Barron’s Weekend Summary: Now may be the time for individual investors to look at new strategies to prepare for retirement in the pandemic era; ZM's recent performance isn't sustainable
* Cover Story: Among the near-retiree set of 50- to 64-year-olds, confidence about having enough saved for retirement has fallen to 48 percent from 65 percent before the pandemic, according to a recent poll by Edward Jones/Age Wave, and they may need a “new playbook to shore up their retirement for the pandemic era”; “The rapid return to record levels in major stock benchmarks opens the door for savers to review their strategies, recalibrate their portfolios, and rethink their risks.”
* Tech Trader: Cautious on ZM: The video communications company’s recent results are out of sync with the rest of the market, and what frustrates investors and analysts is how to model the business and how to use those models to value the business; The chief obstacle is that Zoom appears either unable or unwilling to give realistic guidance in the current environment—and ultimately its remarkable performance isn’t sustainable.
* Trader: A market reckoning is coming—“The Nasdaq has gotten too far ahead of itself for it to end any other way, despite protestations that the rise has been well-deserved. Low interest rates make expensive stocks look cheap and business models look unstoppable, and the looming threat of a coronavirus second wave makes tech stocks look all the more attractive”; Investors are blaming unusual stock options activity for the week’s tech stock rout, but there’s another factor roiling options that affects the stock market: Gamma is exploding.
* Profile: Karina Funk, co-manager of the $3.6B Brown Advisory Sustainable Growth fund, defines sustainability differently than other managers—While many socially responsible funds seek to reduce ESG risks by screening out, say, oil companies to reduce their carbon footprint, Funk also seeks companies that exploit ESG opportunities to increase profits, which she calls their sustainable business advantage (top 10 holdings: AMZN, MSFT, DHR, AMT, TMO, V, GOOGL, INTU, VRSK, UNH).
* Interview: Jenny Davis, co-manager of the $3.6B Baillie Gifford International Alpha 2 fund, focuses on companies around the world that can grow regardless of what events they face—such as the pandemic and the cold war between the US and China—and on long-term trends at companies with considerable competitive advantages.
* Features: 1) Warren Buffett’s surprising bet on five Japanese trading companies spotlights the appeal of Japan’s long-depressed stock market; Based on several measures—earnings, dividend yield, and price-to-book ratio—Japanese stocks broadly look inexpensive, and government policies should help improve weak returns; 2) Positive on PTON: The connected bike company has been one of the great Covid-19 success stories, and demand continues to soar as gyms in many states remain shut down, and with the home fitness segment remaining resilient, many analysts expect Peloton to issue a strong earnings reports; 3) “New rules governing how banks account for bad loans have helped sink bank stocks this year—the changes, however, might provide a boost to the banks and their shares in 2021, if the economy strengthens,” partly because many banks may have been reserving more than the losses they will eventually incur; 4) Abenomics, the strategy of former Japanese prime minister Shinzo Abe, was meant to break the “deflationary mind-set” that had plagued the country ever since its stock market and real estate bubbles burst in the early 1990s, and by some measures it was a success—yet when evaluated against the benchmarks set by Abe and his top advisors, Abenomics has failed to deliver; 5) For some single people, filing for Social Security at 62 could be a short-term solution to get through a period of crisis without income, but it doesn’t have to mean retiring permanently and giving up sizable Social Security benefits for life—and for baby-boomer couples, the options can be even better if they’re able to use a little-known strategy known as a “restricted application” for Social Security.
* European Trader: Cautious on Capita: Shares in the London-listed consulting and outsourcing firm have fallen so much that they have virtually nowhere left to go, and investors are concerned that it won’t make it through the second half without breaching banking covenants—yet a potential sale of its Education Software Solutions unit and £770M in new business offer glimmers of hope.
* Emerging Markets: The upcoming IPO of Ant Group, BABA’s financial arm, is what emerging market investors have been waiting for, and its estimated $250B valuation would make it one of the top global fintech companies—but it isn’t likely to inspire smaller releases among China’s half-dozen other “decacorns,” private companies with imputed worth more than $10B.
* Streetwise: Columnist Jack Hough looks at the “head-scratching math behind when to claim social security benefits,” noting that claiming benefits late reduces longevity risk—the risk of outliving savings—but it presents the risk that you won’t maximize benefits if you die before your life expectancy.