Barron’s Weekend Summary: A Barron’s panel says there’s no recession on the horizon for 2020, but the trade war and election results could spark turbulence
* Cover story: A Barron’s panel says there’s no recession on the horizon for 2020, and companies are likely to see a return to earnings growth that could push stocks slightly higher; “A return to earnings growth will be the force that drives the S&P 500 higher in 2020, with valuation multiples already toward the high ends of their historical ranges”; Still, the coming year raises questions about more than just fundamental asset allocations—shocks from trade war talks and elections could lead to a range of outcomes, a sign turbulence may be in store.
* Tech Trader: Privacy advocates, pundits, and politicians are pushing for more aggressive tech regulation—which involves a range of complex issues—but no matter how the 2020 election plays out, change is already on the way in states such as California, where a bill focusing on improving conditions for “gig” economy workers is creating controversy.
* Trader: Whenever the S&P 500 has closed above 70, it has usually gone on to further gains, says Doug Ramsey, chief investment officer at the Leuthold Group, but he continues to have concerns about the market’s valuation; +/- Saudi Aramco: Though the oil giant briefly reached the $2T valuation sought by Saudi Arabian crown prince Mohammed bin Salman, investors should be skeptical about the stock’s ascent—it remains an intriguing, though overvalued, investment; +/- S, TMUS: Investors seem to agree with states who say the proposed merger will reduce competition and harm consumers, and the market is pricing in a renegotiation of the deal price, or perhaps it falling apart entirely.
* Profile: Ben Barber—co-head of municipal investments for Goldman Sachs Asset Management and the Goldman Sachs Dynamic Municipal Income fund, which focuses on national tax-exempt bonds but has a broad mandate—says state munis offer no shortage of opportunity, but the more interesting area is smaller issuers that only rarely come to market.
* Interview: Bill Nygren of Oakmark talks about banks, NFLX—which he considers a value stock, along with GOOG—the perils of value investing, and his all-time favorite stock, Liberty Media.
* Features: 1) Barron’s annual year-end list of the 10 top stocks for the coming year tilts toward value and includes Berkshire Hathaway, Comcast, Royal Dutch Shell, PFE, VIAC, ANTM, DELL, GOOGL, UHAL, and UTX; the group has an average projected 2020 P/E ratio of 14, against 18 for the S&P 500, while the average dividend yield is 1.8%, in line with the overall market; 2) Positive on DIS: Disney’s movies are thriving at the box office and its streaming service is off to a good start, but “even more remarkable for stock investors is what’s happening to the earnings power of Disney’s parks,” which Wall Street expects will approach $10B in revenue through September 2024; 3) Positive on SCHW: The company’s shareholders stand to benefit from its acquisition of AMTD, but advisors and brokerage customers may not be so fortunate—with equity commissions at zero, reduced competition may make brokers less inclined to reduce fees in the few areas where they remain healthy; 4) Positive on APO, CG, BX: Income investors who’ve dismissed publicly traded alternative-asset managers because of their inconsistent payouts might want to reconsider: Many of these companies have shifted their policies to focus more on steady dividend payments.
* European Trader: Cautious on Kingfisher: The company has struggled to implement “One Kingfisher,” its ambitious five-year plan to sell the same products in all of its territories, unify its infotech system to boost online sales, and improve operational efficiencies.
* Emerging Markets: While China’s economic problems have hogged the headlines, India has seen the most dramatic slowdown in emerging markets—GDP growth has dropped from 8% in mid-2018 to 4.5%, despite the landslide re-election of pro-business prime minister Narendra Modi.
* Commodities: “Predictions calling for hot, dry weather early in 2020 followed by destructive flooding could cause ‘monumental crop failure’ and easily propel wheat prices at least 40% higher within the next few weeks.”
* Streetwise: Positive on PHM, BWA, DISCA, CVS, AMAT, CPRI, REGN: These stocks are among those that have run well ahead of the S&P 500’s median gain of 4.3% over the past three months and have free-cash-flow yields safely above the index’s median of 3.7%, based on current-fiscal-year estimates from FactSet.