Barron’s Weekend Summary: The travel industry faces a long recovery even as the economy reopens; Not all tech stocks are benefiting from the remote work trend.
* Cover story: The broader economy is in recession, but the travel industry is arguably going through a depression, and won’t return to normal right away even as the country gradually reopens; Barron’s looks at seven stocks in travel and in ancillary businesses—SAVE, LUV, DAL, STAY, LIND, MPC, LVS—that appear insulated from the worst of the uncertainty and could be lifted over the next year by an emerging revival in travel; related cover stories are positive on MPC, VLO, and PSX, noting that driving is rebounding as the economy reopens, based on the belief cars are safer than trains, planes, and other mass transit; and on STAY, which unlike large hotel chains such as MAR and HLT hasn’t had to make radical changes to its operations, allowing it to keep hotels open during the crisis.
* Tech Trader: Cautious on HPQ: Tech stocks have done well during the pandemic, but the stay-at-home, remote-work trend isn’t good news for the whole sector, and with most offices shuttered by the pandemic, there is little need for commercial customers to buy printers or ink, a situation that isn’t likely to change soon—the company acknowledged that printer sales could get even worse in the current quarter.
* Trader: For now, the Nasdaq might be experiencing a lull as investors turn to cheaper, more economically exposed names, but with Big Tech such a huge part of the S&P 500—MSFT, AAPL, AMZN, GOOGL, and FB make up 20% of the index—a stall could be problematic for the market.
* Interview: Salim Ramji, global head of iShares and index investments for BLK, keeps a close eye on long-term trends—he talked with Barron’s about the outlook for ETFs, sources of growth, why the active/passive debate still exists, and says “Companies that manage sustainable risks better tend to also manage other risks better, and tend to be better-managed.”
* Profile: Don Kilbride, manager of the $38.9B Vanguard Dividend Fund, says that because the world has changed dramatically during the past few months, even the most reliable dividend payers may need to “reorder their priorities,” he says, by putting the needs of their employees, customers, and communities ahead of shareholder payouts (top 10 holdings: UHC, MCD, JNJ, KO, MDT, MSFT, TJX, NKE, CL, MRK).
* Features: 1) Positive on TWTR: Trump’s threat to issue an executive order stripping away the company’s protections under Section 230 of the Communications Decency Act didn’t cause much concern on Wall Street—analysts say the law has long been tested in court, and can’t be easily overturned, though the situation could create short-term “overhang” for tech stocks; 2) Positive on CTRE: Covid-19 has taken an outsize toll on nursing homes and long-term-care facilities, with tens of thousands of deaths among their elderly residents and staffers, and investors must pay close attention to balance sheets; CareTrust looks like a standout among senior-living REITs, with manageable debt and a seemingly safe dividend; 3) Positive on HIG, CB: As global insurers take a massive hit from the coronavirus pandemic, Hartford Financial and Chubb look particularly well-positioned, given their balance-sheet strength and demonstrated ability to compound value over time—shares of both are depressed based on price to book value, and could rally as Covid-19-related losses become clearer and as industry pricing improves; 4) Positive on LIND: The company, which specializes in “adventure cruises” to places such as Antarctica, the Amazon rainforest, and Patagonia, may offer investors an alternative to the cynical view of cruise ships as “floating petri dishes,” and could come out of the shutdown stronger than large cruise operators; 5) As families decide how to manage long-term care for elderly parents or other relatives in the wake of Covid-19, experts say it’s critical to realize that not all senior-living facilities are regulated the same way—and this divergence in oversight has led to an acute health crisis during the pandemic.
* European Trader: Positive on BAE Systems: The UK-based defense contractor, which helps make the F-35 combat aircraft and the Eurofighter Typhoon, is one of the few firms to come out of the first quarter unscathed by Covid-19, making it a defensive play, and its healthy order book and clarity on multiyear programs put it in a strong position.
* Emerging Markets: Threats to evict some 150 Chinese companies, including e-commerce giant BABA and other hot tech stocks, from US exchanges are real and mounting—but whether investors should care is another matter.
* Commodities: “Palladium trades nearly 30% below the record prices in February, and there are signs of more demand, but though the metal has managed to hold a gain for the year despite economic pain brought on by the coronavirus pandemic, it is far from a bargain.”
* Streetwise: Glenn Fogel, chief executive of BKNG, whose services including Booking.com and Priceline, has a measured view of the travel recovery—think years, not quarters, he says—while UBS analyst Myles Walton just issued his first airline Buy rating since the pandemic, on LUV.