Sunday, May 5, 2019

Barrons weekend summary

Barrons weekend summary: positive features on OXY, BURL; cautious on UBER 
Cover story: The millennial generation—consumers in their mid-20s and 30s—is overtaking the baby boomers as the largest generation of shoppers in history, and by 2020, millennial spending will account for $1.4T in U.S. retail sales, according to Accenture; Maturing millennials will lift spending for all sorts of industries and companies—a powerful demographic tide that should continue rising as the population grows and workers enter their prime earning years.

Features: 1) Positive on OXY: Shares of the company are the best play in the takeover battle over APC, because even if the company loses the takeover contest to CVX, its shareholder would be the winners for three reasons: a potential relief rally in its shares; the possibility an activist investor could surface and try to scuttle the bid and either break up the company or urge a sale; Occidental shareholders could vote down the deal; 2) There may be more similarities than differences among millennials, baby boomers, and Generation X: all three groups have increased “showcasing,” or examining merchandise at a retail store and then shopping for the lowest price online, according to an Accenture survey; 3) Positive on BURL: Retailer is upgrading its stores to appeal to a broader swath of price-conscious shoppers, and occupies a rare retailing bright spot that has been mostly immune to AMZN’s price cutting, and it benefits as designers and vendors look to offset slumping department store sales; 4) Cautious on Uber: Ride-hailing company is less an AMZN and more a glorified version of LYFT—and with revenue growth slowing, increasing competition, profitability nowhere in sight, and legal and regulatory risks, investors may want to say away from the IPO; 5) The Committee on Foreign Investment in the United States, or Cfius, vets foreign buyers of U.S. assets on national security grounds, and is gaining the kind of power that threatens to reshape U.S. mergers and acquisitions in cross-border deals. 

Tech Trader: Cautious on GOOGL: Tech giant faces a sudden slowdown in its advertising business, but investors know very little about the problem—the company’s vague disclosures worked fine when growth was booming, but it’s problematic when the tide turns; Watching AAPL suppliers’ stock prices to get a real-time read on iPhone demand seems like a good idea, but will cease to be so once everybody in the market follows suit. 

Trader: Lori Calvasina of RBC Capital Markets recommends moving out of industries with high valuations such as software and semiconductors and into cheaper ones such as financials, while Verdence Capital’s Megan Horneman recommends holding extra cash; Positive on CHDN: Horse racing isn’t a growth industry, but the company has done an excellent job boosting revenues and profits at its Churchill Downs track through marketing efforts and $100M in improvements. 

Interview: Roger Ferguson, president and chief executive officer at TIIA, talks about hos a 401(k) holder can replicate a defined-benefit pension, and why providing retirement plans for teachers and nurses is important. 

Profile: Jon Cheigh, head of global real estate investment at CNS and lead manager of the Cohen & Steers Global Realty Shares fund, looks for managers with a track record of using debt prudently, allocating capital smartly, and balancing great projects with sensible investment decisions and sound operations (top 10 holdings: UDR, PLD, WELL, CK Asset Holdings, ESS, EXR, Deutsche Wohnen, INVH, Link Reit, Realty Income). 

ETF Special Report: 1) Financial advisors are using exchange traded funds to do everything from constructing cheap, tax-efficient passive portfolios to making sophisticated investment bets that express market views without the need to pick individual stocks; 2) Ron Vinder, a Morgan Stanley Private Wealth Management advisor, became a major proponent of passive investing, and can now focus on asset-allocation decisions and helping clients stick to their plans; 3) Barron’s assembled 19 of the nation’s top advisors, asked them how they use ETFs, and presents their top strategies, which cover a wide range of approaches; 4) Barron’s publishes a 2007 article by investing guru John Bogle that had never seen the light of day, and which offers “an unassailable argument in favor of low-cost, broadly diversified index investing”; 5) Investors hoping to increase their exposure to commodities should consider exchange-traded funds instead of playing the futures market or by purchasing physical bars of bullion—ETFs are simple, and can help reduce overall risks and add to returns; 6) Positive on PRF, VLUE, QVAL: Today’s value ETFs don’t define value using the standard metrics—they incorporate criteria used by active managers, and tend to have bigger allocations to tech stocks and less traditional value fare like financials and energy; 7) As disruptive technologies change our economy, old-economy sectors like retail and financials are cheap for long-term, secular reasons—and ETF investors should think twice before buying sectors that look statistically cheap, but are exposed to secular risk. 

European Trader: Cautious on Tesco: Retailer had a sudden fall, but new management, a smart acquisition, and a focus on rebuilding its core UK business has boosted the stock, which has further upside. 

Emerging Markets: Mexican assets have been volatile since voters elected president Andres Manuel Lopez Obrado, and it remains unclear which side of him will prevail: the combative socialist spouting expensive promises and leveling rhetoric, or the pragmatic administrator who ran a tight fiscal ship as mayor of Mexico City.

Commodities: Gold prices fell in April and have now given back their gains for the year, but they could still climb 20 percent in 2019.

Streetwise: Positive on FB: Social site’s growth outlook is straightforward: There’s a massive disconnect between time spent online and ad dollars spent there, but that will change, and Facebook will sop up much of the growing spending.