Barron’s Weekend Summary: Cover story on commission-free trading says SCHW will likely be the industry winner; TSM is a good way to play tech sector innovation
- Cover story: Customers of firms such as SCHW, ETFC, IBKR, and AMTD may be delighted about their move to cut equity trading commissions to zero, but analysts lowered estimates and tried to figure out who the winners and losers would be once the dust settles; If there is a winner, it is likely to be Schwab, which has a history of disrupting the industry, though it faces significant near-term challenges.
- Tech Trader: The technology industry is counting on 5G to be the next big growth driver for a range of new products, from phones and chips to software and sensors, but 5G remains an amorphous idea, and the short-term beneficiaries are no longer clear; “Even if the 5G opportunity takes more time to play out in the U.S., there is still a powerful near-term investment opportunity for the technology: Chinese infrastructure.”
- Trader: “As the data confirm, the U.S. economy is slowing but still growing, if at a much slower pace than a year ago. For investors sick and tired of the back-and-forth, perhaps it’s best to ignore it”; There’s little reason for PYPL, MA, and V to remain involved with FB’s Libra cryptocurrency—they have benefited tremendously from huge secular shifts in how people shop and have already navigated the regulatory issues that are slowing Libra down; This year, to keep stocks afloat, lower rates are needed, but so is action on the fiscal front, such as infrastructure spending, though a bipartisan package in that area is unlikely to materialize.
- Features: 1) China is growing at its slowest pace in decades—a slowdown that began before the trade war, and Beijing’s previous strategy of printing money to stimulate the economy has resulted in high government debt that prevents it from taking similar measures now, creating a challenge for stock investors who are reassessing their China stakes; 2) Positive on TSM: The company, which pioneered the foundry business model of making chips only for external customers such as AAPL, QCOM, Huawei, NVDA, and AMD, remains a good way for investors to play innovation in the tech sector “without the external noise”; 3) Positive on UTX, RTN: The companies’ planned merger hasn’t been easy to sell to investors, but there are still several good opportunities in the two stocks, though it might be best to act before shareholders of both companies vote on the merger on October 11; 4) Positive on VLO, MPC: Every year, some 60,000 oceangoing freight ships carry $7T in goods and commodities around the world, but big changes are coming to the industry that will reorder the oil and shipping markets—and perhaps make the planet a cleaner place, a shift that presents big opportunities for investors; beneficiaries are likely to include Valero and Marathon Petroleum; 5) Commission-free trades sound nice from a marketing standpoint and are likely to lure investors, but financial professionals say there are limits and some remaining fees, and that free trading could lead investors to make risky bets or disregard other costs of trading, such as taxes; 6) Scams that target the elderly, whether by phone, computer or in person, gain criminals billions of dollars a year, but fear and shame often keep victims from seeking the help that their grown children could provide, according to experts.
- ETF Quarterly: Stories on how emerging market funds are trying to sidestep China; How to bet on pre-IPO companies; What to expect when a fund merges with another fund; ETFs that can limit losses, though they cost more; Leaders and laggards in the industry.
- Follow-Up: Positive on SPOT: Shares of the global leader in streaming music have had a rough few months, but some analysts now say the bad news is already priced into the stock and that a rally is in the mix.
- European Investor: Positive on Technogym: The Milan-listed Italian fitness-equipment maker could become valued like a Silicon Valley technology start-up as it prepares to stream online fitness classes through digital platforms on its machines.
- Commodities: “Palladium has outdone itself with an extended run to record highs that began at the start of 2018 and is continuing, with prices up about 40% this year—the gains have come even as sister metal platinum’s recent rally to a more than one-year high failed to hold.”
- Streetwise: Company earnings won’t begin pouring in for another week, says columnist Jack Hough, and while on the whole the numbers won’t be good, they’ll be better than predicted.