Barron’s Weekend Summary: Cover story says Washington’s coronavirus relief program may not be enough to bridge the gap of a near-shutdown of the economy or prevent another stock market swoon; Feature looks at a range of stocks that present opportunities amid the downturn
* Cover Story: The financial stimulus and rescue measures signed into law Friday in Washington in response to the coronavirus pandemic will bring people financial relief, but it isn’t clear that they will be enough for the economy to bridge the gap of a near-shutdown or prevent another stock market swoon—one that almost surely is coming; The big issues facing the market have been addressed, and the Cares Act provides enough funding to get even some of the hardest-hit industries through the next two months, but markets—by nature forward looking—may soon want more.
* Tech Trader: SoftBank has numerous problems—it is a large investor in struggling ride-hailing companies UBER, DiDi, and Grab, and there are concerns about Oyo Rooms—but these issues are priced into the stock, which at this point seems undervalued, based on holdings that are worth almost triple SoftBank’s share price.
* Trader: While the next few weeks or months could be bumpy, investors should begin combing through the wreckage of March’s selloff to adjust their portfolios for the market’s next phase, call it a bull or still a bear—but don’t start with defensive sectors like consumer staples or utilities, which have already done their job during the selloff.
* Features: 1) The municipal bond market—where defaults are historically rare—should weather the current storm, and a recent three-week selloff has now enticed bargain hunters looking for yield and safety—the highest-quality munis with maturities of two to 30 years now offer yields in the 1% to 2% range, topping those of comparable U.S. Treasury securities; 2) Positive on DOCU, ZM, EQIX, DLR, CONE, COR, NFLX, TWTR, AMD, LRCX, TSM, MU, AMAT, VIRT, TTWO, EA, ZNGA, NTES, Tencent Holdings, RNG, DELL, HPQ, CHTR, ATUS: Though AAPL, AMZN, GOOGL, and MSFT are set to come out of the downturn as strong as they went in, there are less obvious opportunities to be found amid the current carnage and chaos, according to top tech-focused stock pickers, who offer picks in areas such cloud computing, entertainment, and broadband companies, among others; 3) While efforts to shore up the economy and financial markets and counter the coronavirus outbreak are under way, the delay in mobilizing a policy and healthcare response probably means a far lengthier and more severe crisis for both individuals and businesses; 4) Over the past decade, biotechnology firms and pharmaceutical companies have stockpiled an armament of scientists, laboratories, and capital in the billions of dollars, and those labs could end the current global nightmare of Covid-19—but RBC Capital Markets analyst Brian Abrahams things they aren’t doing enough; 5) “As more Americans have bucked conventional wisdom in recent years and retired while still carrying a home mortgage, the market upheaval has created an opening to consider refinancing,” especially with rates for 30-year fixed-rate loans down, even if it means adding years to payoff dates; 6) Positive on CVS: Chief executive Larry Merlos talks about how the Covid-19 pandemic has put the company’s drugstores and Aetna health plans at the center of efforts to secure supplies, expand testing, and get vital medicines to communities that are locked down—Aetna recently said it would waive copays and deductibles for coronavirus hospitalizations.
* Interviews: 1) Former Reserve Bank of India chief Raghuram Rajan says there’s still time to contain the financial crisis stemming from Covid-19, and that the Fed and Congress are taking the right steps to reenergize the economy; 2) Mervyn King, who led the Bank of England during the financial crisis, sees the coronavirus as a more challenging event—in 2008, policymakers had a pretty clear idea as to the kind of measures that were necessary, while Covid-19 is “a classic example of radical uncertainty.”.
* Profile: Matthew McLennan, co-portfolio manager of the $1.2B First Eagle Gold fund, says he owns gold bullion because the future is uncertain; During times like this, he can make the case to own the precious metal strategically as a potential hedge and not as a bet for higher prices.
* European Trader: Positive on Henkel: The German-listed, family-controlled company that makes Dial Soap, Right Guard deodorant, and Loctite adhesives has the right pieces in place for a solid growth strategy as new chief Carsten Knobel “takes an axe to slow-growth brands and transforms its innovation process.”
* Emerging Markets: “Russia at a headline level is one of the most attractive places on the planet to invest now,” says Justin Leverenz, chief investment officer for developing market equities at Invesco—but Barron’s says that claim may not be valid for at least a year or two.
* Commodities: “Natural-gas prices have dropped to their lowest level in a quarter-century, but they have managed to outperform oil against a backdrop of declining demand fed by efforts to slow the spread of Covid-19.”
* Streetwise: “If you’re a long-term investor, it’s a good time to put money in stocks. Something simple like an S&P 500 index fund is fine,” says columnist Jack Hough. “It isn’t important to time the bottom perfectly—you just have to buy at prices that are reasonable compared with the alternatives, and hold for a long time.”