Cover story: Next year could be a time of reckoning for several tech giants that will hit the public market, which takes a more hard-headed view of the high cost of growth than the private market, according to participants in Barron’s Tech Roundtable; The panel picked twelve fast-growing startups to watch: Uber, Airbnb, Stripe, Lyft, Warby Parker, Discord, Allbirds, Toast, Fundbox, Nuro, and Aurora Innovation.
Features: 1) If several large unicorns go public next year, they could revive an IPO market that is wobbling with the downturn in stocks, but investors should temper their expectations for the IPOs and their impact on the stock market; 2) Though 81% of the companies that went public in 2018 priced in or above their indicated range, their luster has dimmed, and combined they have returned minus 2.3% this year; 3) After dropping by about 25%, some European stocks hold a lot of long-term value, and investors willing to do some legwork can find buried gems (positive on Henkel, Danone, Cie Financiere Richemont, BP, BASF); 4) Positive on CVS, LH, TDOC: A JNJ selloff on the alleged risks of baby powder looks overdone, but the stock was expensive to begin with; investors may instead want to focus on powerful long-term trends with these three stocks.
Tech Trader: The market often extrapolates the recent past and pays higher valuations when growth rates are accelerating, but the reverse is also true: earning multiples contract as forecasts fall, a problem the tech sector, and chip stocks in particular, face; Outside the tech world, there are other indications that a global slowdown may have already begun.
Trader: The odds of a recession have increased, according to Jason Pride of Glenmede, who puts the chances of a slowdown at about 35%—and when the odds of a slump are that high, it signals a high level of fragility in the economy; Positive on MS: Though weak prices make sense at some banks, which are trading as if a 2019 recession is guaranteed, the discount is hard to justify at Morgan Stanley, which has a number of growth drivers; “It’s been raining stock buybacks on Wall Street this year, and the outlook appears to be for another downpour in 2019” after repurchases crossed the $1T mark in mid-December.
Profile: Ben Kirby and Brian McMahon of the Thornburg Investment Income Builder fund, which has adjusted its allocation to stocks and bonds in line with shifting market conditions during the past 16 years.
Interview: Gary Heminger, chairman and CEO of MPC , talks to Barron’s about pump prices, refining profits, miles-per-gallon requirements, electric cars, and more.
Follow-Up: The promise of blockchain technology seemed unlimited a year ago, but it may be years before it proves its usefulness, and much of seems to be “smoke and mirrors”; Some investors wonder if the rapid decline in oil prices and a market selloff are an ominous signal about global economic growth, but they probably aren’t.
European Trader: Positive on BTI, PM: After taking a hit for most of the year, shares of the tobacco companies are substantially undervalued, generally less volatile than the overall market, and yield huge dividends.
Emerging Markets: Cautious on GCL-Poly Energy Holdings, Sungrow Power Supply: Until this year, China seemed poised to dominate the solar energy industry, but an abrupt moratorium on state subsidies for new projects has led to a drop in installations.
Streetwise: The decision by CBS to refuse a $120M exit payout for former chief Les Moonves may have inadvertently created a turning point in the “baffling pattern” of harassment settlements.