Barron's summary: positive cover story on IBM; positive on GCI; cautious on AFSI
Cover story: Positive on IBM: Profile of chief executive Ginni Rometty says that despite recent losses under her watch and for all the hand-wringing over the cloud-computing business there are signs that the market may be turning IBMs way based on its plan to move into the private cloud sector, an area more companies are embracing.
- Features:
Positive on GCI: Though many investors view media giant as a dinosaur, paywalls for all its newspapers and increased focus on broadcasting should give shares a boost to $40 in the next two years;
Cautious on AFSI: Property and casualty insurer has distinguished itself by growing faster with seemingly better margins than rivals, but incongruities in its various securities and insurance filings are worrisome; Positive on ARE, AMT, EPR, RLJ: Though many REITs have beaten the broader stock market over the past decade, many are richly priced relative to a profit measure called funds from operations, these four are poised to see gains from that metric; Positive on FUN: Amusement park operators business is improving along with the economy, and shares could offer a total return of 20% in the next two years amid reduced debt load and reinvestment in its parks.
- Trader: Cautious on T: Investors should take profits and step aside, since deal for DTV injects too much merger-execution risk into the stock; Cautious on DAL, GM, GT, AA, X: Pension funding among S&P 500 companies has improved, even for those facing the biggest pension holes, but deficits remain a large percentage of their market caps; Positive on OAK, CG: Nearly 20% drop in shares of alternative-asset managers could present a cheap entry point for investors seeking exposure to the sector.
- Tech Trader: Tiernan Ray says free cash flow seems to be more important these days for tech investors than growth; investors are coming around to the idea that buying earnings cheaply at tech giants such as AAPL and ORCL is the chance to buy future buybacks and dividends at fire-sale prices.
- Small Caps: Positive on COLB: Prudent lender has used its strong balance sheet to buy the assets of five failed banks, boosting loan originations and making the bank, which offers a nice dividend, attractive to investors.
- Follow-Up: Positive on PF: Though HSH bid for company may be in danger due to it being a target of TSN and PPC, PF would receive a termination fee if merger is called off and its shares look reasonably priced, in addition to which is has a strong free-cash-flow yield; Positive on JWN: Retailers technology spending will eventually pay off, as will its focus on Nordstrom Rack outletswhich have higher marginsand its announced plan to sell portfolio of credit card receivables.
- Mutual Funds: Interview with Kimberly Scott, Portfolio Manager, Ivy Mid Cap Growth, who knows about technology and when to avoid it (top ten holdings: NTRS, FAST, MCHP, LKQ, SBNY, MJN, VAR, EPXD, EA, VNTV); Interview with David King, Portfolio Manager, Columbia Management, who looks for income and growth across a spectrum of securities (picks: companies: VZ, GE, AMGN, CSCO; convertibles: CHKDP, WFC-PL, BAC-PL).
- European Trader: Any ECB action in Europe may not be enough to aggressively depreciate the euro against the dollar, says Jonathan Buck; Positive on Stock Spirts Group: Shares sell at a discount to peers, and could climb as much as 30% in the next year or two.
- Asian Trader: Positive on Daum Communications: With its acquisition of instant-messaging firm Kakao Talk, Seoul-based Web portal operator has a strong growth story and a growing Asian footprint.
- Emerging Markets: Nickel companies such as NILSY could be one of the less dangerous ways to invest in Russias economy, since the metal hasnt been a target of Western sanctions.
- Commodities: After years of overproduction of aluminum and steady price declines, producers are making less of the metal, which could bring prices back to $2K/metric ton.
- Streetwise: Bank shares trade at 12.1 times 2014 earnings, making them among the S&P 500s cheapest; Positive on WFC: Bank has less excess capital on its balance sheet than most of its competitors, has a payout ratio of 70%, and could gain 19% in the next 12 months, more if its allowed to return more cash to investors.