Cover story: “The explosive growth of digital data, along with better tools to analyze and store it, has jump-started a once-niche industry that packages under-the-radar information”; so-called alternative data, such as language tracking software that detects consumer sentiment, is becoming mainstream, creating potential and risk for investors.
Features: 1) Cautious on FB: Company has gotten past a string of scandals recently, but there is the risk its prospects may be damaged more than the market expects down the road by Washington and Brussels; 2) Positive on PGR: Company, the No. 3 auto insurer in premium volume behind State Farm and Geico, has excelled at every major aspect of the business, and offers a tech-like growth story with its sophisticated analytics; 3) Regular investors are increasingly able to take advantage of alternative data, such as credit-card use or location tracking, offered by firms such as AMTD or Sentieo.
Tech Trader: Positive on MSFT: Tech giant’s revival bucks a trend in which once-great companies such as Sun Microsystems or Digital Equipment flounder and disappear; Under chief Satya Nadella, it made a bold pivot away from Windows, putting its cash cows at risk, and successfully transitioned to cloud computing.
Trader: Earnings estimates are likely to keep falling, says Dennis DeBusschere of Evercore ISI, and with the S&P 500 trading about at 15.8 times forward earnings, the risk of lower profits will limit future returns; Positive on APTV: For investors unwilling to bet on automakers such as GM because of tough competition and high capital needs, Aptiv, a supplier that sells key safety technologies for driverless cars, could be a good play;The annual meeting of the American Society of Hematology will feature developments from big firms such as CELG, AMGN and smaller ones such as BLUE and Genmab.
Interview: Raghuram Rajan, governor of the Reserve Bank of India, has an independent streak that has drawn backlash; He talks to Barron’s about where the next crisis might be brewing, China’s debt, and why investors should care about income inequality.
Profile: Robert Hyman, manager of the ALPS/Core Commodity Management Complete Commodities Strategy fund is trying to mitigate the contango that has cost about six percentage points per year for the past 10 years to the Bloomberg Commodity Index.
Follow-Up: 1) Positive on GM: Automaker is taking the right steps with its plan to shutter plants and focus on its profitable truck/SUV business and autonomous vehicles, but investors are giving it little credit, and shares are undervalued; 2) Cautious on GE: Story offers four suggestions for how chief Larry Culp can turn around the troubled company: Be bold at GE Capital, sell part of GE Healthcare, infuse new life into the culture, and switch deal-making priorities.
European Investor: Positive on J.D. Wetherspoon: Shares of British pub chain, which recently dropped after an earnings scare, are cheap, and offer a persistently high return on equity.
Emerging Markets: Markets are skeptical about the ability of Mexico’s incoming President Obrador to deliver on socially generous campaign promises and deal with a “caravan” of migrants massing on the U.S. border.
Commodities: “Achieving a balance in the oil markets is proving to be a challenge for OPEC and its allies, and they face their stiffest test yet when they meet in Vienna next week.”
Streetwise: If there’s value in stocks, it’s in foreign markets, says Doug Ramsey of Leuthold Group—companies such as those in the MSCI EAFE index could gain 10% just to get back to median valuations.