Barron’s Weekend Summary: SPACs are growing in popularity as big names increasingly deploy them, but individual investors should proceed with caution
* Cover story: Special purpose acquisition companies, or SPACs, “have gone into overdrive, fueled by rock-bottom interest rates, a volatile stock market, and an insatiable appetite for new public growth companies,” but investing in them requires caution, knowledge of complex details, and a willingness to study SEC filings; Individual investors need to be choosy, judging SPACs on how shareholder-friendly their terms are and how comfortable they are piggybacking on an experienced deal maker such as Pershing Square’s Bill Ackman, the biggest name to start a SPAC this year.
* Tech Trader: There are contrary ways to think about the strong results from AAPL, AMZN, FB, and GOOGL after their chief executives testified in Washington—one argument is that the results prove the tech giants are getting too big and need more supervision, but they also demonstrate why federal and state regulators should leave the companies alone: they create products consumers want, and make tons of money for investors.
* Trader: Large technology companies overall are stuck just like the rest of the market—with some up and some down, the average gain was basically zero for the 280-plus large companies in the sector reporting earnings—a sign something is spooking investors.
* Profile: Alex Umansky, manager of the $1.2B Baron Global Advantage fund, favors unique businesses with sustainable competitive advantages and very large addressable markets that are well positioned for the realities of a Covid-19 world (top 10 holdings: BABA, AMZN, FB, WIX, MELI, TAL, GDS, SPLK, TWLO, VEEV).
* Interview: Brad Safalow, founder and chief executive of subscription service PAA Research, has a largely institutional clientele, which he supplies with ideas on a variety of small and midsize companies; clients who followed his stock recommendations would have outperformed the market by 50 percent on his longs and 30 percent on his shorts since 2010.
* Features: 1) Robo advising, which began as a nascent category of start-ups focused on optimizing investment portfolios, has become a ubiquitous service offered by many of Wall Street’s largest firms; Barron’s fourth annual ranking of the best robo advisors looks at criteria such as access to advisors, financial planning, transparency and conflicts, features, and customer experience, and includes SigFig, TD Ameritrade, Fidelity Go, Vanguard, E*Trade Core, Betterment, Ellevest, Wells Fargo, Wealthsimple, SoFi, and Maximum; 2) Positive on GLD, INIVX, IAU, GDX, GDXJ, NEM, GOLD: Though some investors shun gold, its recent surge is refuting critics, and there could be more room for it—and gold-mining stocks—to advance, with inflation-adjusted US rates negative and the US government running enormous deficits; 3) Positive on AN, GPI, KMX: Though consumers are increasingly buying cars online, especially during the pandemic, traditional dealerships still have some spark, and they offer a compelling play on a recovery, even a bumpy one; AutoNation and Group 1 are contrarian ideas, while CarMax has tailwinds from growing demand for pre-owned cars; 4) China’s economy is starting to rev up again as the country fights COVID-19 outbreaks with testing and contact tracing; It is the only major economy forecasting growth this year, and its recovery offers reason for optimism as the US strives to get its health and financial crises under control.
* European Trader: Positive on Halfords Group: Britain’s leading bicycle retailer has been hurt recently by poor sales from its higher margin auto repair and accessories business, but a new service-focused strategy in which Halfords provides engineers to fit the parts it sells onto customers’ bikes and vehicles gives it an edge over online vendors.
* Emerging Markets: “Brazil is showing a pulse, economically and politically, after a calamitous collision with COVID-19—but the beat looks too faint to power much of a recovery in a depressed stock market.”
* Commodities: “Investors have focused on a rise in record prices for gold, but silver’s up nearly 25 percent in July—the metal’s second-biggest monthly gain on record—and it’s still undervalued compared with the yellow metal.”
* Streetwise: Columnist Jack Hough attempts to understand the rise in Bitcoin, and says that the cryptocurrency, recently at $11,300, will settle back below $10,000 by year’s end—though many investors believe the rally will continue.