Barron’s Weekend Summary: Barron’s fourth annual list of the 100 Most Sustainable Companies; Dominant vaccine makers face a challenge from upstarts
* Cover Story: Barron’s fourth annual list of the 100 Most Sustainable Companies, created in partnership with Calvert Research, is topped by BBY, A, ECL, ADSK, VOYA, TIF, RHI, VFC, VZ, and ON, five of which are newcomers this year; “Sustainability means many things, but companies usually are judged on a series of environmental, social, and corporate governance metrics, known as ESG, that measure how a company’s managers make decisions and plan for the future in areas beyond profitability”; Calvert looked at more than 230 ESG performance indicators, such as workplace diversity, data security, and greenhouse-gas emissions.
* Tech Trader: Story profiles Ryan Jacobs, portfolio manager of the Jacob Internet Fund, which rose 123 percent last year and is up nearly 40 percent in 2021; Jacobs shuns most megacaps and takes a bottom-up approach to finding growing businesses with strong network effects, creating a portfolio that includes an eclectic mix of microcaps (top holdings: APPS, OPRX, SHSP, Voyager Digital, Z, TWLO, TWTR).
* Trader: A survey carried out by Evercore ISI found that the biggest concern for stocks was higher taxes and regulation, followed by inflation and higher interest rates, though the duration and severity of the pandemic remained a significant focus; Positive on COTY: The pandemic has taken a toll on consumer brands, and the company, well-known for its range of beauty brands, had too much debt, too little growth, and a changing executive suite—but accelerating growth in its fragrances division and a management upgrade bode well for the stock.
* Profile: Janet Rilling is co-manager of the Wells Fargo Core Plus Bond fund, which ranks in the top seven percent of its category for the past year; A hallmark of her strategy is focusing on a six-month investment horizon, with the goal of anticipating market inflection points and tilting allocations accordingly (sector allocations: US Securitized, US Investment Grade, Treasuries/Government Related, US High Yield, Emerging Markets, European Investment Grade, European High Yield, Foreign Currency).
* Interview: Mark Mobius, founder of Mobius Capital Partners, once described as “the Indiana Jones of emerging markets,” sees a strong global economic recovery that should finally help emerging markets outperform after a decade of lagging behind developed markets, says he’s not worried about a US-China decoupling, and thinks central bankers’ fixation on inflation is misguided.
* Features: 1) Positive on GLW: Corning is a one-of-a-kind business, and has no listed US peers, and it serves many of the same end markets as the semiconductor industry, including telecommunications, consumer electronics, mobile phones, and auto manufacturing—though its shares are cheaper than those of chip makers; It is recovering nicely from pandemic-related challenges and investors are starting to take a fresh look at its valuation; 2) Positive on HOLX: The medical-diagnostic company has benefitted from the pandemic but is also set to thrive as things return to normal, since testing is likely to continue, and its success dealing with Covid could lead to growth in its other areas—and for investors, shares look like a bargain waiting to be acquired; 3) Cautious on PFE, MRK, GSK, SNY: As Covid-19 vaccine supplies increase and the market turns private, the dominance of the big four publicly traded vaccine makers could face a challenge from upstarts such as NVAX and MRNA, which don’t yet have large sales forces and can ship doses right to government warehouses without dealing with distribution issues; 4) When buying special purpose acquisition companies, investors are paying for the reputation of the deal sponsor, which can be costly; The $106M SPAK is the only passive, index-tracking fund devoted to SPACs—it currently has 136 holdings, weighted by market value; 5) Story on the history of electric vehicles looks at early examples such as Sebring-Vanguard’s two-seat CitiCar, which in 1974 was so poorly made that it wasn’t allowed on major highways—TSLA’s arrival changed the game and paved the way for a new industry.
* European Trader: Positive on Royal Dutch Shell: The company has largely gotten past a range of problems, and shares now appear undervalued; A portion of increasing profits should go straight to stock owners in the form of increased dividends and stock buybacks, once the company hits its debt target.
* Emerging Markets: Rising US interest rates can be bad news for emerging markets, as capital flees to improving returns in the world’s biggest market—but merging-market assets “are still fairly well behaved because US rates are rising for the right reasons,” says Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS Global Wealth Management.
* Streetwise: For investors who want to get into the cannabis sector, Dan Ahrens of AdvisorShares recommends the “four horsemen of the US industry,” whose shares are all rising: Curaleaf Holdings, Trulieve Cannabis, Green Thumb Industries, and Cresco Labs.