Barron’s Weekend Summary: Teenagers are increasingly investing in stocks on new apps, but adults need to watch out for “gamification” trading and social media hype
* Cover Story: Teenagers are allowed to trade stocks, and a new crop of mobile apps is making it easy for the to invest, trade, and following the market, using custodial accounts or tunneling in through other means—and while teens might not have much to invest, brokerage firms are eagerly courting them; Still, using these apps while not properly prepared could lead to formative experiences that eventually backfire, leading to more risk-taking later in life, or fear and risk aversion, and teens may also be vulnerable to “gamification” of trading and to social media trends.
* Tech Trader: FSLY's recent crash raises questions about the stability of the internet, cybersecurity vulnerabilities, and the company’s business, as well as those of other content delivery networks—investors seeking to be in CDN sector have cheaper options, such as AKAM, or stronger performers, such as NET.
* Trader: A recent drop in tech shares and a rise in the percentage of finance stocks when the MSCI USA Momentum index was rebalanced has changed its characteristics; Positive on UPS: Shares of the delivery giant are still a buy even after the past week’s disappointing investor event—the company’s pricing is strong, online shopping is growing, and new business opportunities are popping up in a post-Covid world; Falling bond yields could suggest that the market is starting to price in slower growth, and perhaps even a growth scare later in the year, something that would be bad for value stocks—but history suggests otherwise, says Sundial Capital Research’s Dean Christians.
* Interview: Lauren Taylor Wolfe and Christian Asmar, activist investors at Impactive Capital, which they founded in 2019, lean toward quality businesses with widening competitive advantages and the ability to generate free cash flow significantly in excess of what’s implied in their stock prices; they look for companies that can deliver a high-teens to low-20s percent annual return on their investments, and businesses where ESG improvements can help contribute to some of those returns (picks; WH, KBR, ABG).
* Profile: Mike Gush and Sophie Earnshaw are part of an eight-person team managing the $7.1B Baillie Gifford Emerging Markets Equities fund, which doesn’t have retail shares but is available to individual investors through custodial platforms; Its overarching goal is to find growth companies that have the potential to double in value within five years (top 10 holdings: TSM, BABA, Samsung Electronics, Tencent Holdings, Mediatek, Sberbank, Reliance Industries, Naspers, Norilsk Nickel, Ping An Insurance Group).
* Features: 1) Positive on LLY, Roche Holding, Eisai: The FDA’s approval of Adulhelm, BIIB’s Alzheimer’s disease therapy, opens the possibility of approvals for similar drugs that can clear amyloid plaque, but haven’t been proven definitively to slow cognitive decline, though the scientific consensus is still out on whether plaque clearance has clinical benefits; 2) Positive on Kinaxis: The Canada-based logistics software company stands to benefit from global shortages in a range of goods, including bleach, microchips, condiments, and pickup trucks—unlike rivals, it doesn’t manage supply chains, its products help to plan them; 3) In a fallow decade for income investors, with the financial crisis and the pandemic keeping short-term interest rates near zero, yield still exists in some corners of the market, and not just in relative terms—a handful of asset classes such as closed-end funds, business development companies, and mortgage REITs, pay out seven percent or more, and some investment vehicles offer yields in the double digits; 4) Cautious on TSM: The chipmaker sits at the nexus of a global semiconductor renaissance, supplying companies such as AAPL, QCOM, and Huawei, but shares are in a rare correction, down 15 percent since mid-February—instead of buying on the dip, long-term investors should hold off, because the upcoming quarters could be bumpy enough to send the stock down even more, making it a better deal later on.
* European Trader: Cautious on CD Projekt: The Warsaw-listed company continues to grapple with the buggy release of its “Cyberpunk 2077” videogame, and the shares have fallen by 38 percent this year, the third-worst among Stoxx Europe 600 companies, and down two-thirds from a 2020 high.
* Emerging Markets: Mexico has had everything going for it these past few years except president Andrés Manuel López Obrador, whose invectives against the rich and willingness to cancel predecessors’ state contracts have depressed investment since his 2018 election, leaving the nation of 128M with next to no growth.
* Commodities: “A rise in oil prices to $100 a barrel isn’t very likely anytime soon, analysts say, but traders are still placing bets on a price spike of as much as 30 percent by the end of 2022.”
* Streetwise: James West, an analyst at Evercore ISI, calls this the climate decade, and says the rise of electric vehicles will help make home solar ubiquitous—and Sunrun is his top pick for its scale.