Barrons Saturday summary: positive on GRMN and AER
Cover story: Bonds, once seen as a way to preserve wealth, provide cash flow, and offer price appreciation don't offer much income these days, and some investors are likely to lose money on them; Investors who hold individual bonds to maturity are insulated, but bond mutual funds and ETFs, which don't do so, may end up selling into a declining market; Investors withdrew a net $17B in June from taxable and municipal-bond funds, which could hint at a larger exit to come and a fall in bond funds.
Features: 1) Positive on GRMN: Company is moving beyond its car-navigation devices into wearables, and its ability to innovate could help lift the stock 35% or more during the next 12 months; 2) Positive on AER: Chief Aengus Kelly is shareholder focused, and the shares look undervalued as company continues to benefit from its acquisition of AIG's air-leasing business; 3) Barron's reports that 73 of its bullish stock picks this year rose an average of 3.7% in the first half, compared with a 1.1% decline for the S&P 500; 4) Positive on Fidelity, Citadel: Fidelity Brokerage Services averaged the best pricing among brokers who voluntarily reported performance measures to the SEC, while Citadel Securities had the best pricing among wholesale market makers.
Tech Trader: Problems in China may have an impact on the tech sector, but "there are already enough reasons to sit out this market and wait for the dust to settle," says Tiernan Ray, including high valuations; A slump in Chinese consumption isn't likely to be material to the long-term outlook for companies such as AAPL and SWKS.
Trader: "It's unlikely that earnings will do anything to trip up stocks, since analysts have already reduced expectations"; Cautious on WTW: Company's shrinking user base means less word-of-mouth on social media, while a recovery would mean spending more on paid advertising, which it can't afford-but a strategic buyer could build on the brand and the user base; Growth stocks such as AMZN and NFLX outperformed value stocks in the first half of this year, but that won't likely continue in the second half of the year.
Small Caps: Positive on EQC: Sam Zell's office-property real estate investment trust, which owns 100 buildings in major cities, trades well below net-asset value and plans to boost its balance sheet by selling its least desirable properties.
Mutual Fund Quarterly: Interview with Pat Dorsey of Dorsey Asset Management, which invests for foundations, endowments, and wealthy individuals and looks for assets outside the U.S.; Positive on JNS: After a decade of problems, firm has begun to thrive under the leadership of chief executive Dick Weil, who took the reins in 2010; The Morningstar/Barron's ninth annual Alternative Investment Survey found that many advisors still use hedge fund-like investments, especially long/short and multistrategy approaches; Positive on EV: Pending approval, firm will offer a new kind of fund that promises to cut investor costs while protecting fund managers from predatory trading; International and European funds outperformed U.S. stock funds during the second quarter, while rate-sensitive funds stumbled.
Follow-Up: Barron's editors say that "long-term investors counting on the eventual liberalization of China's stock market are better off focusing on the H shares of Chinese companies than the A shares"; Positive on Barnes & Noble Education ("BNED"): BKS' college-bookstore spinoff "could be an enticing growth story as it adds stores and broadens its product offerings," and success will benefit Barnes & Noble shareholders.
European Trader: Greek leaders seem prepared to take the steps necessary for the country to remain part of the eurozone, but their proposals may not be sufficient to lead to another bailout.
Asian Trader: Positive on BIDU, Tencent, BABA, JD: Chinese Internet stocks are holding their value despite market turmoil in China because of the fact their shares are held by global investors who value their large market caps, growth, and margins.
Emerging Markets: The $100B New Development Bank founded by Brics countries should be lending soon be lending money, but it remains to be seen how the five countries will share power and choose projects.
Commodities: If natural gas storage runs out as autumn brings mild weather and low demand for gas-fired electricity and heat, there could be a glut with no buyers.
Streetwise: "Forget Greece. The big issue for global financial markets is the Chinese stock-market crash and the frenzied efforts by Beijing to quell the crisis," and the damage is likely to spread if the government can't stop the bleeding.