Barron’s Weekend Summary: FB remains a growth machine, and shares won’t remain as cheap as they are for long; The tech sector stands to benefit from the Biden infrastructure proposal
* Cover Story: Positive on FB: Though the company’s stock trails those of other Silicon Valley tech giants, and the company faces a number of challenges, including antitrust lawsuits and ongoing criticism of its privacy practices, the shares “won’t remain this cheap for long, especially with investors rotating out of expensive tech stocks with questionable business models. For all of its baggage, Mark Zuckerberg’s Facebook remains a resilient growth machine.”
* Tech Trader: The technology sector is set to play a key role in the Biden administration’s $2.3T infrastructure plan, and a range of stocks are set to benefit: CHPT, BLNK, APH, TEL, ST (investments in electric vehicle charging stations); CSCO, CIEN, AAPL, ERIC, NOK, QCOM, SWKS, QRVO (expanded broadband); ADSK, BSY, PTC, ANSS (big spending on construction); Positive on WDC: The company was set to benefit from an IPO at Kioxia, with whom it jointly operates chip factories, but though the offering was pulled, Western Digital’s shares still rose, and a potential joint bid with MU for Kioxia could send shares even higher.
* Trader: For investors wondering where to put their money now, there’s little harm in sticking with what’s been working—the sectors that fared well last quarter on hopes of an economic recovery—and there even appears to be a decent foundation for growth.
* Profile: Dave King of Columbia Threadneedle is wary of bonds and sees better opportunities in certain stocks, and says the current environment is “noticeably harder than average on the income investor”; His “absolute favorite” income play remains the Dogs of the Dow, as they are known—the 10 highest yielding stocks in the Dow Jones Industrial Average.
* Interview: Chris Davis of Davis Advisors says the pandemic has only amplified his penchant for the financial-services sector, and talks about why this conviction regarding high-quality financials is the highest it has ever been, even with the growth of fintechs, blockchain, and other disruptive forces.
* Features: 1) Though massive infrastructure plans such as the one President Biden is proposing take years to show results and face hurdles from a patchwork of federal and state rules, economists view the proposal as a long-term winner, addressing years of underinvestment in the country’s foundations; Stocks that could benefit include MTZ, ACM, J, PWR, VMC, ASTE, ROAD, AQUA, GLDD, TPIC, RUN, SEDG, NEE, AY, and CWEN; 2) Positive on GOLD: The precious metal has declined by nine percent to $1,726 a troy ounce in 2021, leaving it 16 percent below its record high of $2,063, reached last August—and with the selloff, it now looks attractive, as does Barrick Gold, whose shares are trading cheaply despite management improvements; 3) Liquid alternatives—mutual and exchange-traded funds that mimic the investment strategies of hedge funds—have long been a solution in search of a problem, but as investors try to predict the outcome of the current health and economic crisis, liquid alts seem to be increasingly attractive, and their returns have begun to show signs of life; 4) Cautious on BNTX: The company expects revenue of more than $11B from the 1.4 billion Covid-19 vaccine doses that it and PFE are contracted to deliver this year, and BioNTech says the companies could make another 1.1B doses in 2021—but though it is working on a long list of cancer and infectious-disease programs, all are years away from a marketable product, which could pose problems for the stock; 5) Positive on WW: The company stands to benefit from the pandemic recovery as Americans who gained weight after a year of restricted movements, interrupted routines, and stress eating look for ways to shed pounds—its live workshop business should bounce back from a slump during the crisis, while digital-only subscriptions, which have higher margins, will continue to grow.
* Mutual Funds Quarterly: 1) Story on how to choose an ETF notes that “As some corners of the value rally are starting to slow down, or even retreat from their highs, three areas seem best positioned to harvest the next leg of gains—quality, momentum, and international small-cap value ETFs”; 2) Unconstrained bond funds emerged in the wake of the financial crisis as fund managers anticipated a recovery would cause the Fed to raise interest rates, driving up Treasury yields and pushing down prices of long-term bonds—and if there were ever a time for their managers to prove their worth, this is the year; 3) Positive on Causeway International Value, Dodge & Cox International Stock, Neuberger Berman Large Cap Value, Oakmark International, Parnassus Endeavor, T. Rowe Price Value: With value stocks coming back and set to thrive—over the past couple of months, the Russell 1000 Value has outperformed the Russell 1000 Growth by the biggest margin in about two decades—these six funds offer investors a way to play the trend.
* European Trader: Positive on RWE: German’s largest power producer could see faster growth as the world increasingly turns to renewable energy sources, giving the stock a boost—and some analysts believe the market may be underestimating the profit potential of RWE’s growing renewables business, particularly wind.
* Emerging Markets: Hydrogen power could be huge eventually—if and when renewable sources start producing excess megawatts, hydrogen comes into play as a storage mechanism, or to convert that power into fuel cells for vehicles, a trend South Korean conglomerates Hyundai and SK Holding, which have launched multi-billion-dollar investments in hydrogen, hope to leverage.
* Commodities: Rhodium has seen a phenomenal gain in prices this year that some investors may have missed: its value has climbed by more than 50 percent, extending a rally that saw prices for the metal nearly triple in 2020.
* Streetwise: Conditions are ideal for a pickup in capex even before factoring in a White House push to spend mightily on infrastructure and green technology—the average age of private nonresidential fixed assets is the highest in 55 years, and factory utilization is reaching levels that have coincided with past capex sprees.