Cover story: Investors accustomed to an environment of high interest rates must readjust, by leaning into growth stocks again, scouring Asia for opportunities, or earning income from investments that won’t succumb to the low-rate trend; Boosting growth during a recovery brings risks—it can lead to asset bubbles, and easing now leaves little policy room to respond when an economic crisis demands it.
Features: 1) The idea that the European Central Bank “is running out of ammunition to counteract a slump is one that its own officials have repeatedly tried to shoot down,” and head Mario Draghi in recent weeks has pressed that point with ever more force; 2) Positive on HUM: Managed care company is well-positioned to ride out volatility in the healthcare sector, and for the long-term investor looking toward 2021 and beyond, there are tantalizing scenarios under a Democratic administration that could allow Humana to win big; 3) Positive on MAR: The world’s largest hotel company could see its stock continue to climb as earnings rise, bolstered by the firm’s expansion in fast-growing regions and new travel businesses—on top of which it is extremely well managed; 4) Story on ESG investing looks at what investors should keep in mind as they construct a values-based portfolio, including sector tilt, unwanted risk, and surprise holdings; 5) Positive on BP, Shell, D, COP, XOM: Momentum is building to put a market-based price on carbon, and it’s coming from an unlikely source—corporations, some of which are calling for a carbon tax paired with a carbon dividend so that the money is returned to taxpayers; 5) The muni market is now smaller than it was a decade ago, according to the Securities Industry and Financial Markets Association—there were $3.6T of munis outstanding at the end of the first quarter, down from nearly $4T in 2009.
Tech Trader: The California Consumer Privacy Act will force almost all companies, even of modest size, to change the way the collect, handle, and share data on state residents, and the effects will spread, making California the dominant player in U.S. privacy law.
Trader: The trade war has had an impact on manufacturing activity but far less of an impact on consumers, but another round of tariffs could cause them to finally throw in the towel; Positive on BA: The company has a long way to go to restore confidence in its 737 Max jets, but the structure of the industry and the way planes are purchased gives it time to make appropriate fixes and for the stock to recover.
Interview: 1) Mario Cibelli, founder of Marathon Partners Equity Management, talks about his activist campaign and the firm’s appreciation for growth and transformative companies; 2) Andrew Lee, UBS Wealth Management Americas’ top strategist for sustainable and impact investing, says ESG is here to stay, though confusing terminology and unclear expectations remain problems.
Profile: Randy Gwirtzman and Laird Bieger, co-managers of the $512M Baron Discovery fund, see the greatest opportunities in the more inefficiently priced small-cap space because of the comparative lack of sell-side analyst coverage and winners’ ability to grow into a large market over several years
Advisor Center Investing: 1) Pimco has moved into sustainable investing by implementing this kind of research throughout the firm, becoming one of the first and largest asset managers to regard investing with an eye toward long-term sustainability as a critical key to success; 2) Kevin O’Leary of the reality venture-capital show Shark Tank uses a “gender lens” subset of ESG that aims to boost returns by investing in companies with female leadership, or that are dedicated to improving women’s lives; 3) Kristin Hull, chief executive of Nia Impact Capital, completed another 12 months of market-beating performance for her gender-lens portfolio, and if things go according to plan, a mutual fund version could be available soon; 4) The SEC shows no sign of moving to require sustainability disclosures, even though the industry routinely asks it to do so—BLK chief Larry Fink says ESG factors “can provide essential insights into management effectiveness and thus a company’s long-term prospects.”
European Trader: Cautious on Merlin Entertainments: Company owns some of the world’s major attractions, including the London Eye and Madam Tussauds, but with shares down, activist investor ValueAct says the company should go private because of the challenge for public market investors to appropriately value its business.
Emerging Markets: The question for Brazil, the fifth-largest emerging market, has been whether president Jair Bolsonaro could shepherd fiscally critical pension reforms through an unwieldy Congress that includes 30 political parties—and it increasingly looks like he can.
Commodities: “The meeting of OPEC and its allies in early July is coming at a particularly important and volatile time for oil—prices have been supported by major producers’ output cuts, growing tensions in the Middle East, but also pressured by forecasts of a slowdown in global demand.”
Streetwise: If fitness company Peloton succeeds in fending off rivals, current comparisons to NFLX might turn to AAPL ones, as users pay high tabs for devices to stick with the ecosystem.
