Barron’s Weekend Summary: 28 investment recommendations from Barron’s Roundtable participants; NFLX is poised for success with its shift in strategy
* Cover story: A look at 28 investment recommendations from Barron’s Roundtable participants Rupal J. Bhansali, of Ariel Investments (Snam, Munich Re, VIV, PM, MSFT); Scott Black, of Delphi Management (ASIX, KE, WLKP, DHI, MGA, NOC); Mario Gabelli of Gamco Investors (NEP, AGR, GCP, HY, Deutsche Telekom, GPC, MSGS, Liberty Braves Group, FOX, SBGI, GAN); and Sonal Desai, chief investment officer of Franklin Templeton Fixed Income (MPACX, GLD, PYWEX, FVHIX, FAFTX, FHYVX).
* Tech Trader: NFLX’s announcement that it plans to break even on a free-cash-flow basis this year is a major shift in its strategy as worries that it would lose market share to new services such as Disney+, Peacock, and HBO Max seem to be fading—Rich Greenfield of Lightshed Partners says the conversation is has moved from “when it runs out of money” to “how it will spend all its cash.”
* Trader: “The sleeping giant that is Big Tech has awoken—and that’s been great news for a stock market that was starting to look a little tired”; Lori Calvasina of RBC Capital Markets, notes the S&P 500 has been following a pattern typical of recessions since 1990: an initial recovery, a period of consolidation, and a second rebound.
* Features: 1) Positive on CCI, SBAC, COR, EQIX: Cell towers, which rent space for antennas and other wireless equipment, should be long-term beneficiaries of the 5G rollout, while data centers are benefiting from a shift to cloud computing, digital storage, and other tech trends accelerated by the pandemic—and these stocks, structured like REITS, are well-positioned for the year ahead; 2) Barron’s looks back on 2020, noting that stocks highlighted in bullish articles had a total return of 24.7 percent from the last trading day before publication through the end of the year, versus 20.4 percent for the benchmarks they are tracked against; 3) Though China is on track to become the largest economy in the world, investors continue to remain wary of it, but while Beijing continues to carry out tough social restrictions—including crackdowns on democracy protesters in Hong Kong and Uighur Muslims in Xinjiang—it is making rapid progress on environmental actions; 4) Sustainable funds continued to shine last year despite the pandemic, mass unemployment, and social unrest—and those on Barron’s list of top sustainable funds have returned 14.6 percent on an annualized basis over three years, versus 14.1 percent for the S&P 500, with 52 percent beating the market; the top 10 are PMVAX, PRBLX, AMAGX, CMLIX, LGILX, MLAAX, VIGRX, BFGBX, USGLX, and SPY; 5) Positive on LKQ: The auto-parts supplier’s shares have seen little movement during the past several years, and there has been little synergy among the companies it acquired—but it is pulling back from M&A, unlocking free cash flow, and has reduced operating expenses by about six percent, paving the way for a turnaround this year, and upside for the stock; 6) Investors expect the Biden administration to continue Donald Trump’s tough stance on China, especially on human rights issues, which “could mean continued complexity for money managers in adjusting their portfolios for the changing relationship but less of the volatility as investors tried to digest a flurry of executive orders in the last weeks of the Trump administration.”
* European Trader: Positive on Polymetal International: The London-listed firm is a top-10 gold producer and a top-five silver producer, with assets in Russia and Kazakhstan—it predicts a 17 percent increase in gold volume over the next five years, and is well-positioned to benefit from the transfer to sustainable energy because it owns platinum metal mines.
* Emerging Markets: Investors don’t seem to care that India’s coronavirus vaccine rollout has had a rough start—many medical professionals are wary of Bharat Biotech’s version, which has no published trial results—such that “Life is all but back to normal in India’s cities, a V-shaped-looking recovery is under way, and markets are on fire.”
* Commodities: “Lumber prices more than doubled last year to touch a record high, but the rally has faded on the back of a rebound in supplies. With the value of the commodity down by 20 percent in the new year, prospects for fresh records have dimmed.”
* Streetwise: The videogame sector is thriving during the pandemic, says columnist Jack Hough, and while a coming wave of initial public offerings will generate excitement, it could also flood the market, giving bulls pause.