Cover story: The case for dividend stocks has rarely been stronger. Lower interest rates—especially with the Federal Reserve signaling that it will not raise rates this year—provide support by making bonds less of a threat to dividend stocks; Barron’s found seven that investors should consider—they all possess good prospects for growing payouts, thanks to strong free-cash flows and sound capital-allocation priorities by their management (Positive on SRE, JPM, NEE, APD, HON, MKC, MSFT).
Features: 1) Cautious on UBER: Ride-hailing company’s first day of trading after its initial public offering was the worst first-day performance for a giant U.S. IPO by a wide margin, a sign investors are hesitant to buy into what Uber called its “massive” global market opportunity; 2) Positive on UPS: Wall Street isn’t entirely enthusiastic about the delivery giant, but at $100, its shares look appealing after changing very little during the past five years, and bulls like the company’s conservative balance sheet and high credit ratings; 3) Positive on JBHT: Company known as the “king” of intermodal shipping—transporting goods on containers via low-cost rail, then switching to higher-cost, shorter-distance trucks—faces negative trends in the railway and e-commerce sectors, but the decline in share price is an overreaction, and the stock now looks cheap; 4) Cautious on Brown-Forman, MCPI: Sales of Kentucky bourbon and Tennessee whiskey have elbowed aside beer to become a favorite of millennials worldwide—revenues doubled for American whiskey suppliers in the past 10 years, but the trend, while it may not have peaked, will eventually slow down, and investors “should eye the exits.”
Tech Trader: Positive on MTCH: The diminishing threat from FB’s plan to enter the online dating space has provided a tailwind for Match, which “has achieved a rare feat in the world of social-networking: persuading people to actually pay for the service,” many of whom may be wary of privacy issues at Facebook.
Trader: The U.S. economy could get hit by a slowdown in demand due to the Federal Reserve’s previous interest-rate hikes and higher prices triggered by tariffs, says Michael Darda of MKM Partners—to prevent the worst-case scenario, the Fed might have to lower interest rates; Companies continue to spend large amounts of money on buybacks, but investors shouldn’t overlook spending on research and development—and how much they stand to gain by favoring the most innovative companies; Positive on GM: The latest round of investment in the automaker’s Cruise division, amounting to $1.15B, barely budged the stock, but investors should be more excited—autonomous driving is a major trend with the potential to remake the car business.
Interview: James Anderson, head of Scottish investment firm Baillie Gifford’s global equities business, believes that a group of founder-led companies “of the utmost ambition” has the potential “for greatness at an extreme scale” (select holdings: AMZN, TSLA, BABA, Tencent).
Profile: Winslow Capital chief executive and chief investment officer Justin Kelly doesn’t hire anybody without an implied agreement they will spend their entire career at the firm, based on the belief turnover can damage the portfolio (MainStay Large Cap Growth Fund top 10 equity holdings: MSFT, AMZN, GOOG, B, UNH, CRM, FB, MA, PYPL, NKE).
European Trader: Replacing Mario Draghi as president of the European Central Bank may well be the most important task for Europe’s leaders this year—but that doesn’t mean the most qualified candidate will get the job, which requires somebody with a serious résumé, political acumen, a vision of the ECB’s future, firm views on monetary policy, and a deep understanding of financial markets.
Emerging Markets: Investors are unsure about how to react to South Africa’s general election—pundits assumed the African National Congress would win re-election, but president Cyril Ramaphosa may not have a large enough margin of victory to neutralize rivals loyal to his predecessor, Jacob Zuma.
Commodities: “Copper’s recent decline looks to be a temporary setback, as the industrial metal readies for a potentially significant supply shortage in the coming years.”
Streetwise: Investors should nonetheless consider putting some money in RSP or the smaller RVRS—doing so can produce handsome returns while providing a hedge after a long S&P 500 run that is “looking equal parts wonderful and weird,” says columnist Jack Hough.