Barron’s Weekend Summary: Dividend-based investing has sparked a movement among investors of all types, and is proving a successful strategy for many retirees
* Cover story: The notion of using dividends in retirement, either as a way to complement other financial assets or for an even larger percentage of income, is increasingly drawing interest, spawning a movement among investors of all ages and levels of sophistication; Several retirement dividend-investing practitioners believe that it’s possible to actively manage a portfolio of dividend stocks for long-term capital return while minimizing the attendant risks; Ten picks that offer retirees durable dividends and potential growth include T, KO, ED, IBM, JNJ, K, PG, SLG, USB, and VZ.
* Tech Trader: “Tech stocks are still alarmingly expensive,” says columnist Eric Savitz. “The Nasdaq Composite index is down about eight percent from its peak earlier this year, and some well-known names have sold off by 20 percent or more, but tech’s losses generally have been modest—and many valuations remain stratospheric.”
* Trader: “After months of outperformance from stocks of economically sensitive and reopening-levered companies, investors felt compelled to play defense this past week; The rapid climb in bond yields paused, and utilities and consumer staples were the best-performing sectors in the S&P 500—but the long-term trend still favors value and cyclical stocks”; Positive on AMAT: At 18 times 2022 earnings, Applied Materials also cheap, especially relative to industrial stocks, which trade at 24 times
* Profile: Aditya Kapoor and Jonas Krumplys are co-managers of the $2.4B Ivy Emerging Markets Equity fund, which has beaten the benchmark and its category on an annualized basis for the past three, five, 10, and 15 years; To mitigate risks, they avoid entire countries, particularly if the currency tends to depreciate significantly, use a proprietary quantitative model to provide objective views on countries, and conduct qualitative research by visiting regions and firm (top 10 holdings: TSM, Tencent Holdings, Samsung Electronics, BABA, JD, ICICI Bank, Midea Group, Reference Industries, Hyundai Motor, Galaxy Entertainment Group).
* Interview: Marko Papic, chief strategist at Clocktower Group, sees a return to a 19th-century system in which nations act solely in their own interests, and allies become frenemies, a situation he called the “Race to Zero,” in which the Industrial Revolution’s attempt to achieve scale, which created waste and contributed to a changing climate, will be reversed.
* Features: 1) Positive on WBT: The restaurants the company supplies took a hit during the pandemic, but with vaccinations rising and locations reopening, investors should focus on what made Wellbilt attractive before the pandemic: growth, profitability, innovation, and an attractive industry structure, all of which make the stock look like a buy; 2) Investors are growing increasingly concerned about drugs that were about to gain FDA approval hitting roadblocks, a trend that initially seemed to affect only a few biotechs but which has developed into a broader pullback as worries grow of a tougher regulatory environment for drugmakers—though the FDA has announced no policy shift, saying only that it is responding more slowly to approvals during the pandemic; 3) Positive on HRB: The company has faced challenges during the past decade amid the growth of rival do-it-yourself tax preparers, but a new strategy focused on continuing to provide tax preparation for individuals and small businesses while expanding into products such as debit and savings accounts and year-round payroll and tax services for small businesses should pay off, and it is working to build a year-round suit of financial offerings for individuals.
* European Trader: Positive on STLA: Under the leadership of Chief Carlos Tavares, known for his unsentimental approach to cost-cutting, the company, created after the merger of Fiat and Peugeot, has two priorities: growth in the Chinese market, where neither automaker has so far succeeded, and a move to electric vehicles, both of which offer reasons for long-term optimism.
* Emerging Markets: The next worry for investors in Turkey following a currency slide that resulted from the firing of the head of the country’s central bank is what would happen if Turkish depositors realize banks don’t have their money—the state drained their coffers last year through more-or-less forced “swaps,” loans that the government squandered in a failed $80B campaign to prop up the lira currency.
* Commodities: Commodities have performed well so far this year, with energy among the biggest sector gainers, as overall expectations for a global recovery support a brighter outlook for demand.
* Streetwise: Europe is still worth a look despite the fact it lags the US on vaccinating its populace—Mutual fund positioning there is relatively low, and Europe is leading the US in returns because its stock markets are more tilted toward value such as banking and energy than the US, and less tilted toward growth areas like tech and consumer goods.