Barrons Saturday summary: positive cover story on HD; positive on RTN; cautious on SRPT
Cover story: Positive on HD: Shares could come to life in the months ahead, especially if the housing market, a crucial driver of revenue and profit, shows sustained signs of improvement. An uptick in housing, market-share gains at the expense of an ailing SHLD, and substantial supply-chain improvements could help lift the stock to $95 in the next 12 months from a recent $77.
Features:
1) Many go-go stocks have taken a hit in recent weeks, but investors should avoid buying most of them on the dip, since they remain too pricey (Worth it: GOOG, RHT; Not Worth It: AMZN, CMG, FB, NFLX, TWTR);
2) Positive on RTN: Shares are still on an upward trajectory and could rise another 20-30% if the defense contractor continues to beat earnings estimates and its modest multiple increases a bit;
3) Cautious on SRPT: Shares of orphan drug maker could soar if the FDA gives an early go-ahead to its drug for Duchenne muscular dystrophy, a disease for which there are no effective treatments and for which Eteplirsen has shown promising results.
Small Caps: Positive on MYCC: Owner and operator of golf courses and country clubs continues to buy properties and remodel existing ones, which along with a manageable balance sheet and strong free cash flow make it an attractive play.
Tech Trader: Recent earnings reports from tech companies showed that the same trends are in place for many companies despite the market selloff in the past month and a half; The market seems more concerned with YHOOs balance sheet and the companys 24% stake in Alibaba than in its income statement.
Trader: Capacity-utilization rate in the U.S. is inching closer to 80%, a level that the market traditionally takes to mean companies will soon have to hire and make capital expenditures, re-igniting the economy; Positive on VIVO: Cincinnati-based maker of diagnostic test kits and reagents, among other medical products, could be a play for defensive-minded investors faced with the fact traditional havens such as JNJ and KRFT are near 52-week highs; Positive on WFT: Company has begun to show important restructuring progress, which should lead to a higher multiple and stock price, and divestments should bring in about $3B.
Follow-Up: Cautious on REV: Shares continue to trade cheaply compared to rivals such as LOreal, with reasons for the discount including companys relatively small market value of $1.5B, a thin float thanks to controlling shareholder Ron Perelmans 77% stake, debt of $1.9B, and scant analyst coverage, but shares could rise if company narrows valuation gap with rivals; Positive on FL: More than half the sneakers it sells are exclusives, which along with remodeling of U.S. stores and stronger sales in Europe should lead to more gains.
Special Report: Barrons annual roster of Americas Top 100 Financial Advisors, led by Gregory Vaughan of Morgan Stanley PWM, Brian Pfeifler of MS PWM, Mark Curtis of Graystone Consulting, Andy Chase of MS PWM, and Shelley Bergman of Morgan Stanley Wealth Management.
Mutual Funds: Interview with William Smead, Portfolio Manager, Smead Value, who looks for companies that provide customers with products they cant live without (top ten holdings: GCI, EBAY, CAB, BAC, MRK, WAG, AMGN, WFC, AFL, BRK.B); Interview with Rob Arnott, Chairman & CEO, Research Affiliates, who says emerging markets look to be the sweet spot for investors with a time horizon of longer than one or two years.
European Trader: Positive on VOD: Chief Vittorio Colao has done a good job turning the company into a leaner and fitter operation, has pulled out of businesses it didnt control, and plans to invest $30B in improve networks and services over the next two years in bid to handle more traffic.
Asian Trader: Macau investors should consider stocks that have a big presence in region, such as LVS, or casino projects that will bring their valuations closer to their peers, such as MGM.
Emerging Markets: Stronger interest in buy-and-hold-friendly ETF strategies, such as EEMV, IEMG, and VWO would be a sign investors are turning more positive on emerging markets.
Commodities: Orange juice futures have been trading at two-year highs on expectations of the smallest Florida orange crop in nearly three decades, but the higher prices could be the markets undoing.
CEO Spotlight: CSCO chief John Chambers predicts the Internet of Everything will generate $4.6T in value over the next decade.
Streetwise: The hit stocks such as TWTR, YELP, FB, WDAY, NFLX, and TSLA have taken recently could be an intimation of whats to come for stocks in general.