Sunday, April 28, 2019

Barrons weekend summary

Barrons weekend summary: Cautious articles on BRK.A and ZM 
Cover story: “The recent exuberance has swelled investors’ wallets, but shrunk their confidence in the market’s ability to keep climbing—only 49% of the 148 professional money managers responding to Barron's spring 2019 Big Money poll call themselves bullish about the prospects for stocks over the next 12 months, down from 56% in our fall 2018 survey; The percentage of bulls hasn’t dipped below 50% since the fall 2016 survey”; American money managers are generally pleased with Donald Trump’s performance, and the majority who participated in the Big Money poll believe he will be re-elected. 

Features: 1) Cautious on Berkshire Hathaway: Many investors are frustrated that Warren Buffett continues to sit on $110B in cash while waiting for a major deal, but the stock’s underperformance probably reflects other factors, such as Buffett’s age and succession concerns, the lackluster performance of a $200B equity portfolio, and the current disfavor of value-oriented stocks; 2) Proxy season may garner more attention this year as several high-profile annual shareholder meetings hold proxy votes along themes such as excessive power concentrated in a company’s leadership and social and environmental concerns; 3) Democratic senator Elizabeth Warren’s proposal to eliminate student debt for most borrowers could work according to academics at Brandeis, who say offering graduates greater ability to save and build assets because of lower debt could spark a consumer-driven economic stimulus; 4) Investors concerned about TSLA's range of challenges can bet on its cars and clientele rather than on the company itself through bonds backed by customers’ car leases, also known as automobile asset-backed securities. 

Tech Trader: Cautious on ZM: To grow into its high valuation, Zoom needs to move into new markets, and has already started with its recent introduction of a Zoom Phone that competes with enterprise phone-system providers—but breaking into new adjacent markets won’t be easy. Trader: Investors have been happy to pile back into tech stocks as the Federal Reserve stands pat on interest rates—Bank of America Merrill Lynch strategist Michael Hartnett says fund flows reflect investors’ conviction that central banks “will never raise interest rates ever again”; Strong corporate earnings are the story of the week—230 companies in the S&P 500 have reported first-quarter numbers, about 46% of the index, of which almost 80% beat Wall Street estimates; Many analysts expect the trend of strong consumer staples to continue, with many investors moving back into them after shunning them during a rough 2018. 

Interview: Edwin Johnston of Buffalo-based Sandhill Investment Management shares his views about stocks, the wealth gap, and the national debt, and says that while Chinese tariffs, Brexit, interest rates, and the border wall garner constant headlines, they won’t have a long-term impact on the market (picks: BE, XRAY, FISV, MTN, ADBE). 

Profile: David Nadel, manager of the Royce International Premier fund, seeks companies with recurring revenues, i.e. business structures with a front-end sale but where most of the money is made on parts, repairs, long-term contracts, or other “sticky” customer relationships.

European Trader: Cautious on ULVR: Although the conglomerate’s first-quarter results showed sales growth, especially in emerging markets, some analysts believe it could run into the same issues as KHC, which recently acknowledged that its pursuit of more profit had led it to underinvest in some of its brands. 

Emerging Markets: A lot of things are suddenly going Russia’s way—including Trump administration sanctions on Iran that are boosting its oil market—while Russian stocks are on the rebound, such that the country may be one of the best-performing markets in bonds and equities this year.

 Commodities: Water is one of the cheapest commodities on the planet, and for can also be a good investment for investors who know where to look—possibilities include water ETFs like CGW and PHO and makers of water heaters and boilers such as AOS. 

Streetwise: Columnist Jack Hough says the good thing about Disney is that after years of television leading its earnings, booming parks and movie businesses are overtaking TV, de-risking the shift to streaming.