Barron’s Weekend Summary: Are we nearing a housing peak? “No, say the housing bulls on Wall Street
Cover Story:
-Are we nearing a housing peak? “No, say the housing bulls on Wall Street, who argue that this is an upturn that could last for a decade. Millions of millennials are now at a point in their lives when they are seeking single-family homes in the suburbs and exurbs. They are entering a market still chastened by an unprecedented collapse in housing more than a decade ago.”
Tech Trader:
-The Metaverse is not just about Meta Platforms’ vision. There are other interesting plays to consider. Enter Zwift. “Zwift is an all-encompassing experience, one with meetups, communication features, and a virtual currency. You need a road bike, a smart trainer, and a laptop or tablet with a decent internet connection. Zwift founder and CEO Eric Min sees room to grow his budding alternative world, and plans to raise more capital to make it happen. One of Min’s ideas is to provide developers access to the same tools Zwift uses to create its virtual environments. That’s Zwift meets Roblox, which is poised to generate $2.7B in sales this year, by making tools that let its users create games and virtual worlds.”
The Trader:
-The Federal Reserve is scaring investors more than the Omicron coronavirus variant. ‘Omicron was bad enough on its own—no one knows how much it will hurt the economy—but then Fed Chairman Jerome Powell had to go and acknowledge that inflation isn’t transitory after all and the taper might have to go faster than expected. “He leaned on that message so strongly, it tells you some strategy change is coming,” says Dave Donabedian, chief investment officer at CIBC Private Wealth US.
- Few pharma companies have been hit as hard as Bristol-Myers Squibb. The stock has dropped 11% so far this year amid concerns that it will lose exclusivity on drugs like multiple-myeloma treatment Revlimid in 2022, and cancer treatment Opdivo and blood-clot preventer Eliquis later this decade. But if pharma is cheap, then Bristol, at just seven times 2022 earnings, looks like a bargain—especially if those concerns are overblown. BofA Securities analyst Geoff Meacham points to Bristol drugs like Abecma, Reblozyl, and others. “The biggest value driver going forward will be good commercial and regulatory execution for its newer launches,” writes Meacham, who has a $78 price target on the stock, up 38% from Friday’s close of $56.32. If pharma is ready to rally, Bristol might be the prime beneficiary.
-“The recent selloff in industrial stocks has left some names looking particularly cheap. Deere (DE), for instance, trades at 14.7 times its next 12 months’ expected free cash flow per share, below its five-year average of 20.7 times. That’s despite the fact that the $107 billion agriculture and construction equipment manufacturer is expected to grow free cash flow in the high teens over the next two years.’
Features:
-Analyst ratings for Rivian are expected to arrive this week. But Rivian isn’t exactly ailing. The company is valued at about $100 billion, more than Ford Motor (F) or General Motors (GM). Still, its shares are down about $2 from where they opened for trading on Nov. 10. Investors who bought shares when Rivian made its Nasdaq debut are down, even though the stock is still significantly higher than its $78 IPO price.
-The Japanese videogame giant Nintendo is still making games that are adored by its fans. But investors have spent much of the year looking for companies making big promises about the “metaverse”—the idea of virtual worlds that enable social interaction and commerce. That has powered stocks like Roblox and Nvidia to huge gains. Roblox is up 160% since it went public via a direct listing in March.
Meanwhile, Nintendo remains as conservative as ever about its ambitions. In a 48-page earnings presentation last month, it didn’t mention the metaverse.
-The Japanese attack on Pearl Harbor on December 7, 1941 was not just the event that brought the US into World War II. “It was the event that effectively gave birth to the US defense industry as we understand it today. But the mightiest force set in motion by the attack on Pearl Harbor was America’s military-industrial complex. Powered by a new national sense of mission, this massive force would win the war and then, over the following decades, turn the U.S. into a globe-spanning superpower.”
Europe:
-The hot jobs market has helped boost British recruiter Robert Walters as companies bounce back from the pandemic and hire more workers. Shares in the employment group, which places accountants, legal, and technology staff, have jumped almost 68% in the past 12 months to 7.60 pounds sterling ($10.11). A shortage of white-collar workers in some of Robert Walters’ 31 markets means companies have hiked salaries to woo the best talent.
Emerging Markets:
“Brazil’s public health system has been a leader since HIV days, and there’s very little vaccine hesitancy there,” says Thomas Kenyon, chief health officer at global medical NGO Project HOPE. Latin America in general is outperforming developing Asia on vaccinations. Chile is a global star at 84%, Mexico just went over 50%. Whether these numbers translate into investment opportunity might depend on your time frame. Verena Wachnitz, a portfolio manager for Latin American equities at T. Rowe Price. “Anyone with a medium-term horizon should find a lot of good ideas in Brazil.”
-“The pandemic has exacted a particularly heavy toll on the emerging-market economies. Not only did these economies suffer deep economic recessions and high unemployment rates. They also found their public finances were highly compromised. According to the IMF, never before have the emerging-market economies been as indebted as they are today. And seldom before have their budget deficits and their gross financing needs been as large as they are today.”
Commodities:
-“Palladium looks to post its first yearly price decline in six years, and platinum is ready for its first loss in three years. Both metals are defying overall strength in the commodities sector, which is on track to see its benchmark index score its strongest performance since 2009. The negative impact on demand for both metals, due to the global shortage of semiconductor chips, “heavily influenced investor sentiment and positioning” on the Comex futures market, says Trevor Raymond, director of research at World Platinum Investment Council.”
Streetwise:
“UBS calls artificial intelligence (AI) a top investment theme for the coming decade. So, where are all the attractively priced stocks? Don’t suggest using AI to search for them—I spoke with a guy who’s doing just that, and it’s off to a slow start. Schmidt says machines will cure our diseases and enrich our lives, and they probably won’t annihilate us Terminator-style. But they might trick us into annihilating each other; he recommends making some modifications while we can.”