Barron’s summary: positive on TMO, USG, SYNA; cautious on Apple suppliers ahead of iPhone 6 release
Cover story: The unemployment rate slipped to 6.1% in June, its lowest level in six years, but the percentage of adult American workers who are actually in the workforce is at its lowest level in 36 years; story reports the government doesnt seem to recognize the severity of the problem, which increasingly appears to be structural; rebound in job market is beginning to make the decline in participation look anomalous and therefore likely to persist.
Features: Positive on TMO: Company that provides research for hire, rents labs, and sells science gear is riding strength in its sectorwhich also includes DHR, PLL, and PKIwhile its low valuation could lead to a 20% boost in share price; Positive on USG: North Americas biggest wall board maker has re-invented some of its core products, stock could rise by 30% following boost in new-housing starts and improved investor sentiment; Positive on SYNA: Company is on the leading edge of fingerprint reading technology, or human interface solutions, and with growing use of such technology in smartphones and tablets could see 35% upside.
Tech Trader: Cautious on RFMD, AVGO, OVTI, STM, NXPI, GTAT: Tiernan Ray looks at suppliers to AAPL, some of which will have parts in the new iPhone while others dont; the problem for all is that broad gains are in such stark contrast to the overall stock market that it seems to prep the group for some profit taking; investors may be best off dumping pricier names and holding cheaper ones, such as SK Hynix, MU, and Advanced Semiconductor Engineering.
Trader: Current level of tension is relatively low for the market and dwarfed by the potential impact on stocks of actions by the Fed and the ECB, says Joseph Amato of Neuberger Berman; Cautious on MCD: Until food chain addresses complexities with its McCaf offerings, fixing the core business will be difficult, and the only way shares are likely to outperform is if the market falls sharply and theres a wholesale move to defensive stocks; According to Bespoke Investment Group, the best loved stocks in the S&P 500 are DAL and AMT, while DO, RIG, CLX, and DE have the most sell ratings.
Mutual Funds: Interview with Gershon Distenfeld and Paul DeNoon, Managers, AllianceBernstein High Income (top five sectors: corporate noninvestment grade, net cash equivalents, interest rate futures, derivative offsets, collateralized mortgage obligations); Interview with Richard Pzena, CEO, Pzena Investment Management (top picks: BAC, C, GS, JPM, GP, Royal Dutch Shell, SPLS);
Follow-Up: Positive on DFS: Company is gaining share in card balances from big banks, though theres room for improvement, there are opportunities in pre-paid and private-label cards, and management sees non-card loans growing twice as fast as card balances; stock should see a double-digit return next year; Positive on DBD: Investors still have ample time to cash in on the stock, and earnings could top $3 per share by 2016; Cautious on HTZ: Integration of Dollar Thrifty has been tough, and profits are likely to be below guidance, while an audit could delay the $2.5B spinoff of its equipment rental business.
European Trader: As a play on Scotlands vote for independence, researchers at Nomura suggest shorting RBS and Lloyds Banking Group and going long on HSBC and BCS.
Asian Trader: Though Hong Kong is no longer the retail powerhouse it once was, some stocks are still strong (Positive on Chow Tai Fook, Lifestlye International).
Emerging Markets: Small-caps have outperformed large-caps in emerging markets since the financial crisis (Positive on WisdomTree Emerging Markets SmallCap Dividend).
Commodities: David Ranson of HC Wainright & Co. Economics offers an index that invests in only four commodities, with equal weights of crude, soybeans, copper, and textiles/fibers, rebalanced each year; companies must have a long price history, economic importance, and a liquid market.
Streetwise: The PFOPX is up 11% in 2014, with 22% of its portfolio in mid-cap stocks, while the BOGIX, which has returned 8% this year, has 34% in midsize companies, an indication that size matters.