Barron’s Weekend Summary: Cover story says dividend stocks are crucial for investors saving for retirement; The overcrowded online food delivery sector won't see much more innovation; positive features on MDT and BR
* Cover story: For investors saving for retirement, dividend stocks are a crucial building block—with reinvested payouts juicing returns during the preretirement phase and providing crucial income to retirees during the drawdown phase; dividend stocks not only offer solid returns in an era of ultralow bond yields that doesn’t appear to be ending soon, but also hold the promise of price appreciation—and they offer advantages beyond income.
* Tech Trader: Cautious on GRUB, UBER, DoorDash, Postmates: One of the biggest problems facing online food delivery apps is the fact that takeout has become too easy, with little value accruing to the companies running the platforms—and as Grubhub said in a recent shareholder letter, “The supply innovations in online takeout have played out, and annual growth is slowing.”
* Trader: The Fed has cut interest rates, and the U.S. and Germany could enact some sort of fiscal stimulus, but that’s simply buying time, says Carmel Wellso of Janus Henderson Investors, because “we’re at the end of the cycle and one day closer to a recession”; “While the long-term fundamental outlook for the department-store and mall-exposed retailer group still isn’t pretty, their beaten-up stocks, cheap valuations, and high short interest mean that just narrowly matching expectations for Q3 could be enough to send shares sharply higher in the coming week.”
* Interview: Nobel Prize–winning economist William Sharpe, who is behind the Capital Asset Pricing Model for gauging systemic risk and the eponymous Sharpe ratio, which captures risk-adjusted return, shares his insights about how retirees can manage their risk.
* Profile: Tom Huber, manager of the T. Rowe Price Dividend Growth fund, looks for companies that have the financial strength and durable businesses to grow their dividends steadily over time, but he also takes a value approach, looking for companies the fund can acquire at a good price (top 10 holdings: MSFT, JPM, V, AAPL, DHR, BDX, TMO, UNH, WFC, PFE).
* Features: 1) Positive on MDT: Medtronic’s success with Micra, the world’s smallest pacemaker, is emblematic of broader improvements at the company, including greater free cash flow, a shift to faster growth, and a 14-quarter string of upside earnings surprises—and shares still look attractive; 2) Positive on BR: The company, which processes and distributes investor communications for nearly every public company, is a defensive stock that should be able to withstand an inevitable slowdown, in part because of loyal customers and a digital transition; 3) Some economists are casting doubt on the effectiveness of changes that the Federal Reserve is considering to the way it measures inflation, and bond investors have been paying close attention to the implications for months; 4) Positive on FDGRX, VDGIX, RPMGX: These actively managed equity mutual funds are the only ones among the top 20 in the U.S. that are beating the S&P 500’s 23.2% return through October; they have also topped the index over the past one and five years, though each has a different approach; 5) More than four decades after the birth of the 401(k), defined-contribution plans are the go-to retirement vehicle in America—but while employers have gotten better at coaxing employees to save for retirement, they’re only now starting to help workers solve the other side of the equation: spending the money.
* Follow-Up: Positive on WMT: While the retailer’s shares may be pricey—something even bulls agree with—improving numbers make its price/earnings ration palatable, and there’s no reason its valuation should stand in the way of further gains.
* European Trader: Positive on J. Sainsbury: Britain’s second-largest supermarket chain is recovering after failing to merge with WMT’s Asda earlier this year, and shares down—but the company is forging an ambitious growth plan that includes cutting costs and drawing customers with lower prices, which could pay off for investors.
* Emerging Markets: Ongoing political and economic issues in Brazil—including the release of former president Luiz Inacio Lula da Silva from prison while he appeals a corruption conviction and a failed offshore oil auction—are bad news for investors, but they could also signal a buying opportunity.
* Streetwise: Big Tech’s promised reinvention of traditional banking continues to move slowly, and predictions that millennials would abandon their banks for AAPL, GOOGL, and AMZN haven’t played out; investors interested in fintech should consider JPM and C, which spend billions a year on technology and continue to benefit from infotech innovation.