Saturday, December 8, 2018

Barron’s weekend summary

Barron’s weekend summary: Cover story on firms benefitting from offering subscription services; Cautious feature on AAPL; Positive features on AMAT, CAT, DVMT 
Cover story: Subscription services are giving companies as different as MSFT and DE regular revenue streams and benefiting investors; Recurring payments are also changing the way Americans consume software, music, movies, TV, fitness, clothing and food (Positive on SNPS, ADVS, CDNS, AZPN, ADBE, ADSK, INTU, MODN, PTC, PRO, GWRE). 

Features: 1) Cautious on AAPL: As the company’s iPhone juggernaut slows down, it could look to ADBE as a model and create a subscription service for Apple Music, iCloud storage, AppleCare warranties, and its rumored video service; 2) Story looks at how Bernie Madoff perpetuated his massive fraud, and at some of the warning flags investors should keep in mind to avoid sophisticated Ponzi schemes; 3) Positive on DVMT: Michael Dell and Silver Lake Partners will reap $11B by gaining control of VMW, but holders of the tracking stock—who aren’t getting as much as they deserve in the deal—will still benefit by owning stakes in a company with $90B in annual revenue; 4) Positive on AMAT: While the company faces near-term challenges, the long-term outlook for growth remains bright, because new, more sophisticated chips require more manufacturing equipment; 5) Positive on CAT: Shares are down, yet investors have dire concerns that seem at odds with business conditions and near-term earnings forecasts, and the recent selling looks overdone; 6) Story says many taxpayers will get a nasty surprise when they finalize their 2018 returns, but there are still ways to minimize the damage from new restrictions on deductions and other changes to the tax law. 

Technology Trader: Positive on PYPL: Company has “become an essential arms merchant in the raging war for e-commerce dollars” as retailers such as WMT, TGT, and BBY battle AMZN—and is flourishing in the transition to smartphone e-commerce. 

Trader: As the market grows more volatile, investors should own high-quality, low-volatility stocks, and not chase the market’s moves, says Savita Subramanian of BAC/Merrill Lynch; Positive on LEN: Housing doesn’t have to boom for the stock to do well, and with a dismal spring selling season baked in, shares are cheap—and likely to rise on even a modest upswing in home sales; A recent paper from the New York Fed says that equity markets treat the Fed chair “almost as the pope of Wall Street,” and that his or her words can significantly move equity markets. 

Interview: Matthew McLennan of First Eagle Global favors companies with strong competitive advantages and market positions, as well as conservative leverage, regardless of where they’re located (picks: XOM, ORCL, WY). 

Profile: Luz Padilla, manager of the DoubleLine Emerging Markets Fixed Income fund, was cautious as this year’s emerging markets rout unfolded, and believes developed markets could be the tinder for the next crisis. 

Follow-Up: Cautious on LRCX: If earnings have finally hit bottom, the shares could be a deal, but if not, the question is how low they can still go. 

European Trader: Cautious on DB: The fact that shares are down doesn’t make them a bargain, and investors should consider dumping them in any forthcoming rallies, or purchase out-of-the-money put options that will pay out if the stock falls. 

Emerging Markets: Investors will almost certainly make money in Asia over the next three years, says Edmund Harris of Guinness Asset Management, but things could certainly get worse during the next 12 months. 

Commodities: Silver prices quietly sit close to their lowest levels in nearly three years following a 15% decline this year, and the metal deserves a closer look. 

Streetwise: Politicians should stop criticizing GM chief Mary Barra for plant closures, since she is guiding the 110-year-old company toward the autonomous, electric future, while expanding its profit margins and U.S employment.