Barron’s Weekend Summary: What is happening in New York City during the coronavirus pandemic is indicative of how the US economy will fare through the business shutdown and beyond; The pandemic is validating the growing embrace of cloud computing
* Cover story: In one month, New York City—responsible for nearly on tenth of overall US economic output—has become the epicenter of the novel coronavirus outbreak in the US, and what’s happening there is informative for other metropolitan areas bracing for the stealthily spreading virus and indicative of how the US economy will fare through the widespread business shutdown and beyond.
* Tech Trader: Positive on Comcast, VZ: With Americans hunkering down in their homes amid the pandemic, Internet use is surging—but the good news is that networks are handling the traffic spikes without any major hiccups; One takeaway from the current situation is that it offers clear validation of the corporate world’s growing practice of moving computing to the cloud.
* Trader: “Investors should continue looking for opportunities in individual stocks, with less worry about the kind of no-safe-haven, sea-of-red days when no company’s shares are spared from steep losses”; For investors seeking exposure to oil and gas, CVX is the most attractive stock on a relative basis—its balance sheet is strong enough to protect its 7% dividend yield and the company has made commitments to slow drilling and preserve cash.
* Features: 1) If ever there were a prime time for active funds, this is it: the first bear market since the financial crisis, soaring volatility, and a chance for stock and bond pickers to prove they can tiptoe through the minefields, adding value over unmanaged index funds that mirror the market; 2) With the global economy on shutdown, advertising is disappearing across the media landscape, mainly because even the most prominent ad buyers—airlines, automakers, hotel chains, etc.—lack reasons, and often the means, to buy ads; 3) “New York City, as the nation’s epicenter of the Covid-19 pandemic, is battling an unprecedented health crisis. It is also grappling with a rapid economic slowdown that is undermining hard-won gains in its fiscal health that have been achieved since the financial crisis of the 1970s”; 4) New York has weathered crises before, from the dot-com bust and 9/11 to the financial crisis—but this time, banks are part of the solution, not the problem, because they’re the conduits by which billions of dollars will be funneled to small businesses across America; 5) Hospitals across the country are facing major challenges as the coronavirus spreads—the particular nature of the disease and the unusual length of time it takes to get really sick are compounding the growing problem of hospital shortages; 6) With tens of millions of people losing jobs in the US, companies are looking beyond shareholders, a move that’s likely to accelerate the “stakeholder capitalism” trend in which employees, suppliers, customers, and communities are given equal consideration to shareholders.
* Interview: Eli Casdin, founder and chief investment officer of Casdin Capital, a New York-based hedge fund specializing in life-sciences investments, talks about biotech, and why investors should recognize that an industry with a lot of growth ahead isn’t going to sustain disruption in the same way that much of the legacy economy will.
* Mutual Funds Quarterly: 1) Positive on RNWOX, POLRX, RYSEX, IVIOX, JENSX: Story says these are the five best mutual funds to own now, because they focus on companies that have the cash to survive the coronavirus downturn; 2) Bond mutual and exchange-traded funds can react very differently in times of market volatility, even when they own the same securities, creating potential problems for investors; 3) Extreme drops in the stock market during the coronavirus pandemic have shown investors how well their portfolios can withstand periods of market volatility; 4) Negative interest rates have been the norm in many developed nations for more than a decade, but the notion that US interest rates could drop below zero had seemed unfathomable—until recently; 5) Most bond funds have taken a hit recently, and while it’s probably best for bond investors to avoid major changes to their portfolios, there are several strategies they can put to work now to mitigate the damage.
* European Trader: Positive on Morrisons: The British supermarket chain is doing well, and the sector becomes a defensive play, as people stockpile during the pandemic; the company stands out from rivals because of its vertical supply chain—it owns many of the farms and processing facilities that supply its food.
* Emerging Markets: Mounting emerging market corporate debt has looked like an accident waiting to happen for some time, but some fund managers say the coronavirus’ real consequences in defaults and downgrades may prove more like a fender bender, leaving room for a lucrative rebound.
* Commodities: “Corn prices could drop to their lowest levels in more than a decade as coronavirus-related weakness in demand for gasoline pushes the cost of ethanol toward record lows.”
* Streetwise: Retail investors should consider a barbell strategy, says Chuck Grom of Gordon Haskett, with stores that can prosper during a downturn on one end, and ones that can bounce back during a recovery on the other—of the latter type, his favorites include WSM, W, and TSCO.