Sunday, February 17, 2019

Barrons weekend summary

Barrons weekend summary: cover story on cannabis stocks; positive feature on Loews (L) 
Cover story: Investors interested in U.S. cannabis stocks face a number of challenges: Although marijuana is legal for recreational or medical use in many states, it remains illegal under federal law, so cannabis companies—with the exception of those that only sell in Canada such as CGC and TLRY—can’t list on American exchanges; Top contenders in the U.S. market include Acreage Holdings, Green Thumb Industries, MedMen Enterprises, Harvest Health & Recreation, Trulieve Cannabis, iAnthus Capital Holdings, which are pursuing varied strategies, with only Acreage and iAnthus profitable so far. 

Features: 1) The patchwork of marijuana regulation in the U.S. makes it hard for cannabis companies to manage legal issues, but a broader federal reform would result from the States Act, proposed in June 2018, that would exempt cannabis from most federal drug laws in states that have legalized it; 2) Positive on EQIX, COR, IRM, INXN: Barron’s found four leading companies in the data-center sector whose shares look compelling after an industry slowdown that weighed on investor sentiment—the shares are staging a comeback and seem poised for further growth; 3) Positive on Fanuc, ABB, Yaskawa Electric, Kuka, TER: Major robot makers offer investors a good opportunity to gain exposure to a technology that is part of what manufacturing executives say will be the next industrial revolution—and of the five, Teradyne is particularly attractive; 4) Positive on L: The home-improvement company is a $15B conglomerate that “flies under Wall Street’s radar,” and is “a conservatively run, value-oriented company, with decent growth prospects, that trades at a nice discount from its net asset value.” 

Tech Trader: An executive order from Donald Trump banning Huawei Technologies gear in the U.S. would be good for the company’s rivals—including NOK, ERIC, and Samsung Electronics—problematic for foreign telecom operators, and worrisome for U.S.-China trade relations. 

Trader: “The market’s rally has forced investors to rebuild positions they may have sold off during December’s tumble—and they may not be finished just yet,” while hedge funds and risk-controlled portfolios still have little exposure to the market relative to history and retail investors haven’t put much money back in since the downturn; Positive on YETI: Maker of outdoor gear such as coolers, jugs, wine tumblers, and more has low brand recognition, but as more people learn about it, shares could rise by as much as 60%; Cautious on XPO, FDX, UPS, KR, FAST, GWW: As AMZN “eats the economy,” its influence continues to expand, and no sector—from shipping to groceries to industrial distribution—seems safe from its disruption, leaving investors the challenge of finding which industries could benefit from its growth. 

Interview: Matt Diserio and his partners founded Water Asset Management in a bid to solve environmental problems while making good returns, but he doesn’t think all sustainable investments are winners, and he likes water more than renewable energy (picks: PRMW, AOS, RXN, Suez). 

Profile: Vivian Wohl, one of eight co-portfolio managers at the $1.7B Federated Kaufmann Small Cap fund, focuses on medical devices and healthcare software and services, spends a lot of time on Facebook following patient groups to see what users are saying about new devices and services (top 10 holdings: VEEV, INSP, DXCM, TNDM, HZD, GKOS, PRAH, NEO, IRTC, XENT). 

European Trader: Positive on AMS: Swiss company that produces 3-D sensors and laser technologies used in smartphones was one of several AAPL suppliers hit by slowing iPhone sales, but it is trying to diversify into other consumer areas and industrial applications, which should eventually boost sales. 

Emerging Markets: Chinese companies are increasingly defaulting on their bonds, a good thing in the long term, but also in the short term for investors who know what they are doing—but they can’t navigate these assets from an armchair.

Commodities: “Volatile prices make gasoline a particularly risky investment, but the fuel’s importance to drivers hasn’t wavered” and most consumers consider it to be a more important household expenditure than expenses such as health care and savings.

Streetwise: For AMZN, the decision to pull out of a planned New York headquarters is a financial nonevent. But shareholders should remember that its surging profits could invite a backlash—and from devout capitalists, not just progressive protesters.