Barron’s Weekend Summary: Global investors should re-consider Europe, which after a decade of anemic economic growth and equity underperformance with respect to the technology-led U.S. market as well as markets in China and other dynamic emerging economies, may be ready for a post-pandemic rebound. “The near-term case for relative outperformance by Europe now is the strongest in years
* Cover story
Global investors should re-consider Europe, which after a decade of anemic economic growth and equity underperformance with respect to the technology-led U.S. market as well as markets in China and other dynamic emerging economies, may be ready for a post-pandemic rebound. “The near-term case for relative outperformance by Europe now is the strongest in years.” Some suggested stocks to consider are BAE Systems (BA.UK), BNP Paribas (BNP.France), Booking Holdings (BKNG), Fraport Frankfurt Airport Services Worldwide (FRA.Germany), Groupe Bruxelles Lambert (GBLB.Belgium), ING Groep (ING)
* Tech Trader
Amazon.com founder Jeff Bezos will step down as the company’s CEO on July 5. He will be replaced at the helm by close Andy Jassy, “a 24-year Amazon veteran who built and ran Amazon Web Services (AWS), the company’s dominant cloud-computing business.” Wall Street analysts say that Jassy faces a “tough compare.” Meanwhile, Amazon “sparkled during the pandemic.” And in the first quarter of this year, sales spiked 44% from a year earlier—the company’s best quarterly growth rate since 2011—and net income was $8.1 billion, its largest quarterly profit ever.
* The Trader
There’s growing demand for business jets. And “it’s not a surprise that the demand for new jets has been driven by the ultrawealthy—apparently, interest from first-time buyers is particularly strong—who seem to prefer traveling on their own than sharing a seat with the hoi polloi.” And the demand surge has room to grow. One of the best companies to consider in this context is General Dynamics (GD), which owns the Gulfstream line of jets and deliveries of its Gulfstream 500 and 600s are picking up, even as its defense business is growing.
U.S. consumer demand is set to rise as shown by Friday’s personal-consumption expenditure data, “which showed consumers were still spending, even if the number didn’t grow from a month ago. But we didn’t really need that data to know that people are feeling more than a little flush. They have more cash than ever—the savings rate was 12.4% in May—and are likely to spend it.” One stock to consider in this context is Olive Garden parent Darden Restaurants (DRI).
* Profile
Investors may be over-invested in five megacap technology stocks, which have risen to new highs, while “some strategists see a potential turn ahead in the markets.” The five stocks in question are Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Facebook (FB), and Alphabet’s Google (GOOGL). Together these stocks have gained of 125% to 245% since the beginning of 2019. This is not a new pattern: “the Nifty Fifty stocks dominated the 1970s, and blue-chip stalwarts such as IBM (IBM) and AT&T (T) ruled the 1980s.” But, “the level of market concentration is higher now, and the Big Five’s impact on the broad market is much greater because of their size.”
* Interview
“Black families have one-eighth the wealth of white families, and Malik Lee is trying to close that gap.” Atlanta based financial advisor Malik Lee caters to a 90% African-American clientele. He suggests that the “Black wealth gap is largely the product of institutional racism that limits opportunities for African-Americans.” But Lee also observes that many African Americans are held back by their conservative approach to investment. And Malik notes that he founded his firm “to help close the wealth gap. We purposely don’t have any account size minimum. You don’t have to have $1 million to work with us. We have clients with $40,000.”
* Features
Matt Patsky, CEO of Trillium Asset Management, the $4.3 billion sustainable-investing (or ESG) firm, “noticed rising inflows into the Trillium ESG Global Equity (ticker: PORTX) and John Hancock ESG Large Cap Core (JHJAX) funds, both managed by Trillium.” Morningstar rates both as five stars and “five globes, the highest sustainability rating that the fund-research firm offers.” And there is a new impetus toward retirement plans moving more toward sustainable investing according to a survey by investment manager Schroders, which “found that 69% of retirement-plan participants said they would or might increase their overall contribution rate if their plan offered ESG options.”
* Follow-up
Facebook secured a significant legal victory last week, “when a federal judge tossed out a Federal Trade Commission complaint arguing that the company violated antitrust laws, and dismissed a parallel complaint from a group of state attorneys general making similar claims.”
* European Trader
European tourism could resume as “countries relax restrictions on the back of successful Covid-19 vaccination programs and declining rates of infection.” The recovery should be stronger in northern Europe and Barron’s suggests the following two stocks: Scandic Hotels Group (SHOT) and Frankfurt based FRAPORT (FRA).
* Emerging Markets
China’s Didi Global, a ride-hailing company, saw its shares climb 18% in its first two sessions after launching an IPO last week. “That success could usher in a next wave of tech IPOs from emerging markets. But the best ones may be outside China.” One of these is GoTo, “the Indonesian unicorn formed when ride-hailer Gojek merged with e-commerce player Tokopedia; Indian digital payments leader Paytm; and Nu Pagamentos, whose Brazil-based Nubank has quietly become the world’s largest digital bank.”
* Commodities
“A blistering drought across vital U.S. farmland looks set to destroy the crop of spring wheat this year if rain doesn’t arrive in the next few weeks. Without that much-needed moisture, prices for the grain could easily rally by more than 30%, experts say.”
* Streetwise
Robinhood released plans to go public last Thursday, “a day after the Financial Industry Regulatory Authority, or Finra, issued its largest fine ever against Robinhood for giving false or misleading information to customers and operating a platform so unreliable that it repeatedly falters at key moments, costing its clients money. (The company did not admit to or deny the allegations.)” But there are many risks associated with the company and what it may trigger in the markets.