Barron’s Weekend Summary: Cover story looks at three strategies for building defensive portfolios as tensions in the Mideast rise; The tech sector could see a new “Roaring ‘20s”
* Cover story: With US stocks priced for perfection, market professionals say the increase in Mideast tensions is a reminder of two things that can scuttle growth and spark a recession: a trade war and a hot war; Barron’s explores three ideas to create defensive portfolios or position for post-pullback gains: the use of options, bargain hunting, and playing oil volatility.
* Tech Trader: Veteran analysts Mark Mahaney of RBC Capital Markets and Colin Sebastian of Baird offer their top picks for 2020; both say that regulatory scrutiny of Big Tech is a risk this year, but they’re optimistic that the decade could bring a new “Roaring ‘20s” for technology (positive on GOOGL, AMZN, UBER, ZNGA).
* Trader: Investors are right to fret about what’s happening in the Middle East—Iran will almost certainly respond to the US assassination of general Qassem Soleimani, adding more uncertainty to an already chaotic situation that will likely affect oil prices; The “Dogs of the Dow”—the popular investment strategy that prioritizes dividends—beat the DJIA by more than one percentage point a year on average through the past decade; Barron’s says the Dogs to buy in 2020 include DOW, XOM, IBM, CVX, PFE, MMM, WBA, CSCO, KO, CAT.
* Features: 1) As tech investors increasingly focus on profits, startups may find it more difficult to get funding in private and public markets, and consumers will probably see changes in services such as ride-sharing and food delivery that pinch their pocketbooks as companies offer fewer freebies and perks; 2) Shares of Chinese insurance company Ping An have returned an average of 22% annually during the past five years, but despite its strong run, fund managers see more upside—and its recent underperformance over the past couple of months makes it an attractive opportunity, given multiple avenues of growth; 3) Direct listings were revived by companies such as SPOT and WORK, and other companies—including Airbnb—are likely to use them this year, boosted by a push from the two major U.S. stock exchanges to increase the universe of companies able to pursue direct listings; 4) The five years before officially quitting full-time employment is the time to finalize retirement plans—pre-retirees should start look closely at their financial situation and take what actions they can take to bolster readiness and confidence as they near their last day on the job.
* Mutual Fund Quarterly: 1) As the financial-services industry embraces the low-cost, high-transparency ethos, many investors have brought these expectations to the advisory business, seeking out “independent” advisors they expect to have their best interest at heart, though many don’t; 2) Disclosures from brokerages such as LPL reveal a variety of conflicts of interest—clearly stated as such—that provide insights into the ways advisory firms make money using commissions, fees, and other revenue sources to profit; 3) The ETF industry is intensely concentrated, with most of the assets held by large firms such as BLK, Vanguard, STT, Invesco, and SCHW, but even in that tough competitive landscape, newer providers are rolling out new ETFs at a rapid pace, though many won’t succeed—and the closures are good for the industry, and investors; 4) Investors have few choices when they receive a liquidation notice: sell immediately, wait for the liquidation, or carefully wait for a sale—but the decision about how to proceed isn’t straightforward; 5) Investors should know who owns their fund management company, and whether it’s publicly or privately held, controlled by a handful of insiders, influenced by an outside private group, or widely held in the public markets—because ownership can affect a fund’s management, fees, performance, and, ultimately, whether it continues to exist; 6) An advisor at an independent broker-dealer may be just as conflicted as one who works for a large Wall Street “wirehouse”—overly incentivized to put clients into products that earn commissions, such as privately traded REITs and other nonpublic securities that may not be suitable for many clients.
* Interview: Richard Thaler, the 2017 Nobel Laureate who popularized the notion that people’s biases and impulses are profoundly relevant to the study of economics, talks about what he views as investors’ common mistakes, overconfidence, and nudging.
* European Trader: Positive on Persimmon, BCS, BT Group: Jefferies analyst Glynis Johnson says shares of these UK-focused stocks could rise higher if British prime minister Boris Johnson successfully and safely negotiates the Brexit.
* Emerging Markets: Last year was good for emerging market debt, and that strong performance will be tough to match in 2020 as the global easing cycle peters out; One way to boost a portfolio is to move toward more exotic sovereigns that pay above the odds.
* Commodities: Investors who didn’t own gold in 2019 could be kicking themselves after an 18% rise in prices for the year—but it might not be too late to join the rally.
* Streetwise: JPM analyst John Ivankoe says 2020 will be a more difficult year than usual for restaurant stock-picking, and though he likes MCD and WEN, he doesn’t recommend any casual-dining stocks.