Barron's Summary: Positive on ALU, CIEN, JDSU, DDR, EXAS; Cautious on KO, TSLA, FB, KATE
- Cover story: Lower energy costs will have a salutary effect on the U.S. economy, while vast new discoveries of oil and natural gas in the U.S. and around the globe could drive oil prices to as low as $75 a barrel over the next five years from a current $100; as fuel choices are gradually introduced to the market, global oil consumption will slow.
- Tech Trader: Cautious on FB: Social site hasnt offered an explanation of whether it first tried to build the technology behind Oculus itself before buying the virtual reality hardware maker, nor has it made a valuation case, a troubling situation because there is no way to know whether it paid a fair price; Positive on ALU, ERIC, CIEN, NOK, FNSR, JDSU, AVGO: Wireless and wired equipment makers have increasing utility and value as FB, GOOG, VZ, and CHL build out networks to bring more users online.
- Trader: More volatility could come from lower-than-expected first quarter earnings reports, out in April and May; Cautious on KATE: Shares are up, but improved annual results are less stellar than they look at first glance, and company would have to significantly boost sales to justify current stock price; Negative on KO: Weak stock rise over the past 24 months suggests investors believe management is underperforming. Yet a richer compensation plan is being introduced when the previous one still had a year to run, prompting shareholder Wintergreen Advisors to call for its withdrawal.
Features:
1) Cautious on TSLA: Chief Elon Musks plan to build a huge factory in bid to trim cost of lithium-ion batteries could work, but cost reductions would only materialize if 500K batteries a year are produced, while automaker sells only 35K cars per year;
2) Cautious on GOOG, FB, Tencent, BIDU, YHOO, TWTR, LNKD, YELP, ZNGA, AOL, SOHU, RENN: Companies control about 81% of the online advertising market, but given its size and potential growth, it will be nearly impossible for firms to grow into their current market values;
3) Positive on DDR: Shares of shopping-center REIT have fallen, but with rents rising and debt going down, stock could climb to $20 from $16 as fundamentals improve;
4) Corporate Americas switch to private healthcare exchanges could give private exchange providers, ancillary benefit suppliers, pharmacy benefit managers, and managed-care providers a boost (Positive on AON, MMC, TW, XRX, MET, UNM, CVS, ESRX, AET, UNH, CI);
5) Positive on EXAS: Shares could rise 50% if pharma companys colon-cancer test ramps up quickly, a situation short sellers are betting wont happen.
- Follow-Up: Cautious on C: Despite banks stress-test failure, the great strength of its global franchise sets it apart from peers, but worldwide operations arent generating enough returns and developing market exposure has some investors worried; Positive on ANN: Shares, already on the rise, could see another 15% gain if retailers earnings continue to meet expectations; Positive on PAY: Data breaches at companies such as TGT are good news for company, which is seeing ramped-up demand in U.S. for terminals that can read chips embedded in credit and debit cards.
- Hedge Funds: Interview with Lawrence Speidell, Founder, Frontier Market Asset Management, who picks small, well-run companies that arent affected by the global macroeconomic din that usually drives big bourses like Sao Paulo and Shanghai; Interview with Robert Willens, Tax Consultant, Robert Willens LLC, who says draft legislation for the Tax Reform Act of 2014 is of concern because of the way it could affect investors who own REITs.
- European Trader: European consumer stocks could have their moment in the sun as the regions fully valued equities markets prompt investors to scout for undervalued companies (Positive on Heineken, British American Tobacco, Imperial Tobacco Group).
- Asian Trader: Japanese bank stocks have fallen to levels that make them attractive again, and some are making acquisitions in U.S. and Asian markets (Positive on Sumitomo Mitsui Financial Group, Mitsubishi UFJ).
- Emerging Markets: Whats good for Mexicos economy, including landmark reforms that open up energy and telecom sectors to encourage competition and foreign investors, isnt necessarily good for stocks (Negative on EWW, EWZ, MX, Fomento Economico Mexicano, Wal-Mart de Mexico).
- Streetwise: Brian Sanborn of Ned Davis Research says investors should seek stocks that analysts are revising upward without getting carried away, such as HUM, which generally isnt considered a momentum name.