Barron’s Weekend Summary: Cover story says new entrants in the streaming media business need to win customers quickly; Feature is positive on COP
* Cover story: As new players enter the streaming media business, consumers are going to face a “bewildering sprawl of choices”; These companies will need to win customers quickly if cord-cutting accelerates among traditional cable customers, because if viewers stick with bundles, streaming companies could end up overspending; For now, even media bosses don’t know how things will play out as CMCSA, NFLX, DIS, T, CBS, VIAB, ROKU, AMZN, AAPL, and GOOGL battle it out.
* Tech Trader: Enterprise tech has been a hot area for investors in recent years, but the theme works only as long as corporate buyers are paying up for the technology, which is no longer a sure thing—tech purchases are closely tied to business confidence, and worsening sentiment could spark a negative feedback loop where perception becomes reality.
* Trader: Low-volatility stocks, perceived by some as the market’s safest, continue to outperform, says Chris Harvey of Wells Fargo Securities, while investors remain positioned for lower interest rates and a possible global slowdown; Cautious on EMR: Activist investor D.E. Shaw is pushing for change at the company, claiming tighter cost controls, better governance, and splitting the company in two could boost the stock, but many analysts think Shaw’s cost targets are too aggressive; Health care isn’t just cheap, it’s the second-cheapest S&P sector, and if the economy holds up, it has enough risky stocks, particularly in biotech, to benefit if the market moves higher.
* Interview: In 2017, Denise Chisholm, a statistician at Fidelity Investments, noted that amid concerns about tech’s meteoric rise, the sector’s valuations were in the bottom quarter historically, while its operating margins were in the top 10th, creating high odds of outperformance. Profile: Philippe Bordreau, manager of the Pimco Preferred and Capital Securities fund, which specializes in income-paying bank preferred stocks and their European counterparts, talks about why these are strong and secure investments (top 10 bond holdings are at these firms: BAC, BNP Paribas, Credit Agricole, ING Groep, JPM, Rabobank, DB, HSBC, C).
* Features: 1) Positive on COP: Energy company, which has an attractive global resource base, was among the first to realize that it couldn’t just focus on boosting output, it had to rein in capital spending, generate free cash flow, and return it to shareholders in dividends and buybacks—and after a recent selloff, the shares look appealing; 2) Medigap supplement Plan F, the most popular supplemental plan for retirees to cover medical costs that Medicare doesn’t pay, is being phased out at year’s end, shutting newcomers out of a plan many retirees buy for peace of mind, and potentially boosting costs for those who remain or turn to another popular option; 3) “High-dividend stocks have been performing strongly since September, lifted by the recent rebound of the market’s cheaply priced value group,” but it’s unclear how long the rotation into cheap stocks can last, so investors should consider adding hedges to their income portfolios.
* Follow-Up: Cautious on BA: UBS analyst Myles Walton recently surveyed 1,000 fliers, most of whom indicated they would feel comfortable on a 737 MAX jet after about six months of safe operation—and should the company reach that milestone, its shares are likely to head up.
* European Trader: Positive on GVC Holdings: Shares of the company, one of the world’s largest in the sports betting and gaming sector, look like a good play as the company positions itself to capitalize on the flourishing U.S. sports betting market.
* Emerging Markets: Donald Trump probably won’t decimate Turkey’s economy, though Turkish president Recep Tayyip Erdogan may do it by himself—his recent military incursion into Syria has taken a fresh bite out of Turkey’s assets, and investors aren’t rushing to buy Turkish securities on the dip.
* Commodities: “A new rule that sets a much lower global limit on sulfur content in marine fuel is on the horizon, leading to higher shipping costs that may ultimately force consumers to pay more for goods and to heat their homes.”
* Streetwise: Damon Ficklin of Polen Capital is bullish on Australia-based CSL, France’s EssilorLuxottica, and ZTS—shares of all three go for more than 30 times this year’s estimated earnings, and have a good shot at growing earnings at a double-digit pace for many years.