Barron's Summary: Positive on CQB, GHC, EMC, FEIC, PX, RHT; Cautious on MW, MATX
- Cover story: Detroit is undergoing a renaissance, led by investors such as Dan Gilbert of Quicken Loans, who has invested $1.5B to buy and rehab more than 40 buildings in downtown and nearly Greektown; For a true turnaround to take effect, Detroit must come to terms with its woeful financesterms that will result in severe pains for many of the holders of its crushing $18B in debt and future obligations. Some holders of the citys general obligation bonds could take an unheard of 80% haircut on their principal.
- Tech Trader: Tiernan Ray reports that the most interesting new technology at SXSW was related to sensors, a sector that has been around for awhile but is gaining steam as smartphones and wearable devices proliferate; Key players include Bionym, Alps Electric, INVN, SYNA, and OVTI, but investors need to be cautious, as shares can be volatile.
- Trader: Anxiety about the Fed may be feeding a rally in gold, but it remains difficult to choose which stock to play in the sector, partly because political risks are rampant (Cautious on CEF, GDX, AEM); Negative on MW: With acquisition of JOSB at an inflated price, clothier is borrowing money to buy a chain whose profits have languished for years; it isnt clear how the two slow-growing companies will improve, and MW shares could fall 20% to the low $40s.
Features:
1) Story looks at the S&P 500s cheapest stocks based on price/earnings multiples (ESV, HPQ, RIG, VLO, NE, MU, GT, MET, GM, PRU, TSO, MPC, XRX, LNC, JPM) and price/book value ratios (CLF, GNW, AIG, C, NWSA, RDC, BAC, HIG, XL, WPX, L, RIG, ESV, APA, NE);
2) Positive on EMC, FEIC, PX, RHT: Companies are likely to benefit as corporate America increases long-overdue spending on plants, equipment, and software in shift from share repurchases to reinvestment;
3) Cautious on MATX: Shares trade at a premium of nearly 20% to the S&P 500 but uncertainty about the shippers financial liability for a giant molasses spill in Honolulu harbor could put pressure on them;
4) Barrons list of the Best Online Brokers of 2014, topped by Interactive Brokers, tradeMonster, Place Trade, TD Ameritrade, and TradeStation.
- Small Caps: Positive on CQB: Banana giants merger with Irelands Fyffes could create a leaner, meaner supplier due to cuts in logistics and procurement costs along with other synergies, deal should also benefit rival big banana firms such as FDP.
- Follow-Up: Positive on GHC: Repurchase of 20% of its shares from Berkshire Hathaway is a bullish development for the TV and education company, which looks appealing based on its asset value and the turnaround potential at Kaplan; Last weeks stock auction of FNMA and FMCC shares is just the preliminary tremor of a major earthquake that will render all the claims of the old equity holders worthless.
- Mutual Funds: Interview with Richard Nackenson, Portfolio Manager, Neuberger Berman Multi-Cap Opportunities (top ten holdings: JPM, CAH, BA, BRKB, SLB, EBAY, HCA, OMC, MSFT, MMM); Interview with Jeremy Grantham, Founder and Strategist, GMO, who says Bubbles dont usually stop until sensible investors, value investors, and prudent investors have been hung out to dry. That hasnt happened yet, so theres probably quite a bit left in this rally.
- European Trader: Positive on Wm Morrison Supermarket: Shares look like a bargain as management launches overhaul that will repackage the supermarket chain and better position it to take on British rivals.
- Asian Trader: Over five years, the Philippines has ranked as Asias best-performing market, up about 230%, while over the past 12 months it has grown faster than China (Positive on EPHE, Ayala, Robinsons Land).
- Emerging Markets: Chinas largest Internet companies, such as Alibaba and Tencent, are on a buying spree, a trend that is likely to continue, with BONA, YOKU and QIHU likely targets.
- Streetwise: Biotech companies such as ICPT, ITMN, and SGMO have been driving gains at the Russell 2000 index, which has risen 24% in the past 12 months.