Sunday, July 21, 2019

Barron’s weekend summary

Barron’s weekend summary: positive features on FDX, TGT, and select banks 
Cover story: Investing in Softbank Group “offers a radically discounted bet on the future,” with cheap shares that are arguably priced 30-50% below the value of their underlying assets; Understanding the company and the vision of its leader, Masayoshi Son, takes effort, but could lead to a big payoff for investors. 

Features: 1) Positive on FDX: Investors have sent shares down over concerns about AMZN’s move into logistics, but as e-commerce volume grows, capital spending declines, and better execution results in higher profits, shares could rally to $220, which with a dividend yield of 1.6% could deliver a 33% total return; 2) Positive on TGT: Retailer has managed to withstand pressure from AMZN and the growth of online shopping, while benefiting from the closure of rivals’ stores—and with improved Web operations and low prices, the stock has yet to reach its potential highs; 3) Story looks at what people need to look out for when buying annuities—income generating annuities can be effective tools for those concerned about outliving their money, but investors need to be cautious and inquisitive; 4) Barron’s annual list of the top 100 annuities now includes categories that represent more products and better reflect investors’ buying habits, as well as variable and fixed-index annuities with the highest potential average income based on probability analyses; 5) Positive on KEY, SBNY, USB: Many banks are sensitive to falling interest rates, but investors expect these three to be better positioned for a Federal Reserve interest rate cut, thanks in part to a lower percentage of variable-rate loans versus some peers. 

Tech Trader: Cautious on NFLX: The streaming giant’s strengths—including scale, value, and a vast library—may not be enough to make up for shortfalls in show quality, and its aura of invincibility may be wearing off after its recent report of lower-than-expected subscriber growth. Trader: One hundred and thirty three companies in the S&P 500 are set to report earnings this week, but “the lack of broader market action might end up just being the calm before the storm”; Look for that second-quarter consumer strength to boost earnings at the likes V, CMG, AAL, and AMZN when they report this coming week—the contrast between the economy’s consumer and industrial segments remains stark; Fintech companies continue to outpace traditional banks, which have underperformed the broad market over the past year, but the shares may be overpriced, and the best way to play the sector remains V, MA, and PYPL. 

Profile: Michael Cirami and Eric Stein, co-directors of Eaton Vance, believe that staying out of troubled assets is critical to boosting returns and reducing volatility (top 10 countries for debt holdings in the Eaton Vance Emerging Markets Debt Opportunities fund: Egypt, Nigeria, Ukraine, Serbia, Peru, Bahrain, Sri Lanka, Argentina, Indonesia, Thailand). 

Interview: Ziad Bakri—who manages $16.3B across T. Rowe Price’s health-sciences strategy, including the $13.2B Health Sciences fund—talks about picking biotech stocks and the Medicare for All debate (picks: SAGE, BDX, TMO, Roche Holding, UNH, ANTM, CI, NVCR).

Follow-Up: In a cover story last September, Barron’s argued that gold looked appealing, as did depressed gold stocks; the metal tends to do well when inflation-adjusted interest rates are low, which is the case now. European 

Trader: Germany, an export-oriented economy, has been hit hard by turmoil in global trade, and if a current slump continues, the government of chancellor Angela Merkel may have to temper its longstanding aversion to deficits and debt. 

Emerging Markets: Mexico’s economic outlook is going from bad to worse eight months into President Obrador’s administration, with the resignation of respected finance minister Carlos Urzua and major problems at state oil company Pemex—though the country’s assets are priced for risk. 

Commodities: “Natural gas finally has broken out of the tight trading range it’s been stuck in for the past six months, though it’s done it the hard way, by falling to a more than three-year low. However, there could be good news in the bad news.”

Streetwise: Online ordering, delivery, and a new loyalty program have given CMG more ways to serve and learn about its customers, but those are effectively table stakes in today’s restaurant business, and the company hopes to rollout more key initiatives as part of its comeback.