Barron’s Weekend Summary: Cover story says investors should hedge their bets and prepare for several possible scenarios after the November presidential elections.
* Cover story: While it seems likely that Democratic presidential candidate Joe Biden will take the White House, with less than 100 days to go before this year’s presidential election, anything could change, from voter sentiment to the candidates’ standing to the trajectory of the coronavirus pandemic—all the more reason for investors to hedge their bets and prepare for several possible scenarios, each with different implications for policy, the economy, and financial markets.
* Tech Trader: Cautious on AAPL: For years, bulls asserted that Apple shares looked cheap on most typical valuation metrics, but the rally has driven the stock to its highest level in at least a decade based on a range of metrics, a situation that makes some analysts nervous as the release of the iPhone 11 draws nearer and the company faces a number of challenges across its businesses.
* Trader: Against a backdrop of a dreadful economy and little hiring action in recent manufacturing and services surveys, it’s getting harder to make the argument that the stock market is forecasting a stellar recovery—and yet it continues to climb; Positive on DIS: The company’s decision to bring the much-delayed remake of Mulan to its Disney+ streaming service could change the way people watch movies—though the company claims this strategy is an exception because of the pandemic, some analysts think the approach is likely to be repeated.
* Profile: Doug Foreman, manager of the Virtus KAR Mid-Cap Growth fund, which invests in quality growth companies, has returned an average of 22.9 percent a year, better than 99 percent of its mid-cap growth peers (top 10 holdings: MELI, TTD, AVLR, DOCU, FICO, BILL, SITE, TDOC, MKTX, PAYC).
* Interview: Carla Harris, vice chair of global wealth management and a senior client advisor at Morgan Stanley, also works with the bank’s Multicultural Innovation Lab, which provides support for startups led by women and people of color and is now working with its fourth cohort of entrepreneurs.
* Features: 1) Politicians have long used the tax code to “fix” or change the economy, markets, and investor or consumer behavior, and as the presidential election approaches, Joe Biden and Donald Trump will start touting tax plans they hope will bring the nation out of the downturn; 2) Trump believes that the economy’s fundamental “resiliency” can drive a strong recovery if the government maintains its commitment to “growth-focused policy,” while Joe Biden believes that the severity of the coronavirus downturn has been exacerbated by the US government’s longstanding failure to protect Americans from economic volatility; 3) Positive on EL: The company was a winning stock before the pandemic hit, but shares dropped as consumers shifted spending to necessities, creating an opportunity to buy on the dip—analysts expect Estée Lauder to emerge from the current crisis in a better competitive position, and they predict about 20% upside for its shares; 4) Positive on LEN: The company’s super-voting class B shares trade at a discount of 25 percent to the lower-vote class A shares, the largest percentage gap among sizable companies with dual-class stock, offering investors a cheaper way to gain ownership, with the potential bonus of a closing of the gap between the two stocks; 5) Over the past four years, the Portopiccolo Group has quietly built a nursing-home portfolio that rivals some of the nation’s largest chains, but longstanding industry issues such as understaffing and infection-control problems that have made some nursing homes particularly vulnerable to Covid reveal a tension between patient care and profit motives with private equity owners.
* Follow-Up: Pawnshop chains such as FCFS have taken a hit during the pandemic, especially because of a strong presence in the Sunbelt, and it could take well into 2021 for the company to experience a rebound; Positive on Tencent: With stakes in companies such as ATVI, Ubisoft, SNAP, SPOT, and TSLA, Tencent is a sprawling business that tech investors can’t ignore—and with direct revenue exposure to the US market at just two percent, Trump’s executive order about Chinese companies may have little effect on it.
* European Trader: Cautious on VOD: The company, which has long disappointed consumers and investors, should benefit from roaming charges and increased handset sales boosted by a likely 5G AAPL iPhone in October, though it will take some time to determine whether that will spark true growth.
* Emerging Markets: While US politicians demand the dismemberment of Chinese-created social network TikTok, the country’s budding electric-vehicle industry is globalizing, and investors in Chinese EV companies such as BYD and battery maker Contemporary Amperex Technology are betting on a bright future, even as Covid-19 depresses sales within China by a third.
* Commodities: “Corn prices look set to rise over the next few weeks as extreme weather and agricultural pests put a dent in the harvest of the world’s two largest producers of the grain”; Investors looking to profit from the surge in prices can buy December-dated futures on the CME futures exchange or try CORN, which holds a basket of corn futures.
* Streetwise: TikTok might give MSFT a path to one day competing with the likes of NFLX on streaming, says New York University marketing professor Scott Galloway, who adds that TikTok “taps in to Joy, whereas Instagram is for communicating to other people how much better your life is than theirs.”