Sunday, July 28, 2019

Barrons weekend summary

Barrons weekend summary: cover story long term positive on PCG; cautious on select software names; cautious on electric vehicle market 
Cover story: The bankruptcy of California utility PCG “is an extreme example of the potential consequences that climate change may create for the utility industry”; Getting through it “will require a balancing act among many players: company officials, politicians, consumer advocates, and investors. At the same time, it offers an opportunity for savvy individual investors with a strong stomach”—who could eventually see an upside of 20% or more in the stock price. 

Features: 1) Cautious on WDAY, NOW, OKTA, ZS: Shares of software companies are up, but investors are overlooking a lack of earnings based on standard accounting to focus on high revenue growth and a large market opportunity—meaning a bubble could be in the making; 2) Barron’s third-annual ranking of robo advisors—topped by Fidelity Co., WiseBanyan, and Wealthfront—finds the sector’s assets have risen to at least $44B, driven by new services, including access to live advisors, sustainable-investing products, and higher-yielding cash accounts; 3) Cautious on F, TSLA: Electric vehicles are the future, and not just because they cut carbon or save on gas—they have more power, but until they’re common, so-called mild hybrids that are cheaper to build and still save on gas and emissions may become popular. 

Tech Trader: Positive on T, Comcast, DISH, VZ, CHTR, ATUS: Companies’ cable divisions are losing customers—but for now, investors don’t mind: fewer video subscribers actually boosts profitability, since video has lower profit margins than broadband, which continues to thrive, boosting average revenue per user, a key metric. 

Trader: Banks, which have been showing signs of technical strength, are one group that might outperform regardless of whether there is a hiccup in inflation or interest rates; A number of data points indicate the potential for a recession on the horizon, but just because these economic indicators look bad now doesn’t mean they have to stay that way, and there are already signs of improvement; Softbank’s second Vision Fund, were it to have a similar formula and comparable returns to the first one, could generate billions of dollars for the company in the years ahead. 

Interview: James Montier, a strategist at Boston-based GMO, talks about a range of topics, including why modern monetary theory is a good model for governments’ interactions with the market and why he’s still waiting for a decline in the U.S. stock market. 

Profile: Don Wordell, manager of the $3.1B Virtus Ceredex Mid-Cap Value Equity fund, explains why dividends, valuation, and fundamentals have to come together for him to consider a stock, and why if any are violated, the stock is sold (top 10 holdings: HUM, ZBH, MPC, ENR, PEG, K, HIG, PNFP, AMP, ABC). 

Follow-Up: Investors are concerned about the government’s plan to investigate Big Tech, but they should ignore the regulatory noise and focus on fundamentals instead. 

European Trader: Positive on Ocadio Group: British firm that licenses artificial intelligence and robotic systems to help supermarkets deliver food ordered online has been called the AMZN of the grocery market and the MSFT of retail—and with new deals in the works, shares could keep rising. 

Emerging Markets: If China’s Science and Technology Innovation Board—known as the STAR market—takes off, it could be a very big deal financially and geopolitically, given that China is home to 94 of the world’s 326 unicorns. 

Commodities: “Commodity investors should consider pigging out on lean hogs: A record-breaking drop in global pork production will mean a massive shortfall of meat, which could spark a rally in hog prices of at least 20% by year end.” 

Streetwise: Things are getting weird for bonds in Europe—even some junk-rated debt there pays less than nothing, and if yields are indeed near bottom, expect central bankers to turn to more-creative means for stimulus during the next downturn.