Barron’s Weekend Summary: As the pandemic wanes, fiscal stimulus and low interest rates will drive growth—but the environment won’t be easy for investors to navigate
* Cover Story: As the coronavirus pandemic wanes, “the combination of trillions of dollars of fiscal stimulus, ultralow interest rates, and a newfound sense of liberation means the US economy in coming months will be unlike any the country has experienced in decades. Growth will be faster. Inflation will run hotter. The job market could bounce back more speedily than even the Fed expects. This environment won’t be easy for investors to navigate, as a likely rise in interest rates and a rebound in economically sensitive stocks” will pose challenges.
* Tech Trader: Positive on CPNG: The South Korea based e-commerce stock that went public this week resembles AMZN in many ways, but has important geographical advantages, including the country’s high-density, which allows the company to be super responsive, while its use of reusable containers to ship and its easy return policy will pay off.
* Trader: Rising interest rates and what they signal about rising inflation are the reason for volatility, but aren’t a signal that investors should sell now—the market could well rise higher still, though the leading stocks might be different from those that led the market to records in 2020.
* Interview: Richard Aboulafia, vice president of analysis at Teal Group, who provides Wall Street analysts and portfolio managers with projections for commercial aviation and defense sales, talks about BA and whether it can recover from the 787 MAX debacle, and provides his outlook on commercial aerospace in a post-pandemic world and on the companies best-positioned to thrive, such as RTX, NOC, LMT, HWM, and Safran.
* Profile: Thomas O’Halloran, manager of the Lord Abbett Growth Leaders fund, says he and his team are “fundamental analysts who are guided by charts” and who “integrate several price-momentum measurements to gauge rising and falling price trends into their fundamental research,” allowing them to hold large positions in as many large growth-stock winners as possible (top 10 holdings: AAPL, AMZN, MSFT, TSLA, GOOGL, ROKU, NVDA, UBER, QCOM, PINS).
* Features: 1) Though the global drug industry pivoted quickly to deal with the pandemic when it hit, with companies such as PFE and JNJ quickly developing vaccines, investors have instead focused on companies that will benefit when the economy opens up—making drug stocks “one of the best pockets of value in a richly priced stock market”; 2) Positive on WD: The company is a rising star in financing the multi-family home market—Bill Hench of the Royce Opportunity fund says it trades at a discount given its 15 percent growth rate, and is small enough that it could potentially become a big commercial lender; 3) The professionals on Barron’s annual list of the country’s Top 1,200 Advisors in each of the 50 states have an average tenure in the industry of 30 years and, with their teams, typically serve 750 households, each of which has an average of $14M to invest; Each advisor manages about $3B in total, and has an average retention rate of about 98 percent; Related stories profile advisors on the list, including Walter Gondeck of The Lerner Group, Jennifer Marcontell of Edward Jones, Charles Zhang of Zhang Financial, Daniel Fries of Merrill Lynch, Mark Wilkins of UBS Private Wealth Management, Thais Piotrowski of Ameriprise Financial, and Kathleen Roeser of Morgan Stanley Wealth Management; 4) Wall Street doesn’t expect a continuation of the volatility that started in late February, when soaring yields helped fuel a correction in the Nasdaq as investors discounted companies’ future stock returns at higher rates, but many market observers do expect yields to continue to rise, pushing bond prices lower, which has important implications for fixed-income investors; 5) The initial public offering market is in the midst of the kind of exuberance it hasn’t seen in about 20 years, but not everybody is happy with the boom in new issues—some IPO investors are growing more cautious about what they see as super-frothy valuations; 6) The experience of the founders of special purpose acquisition company Pine Technology Acquisition, which is registering to raise $345M with the help of underwriter Cantor Fitzgerald, may give investors pause—they previously ran a company called AmTrust, which lost about three-quarters of its stock market value as it revised down reported profits and remedied inadequate loss reserves.
* European Trader: Positive on Moncler: The Italian luxury goods company, known for its puffer jacket, “has a rich valuation but could still be poised for growth thanks to a focus on China and a push for younger customers.”
* Emerging Markets: Homegrown emerging market startups such as South Korea’s CPNG, Poland’s Allegro, and Russia’s OZON are holding their own with AMZN and BABA—and they are benefiting from growing competition the emerging markets digital technology sector, which is driving new levels of innovation.
* Commodities: “Rare-earth metals are used to make just about everything, from smartphones and display panels, to speakers and televisions, and while China currently dominates the market for these commodities, the US has taken interest—and resource investors should too.”
* Streetwise: Columnist Alex Eule assembled a Nostalgia Index, a basket of companies that should have been disrupted by technology but have managed to endure; the list includes VIAC, BNED, GCI, FOSL, PBI, WW, DLX, CNK, HRB, and MAT.