Barron’s Weekend Summary: Boeing’s stock could be 35% more valuable, but not before it makes some key changes.
* Cover Story : Boeing’s stock could be 35% more valuable, but not before it makes some key changes. There was good news, but not enough to drive BA stock back where it was before the 737 Max debacle. “If Boeing expected investors to celebrate the surprising news that it had turned a profit in this year’s second quarter, it had another thing coming.” CEO Dave Calhoun must take “bold steps to restore the company’s engineering supremacy and repair its balance sheet. Those steps should include building a brand new plane.”
* Tech Trader: “When Zuckerberg says Facebook (FB) is essentially shedding its social-media roots, investors should pay attention. Last month, during Facebook’s earnings call, Zuckerberg said that Facebook’s future is in the metaverse. Don’t laugh. Like it or not, the metaverse is here, and you might even already be in it.” The Metaverse might be “the next major realm of computing and the next vision for the internet.” The term ‘metaverse’ refers to “a virtual environment in which users can interact with each other and their world, letting people play games, work, socialize, or consume content, to name a few potential uses.”
* The Trader : “Trading was equally lackluster. Friday had the lowest volume of any day in 2021. The Tick Index, a sentiment gauge that calculates the number of stocks trading at upticks minus the number of downticks, hasn’t hit 1,000 or -1,000 in over a week, a sign that the market hasn’t become overbought or oversold. Even the Cboe Volatility Index, or VIX—the market’s fear gauge—is back under 16, a sign of calm. It was such a boring week that not even the meme stocks did all that much, with AMC Entertainment Holdings (AMC) rising 5% and GameStop (GME) gaining 7.5%, but staying completely rangebound.”
* Interview: Ed Yardeni, president of Yardeni Research, “has been resolutely bullish since 2009, and his virtually unbroken forecast has been rewarded by enormous gains in stocks.” Barron’s spoke with Yardeni about “his new forecast for the S&P 500 index, the productivity boom that is driving what he calls “the Roaring 2020s,” and why he isn’t concerned (much) about inflation or the virus.”
* Features: 1) “The second wave of monthly payments for the enhanced child tax credit hit bank accounts this week, but if you haven’t received the money yet, it’s not too late to get in on the cash.This month’s round of direct payments totals more than $15 billion and will go to families that are raising approximately 61 million kids, according to Treasury Department figures.” 2) President Joe Biden urged the auto industry to increase production of electric vehicles “to the point that they account for about half of total U.S. sales by 2030, a plan that raises hopes that EVs can shift from niche to normal.” Apart from Tesla (TSLA), which accounted for 2.4% of U.S. cars sold in 2020, up from 0.7% five years ago, according to BloombergNEF, “Several auto makers had already announced bigger EV ambitions even before the White House call.” 3) Barron’s identified 10 stocks “that growth investors have identified as being able to generate consistently high growth in revenues or profits for many years:” In alphabetical order the stocks are:Amedysis (AMED) Amyris (AMRS) Booz Allen Hamilton Holding (BAH) J.B. Hunt Transport Services (JBHT)Marriott Vacations Worldwide (VAC)SiteOne Landscape Supply (SITE) Staar Surgical (STAA) Stitch Fix (SFIX) Trex (TREX) Upwork (UPWK)
* Europe: Shares of the German car rental company Sixt shares (Six2) managed to increase 17% over the past six months to €117.60 ($137.83) despite the pandemic-related slump in global travel. “Sixt, which operates in more than 100 countries, including through franchisees, avoided posting a loss in 2020 largely due to cost cutting and a one-off financial gain from the sale of a leasing business.” Sixt is the fourth-largest car renter in the US, having “a market share of 2%, while in Europe it has 17%, including franchisees. Last year, Sixt acquired concessions at 10 U.S. airports from the parent company of Advantage Rent a Car.”
* Emerging Markets: There was a Harvey Weinsteinesque incident at e-commerce giant Alibaba Group Holding (BABA), which could have repercussions on Chinese companies and stocks similar to those that the indictment of the #MeToo movement had for Hollywood. It all started when an Alibaba “female employee reported that she was assaulted in her hotel room by a male superior after a night of heavy drinking with a client.” And the resulting furor “represents both long-term opportunity and one more short-term peril for China’s tech sector—opportunity to lead as pervasive sexual harassment slips out from under China’s carpet; peril because it lends an additional stick to authorities already bent on beating up powerful online platforms like Alibaba, Tencent Holdings (700.Hong Kong), and Meituan (3690.Hong Kong).”
* Commodities: Even if the lumber bubble has burst, the cost of housing won’t go down soon, the cost of housing in mature markets will continue to remain high. “Prices likely will stay rangebound for the foreseeable future as supply increases and demand from home builders remains robust:‘We expect prices to hover between $500 and $600 per 1,000 board feet,” says Samuel Burman, a commodities economist at independent research firm Capital Economics.’”
* Streetwise: In this week’s edition, Jack Hough takes a look at used car dealers. He’s not revealing humorous anecdotes about their stereotypes. Rather, he’s talking about the remarkable success of used vehicle dealers over the past year, and hoe investors can tap into this success by investing in used car dealership related stocks: “Take fast-growing Carvana (CVNA), which has a largely online model. Three years ago, its gross profit per vehicle was about $2,000. The long-term goal is over $4,000. Last quarter, the company blew past $5,000.” And that’s because production shortages and delays have made some used cars more expensive than new: “Prices for used vehicles have shot 42% higher in a year, according to a new U.S. inflation report. Some drivers are rolling in unrealized gains. The Honda Odyssey, Kia Telluride, and Dodge Challenger are among more than a dozen models that recently fetched more used than new, thanks to manufacturing shortages.”