Barron's Saturday Summary: Positive on HAS, ANF, AAPL, TRP, BG, HD, PKX; Cautious on SHLD, APA
Cover story: Pressure on PEP to spin off thriving Frito-Lay snack-food business is growing, led by activist investor Nelson Peltz of Trian Partners, who thinks move would help stand-alone beverage business improve margins; some investors, such as Robert Burnstine of Fairpointe Capital, disagree with spin-off idea, noting existing synergies are helpful to both sides of the business.
Features: Positive on HAS: Toymaker's franchise brands, such as Transformers and My Little Pony, are thriving, and shares could return 20% in a year, including a 3.3% yield, making it a better play than MAT despite their similar price-to-earnings ratios; Positive on TRP: Canadian company offers a good alternative to MLPs, has a number of strong projects in the works, and generates lots of cash; a separation of the pipeline and power-generating assets could put shares as high as $86; Positive on BG: Agribusiness company's new CEO is trying to smooth its volatile performance, and steady earnings gains could boost shares by 15%.
Tech Trader: Positive on AAPL: Company has long focused on having users keep photos and music stored locally on its devices, but there are signs it is beginning to prioritize the cloud, which could be a long-term rainmaker if Apple can charge monthly fees similar to those of services such as Spotify or Dropbox. Notes that Apple's stock price has reached a recent high, and has messed up its Cloud offerings in the past but this time could be different.
Trader: Positive on ANF: Company is doing better than rivals AEO, BKE, URBN, and ARO to change course in difficult teen apparel sector, closing stores and ramping up online operations while adding more independent voices to the board; Positive on OKSB: For investors looking for an out-of-the-way stock to play a rebound in banking sector, company could prove profitable.
Hedge Funds: Interview with Joel Greenblatt, Manager, Gotham Asset Management (top five long holdings: ENR, SAFM, BG, AXE, CAT; top five short holdings: SUSS, THC, BOBE, KMT, TMO); Interview with Tad Rivelle and Laird Landmann, fixed income investment executives at TCW, who say "There is not a lot of upside to being long rate-and there certainly could be a lot of downside if there is a shock to the market."
Follow-Up: Positive on HD: Retailer is poised to benefit from boost in housing starts and applications for building permits, and its operating margins are better than those of rival LOW; Cautious on SHLD: Until retailer stops losing money, spinoffs and issuance of commercial paper or second-lien debt won't solve any problems; Cautious on APA: Potential plan to shed international assets and an ease on capital spending haven't boosted the shares, which still trade at a discount to those of rivals.
European Trader: Though recent merger attempts and other deals in European pharmaceutical sector have led to stocks outperforming the broader European market, rise due to M&A speculation may obscure the failure of many companies to address important structural issues; NVS has probably gone farthest to address problems.
Asian Trader: Positive on Posco: The worst may be over for Korean steel giant, which has been bogged down by overcapacity, falling margins, a strong won, and a weak global economy; its shares are up 19% over the past ten weeks.
Emerging Markets: Positive on Grupo Financiero Banorte: Mexican bank has a sizable government and corporate lending business, and is well positioned to expand its commercial and consumer loan portfolio as reforms take root in country.
Commodities: U.S. orange production and juice sales are both sliding, yet futures prices have gained 5.9% this year, and lower prices are not on the horizon.
CEO Spotlight: Profile of MAR chief Arne Sorenson, who works to strike the right balance between a global brand and local needs, and who says his biggest imperative is forging a bond with a younger generation to keep the brand thriving.
Streetwise: Stifel Nicolaus strategist Barry Bannister has increased his year-end target for the S&P 500 by 450 points, to 2300, making him the most bullish analyst on the Street.