TradeTheNews.com Barrons weekend summary: Positive feature on BMY; positive on airline sector; Speculates Apple should make a big acquisition like Nintendo
Cover story: Almost none of the members of Barron’s 2019 Roundtable expect a recession this year; they also believe the economy will continue to grow, that Donald Trump and Xi Jinping will strike a trade deal, and that the Fed will apply a light touch to monetary policy—all of which should add up to a good year for stocks.
Features: 1) Positive on BMY: Investors worry the CELG deal will do little to improve prospects for the drugmakers, but a recent selloff makes Bristol shares inexpensive, and they could rally as the Street warms to the tie-up, or if the company becomes an acquisition target; 2) “The global interest-rate benchmark Libor could be going away after a manipulation scandal that rocked the big banks, but it threatens to cause problems for investors long after it dies”; 3) Investors are becoming more sensitive to risk, and fund managers who invest with an eye toward it could do well; five funds have generated returns and curbed losses in various market cycles (Positive on YACKX, IAUTX, PRBLX, NBGNX, VSEAX); 4) The days of low volatility and central banks working in tandem may be a thing of the past, posing challenges for investors loaded up on risk—but some overlooked funds may be the answer (Positive on MWTRX, PTTAX, SGENX, NEWFX); 5) The annual CES show in Las Vegas featured big themes such as artificial intelligence, smart homes, and robotics, but also lesser-known efforts such as DAL’s rollout of biometrics technology to help passengers navigate airports; 6) Positive on DAL, AAL: Weak pricing updates have stoked fears that a downturn is coming and that airline profits will suffer, but the outlook for the airline sector isn’t as bad as many think, and brave investors will find value.
Tech Trader: Amid growing fears about iPhone growth, AAPL may need an acquisition to spark its next phase, and while NFLX and TSLA are possible candidates, the best fit might be Nintendo, which has “mountains of cash, gushing profits, beloved brands, loyal customers, and sticky ecosystems of software and services.”
Trader: The market’s January effect is in full swing, says Chris Harvey of Wells Fargo Securities, and recent events suggest the same mindset that caused last year’s fourth-quarter selloff—rather than a shift in the fundamentals—is helping boost the market now; Positive on ICE, NDAQ, CBOE: A move by nine brokers and market makers to form a new exchange shouldn’t hurt existing players any time soon, though their long-term success hinges on their ability to evolve away from equity trading; Positive on AOS: Milwaukee-based maker of residential and commercial water heaters and boilers is growing faster than peers and targets seven percent topline growth in the future.
Profile: Kristian Heugh, manager of the Morgan Stanley International Opportunity Portfolio, believes in concentrated long-term investing, and aligns his own financial future with fund shareholders (top 10 holdings: Moncier, TAL, HDFC Bank, DSV, BKNG, Reckitt Benckiser Group, EPAM Systems, Hermes International, Fevertree Drinks, Chocoladefabriken Lindt & Spruengli).
International Investor: Positive on Legal & General: Firm, which specializes in general insurance, asset management, and mortgages, offers a fat dividend yield at a compelling valuation, and is an opportunity for investors amid Brexit-related problems.
Emerging Markets: Emerging market stocks in aggregate are trading at a 27% discount to developed market peers on a price-to-forward-earnings basis, which could mean investors should expect some outperformance—though not everybody agrees.
Commodities: The government shutdown is taking a toll on agricultural markets, preventing farmers and traders from accessing key pieces of U.S. government data they need to market and trade soybeans and other crops.
Streetwise: Though the public probably won’t benefit from the creation of the new MEMX stock exchange, brokers and trading firms will get something they have long wanted: a seat at the regulatory table.