military contractors such as LMT, NOC, and RTN. 

Features: 1) Positive on AMZN, GOOGL, MSFT: Top software and Internet companies could become defense-sector players because they spend vast amounts of money on research, much of which is relevant to the Department of Defense; 2) Neuroscientists and behavioral economists say erasing hard-wired biases isn’t possible; many institutional investment firms are hiring coaches to them better understand how emotions affect investing; 3) Donald Trump says that stocks will go down if Democrats are elected in the midterms, but if the market is forward-looking, why hasn’t a crash already happened?; 4) A broad selloff in the housing market has left a few stocks looking like bargains, and the HVAC sector can still deliver upside despite housing concerns; IR and LII look poised for a rally. 

Tech Trader: Cautious on IBM: Company’s acquisition of RHT has been met with mixed reviews, and is “not a game changer for anybody but IBM,” which lags AMZN, MSFT, BABA, and GOOGL in the cloud; IBM is touting the deal as a path to a new “hybrid cloud,” but there’s no industry consensus about what that is. 

Trader: “The fact the market sold off so abruptly on Friday is just one more reason for investors to use rallies as opportunities to sell, rather than buy”; With interest rates certain to go higher, investors need to focus on companies that won’t feel the pinch from higher borrowing costs; Positive on REZI: The HON spinoff gives investors exposure to the Internet of Things, and even if it doesn’t live up to its potential, is appears to be trading at a discount to its fundamentals. 

Interview: Jim Callinan, manager of the Osterweis Emerging Opportunity fund, looks for company management teams who “stretch goals” and then deliver on them. 

Profile: Adam Weigold, manager of the Eaton Vance Municipal Opportunities fund, has a team of 16 analysts who carry out deep credit analysis to find undiscovered gems; they’re currently looking for possible takeover candidates in the municipal hospital sector. 

Follow-Up: GE’s move to cut its dividend is not a good sign for shareholders, and while buyback programs are easily adjusted with little fallout from investors, that’s less true with dividends. 

European Trader: Positive on RIO, Glencore, Anglo American: With copper prices down, investors have an opportunity to buy shares of mining giants with generous dividends, but their long-term prospects will depend on how the global transition to electric vehicles plays out. 

Emerging Markets: Mexican president-elect Andres Manuel Lopez Obrador’s decision to abandon construction of a $13B airport outside Mexico City spooked investors, who may have oversold the country based on that single policy decision. 

Commodities: “The oil market has had nearly six months to assess the possible effect of U.S. sanctions on Iranian oil exports,” but the prospect of significantly tighter global supplies has resulted in lower prices. 

Streetwise: The basic problem with so-called ESG investing is that there is no standard legal definition, leading various funds to approach it in their own way, and it has yet to produce demonstrable proof of its efficacy on long-term shareholder returns.