Barron’s Weekend Summary: Trump’s coronavirus infection hasn’t rattled investors, but it’s too early to sound an all-clear for its impact on the economy and markets
* Cover Story: The markets didn’t overreact on news that Donald Trump has the coronavirus, but it would be premature to sound an all-clear for the impact on financial markets and the broader economy; The odds may now increase that Washington will act more decisively to contain the virus, possibly with new public health measures and passage of a broad-based stimulus package—but some analysts are concerned the situation could also heighten worries that the virus is far from contained, eroding consumer and business confidence and renewing calls for lockdowns or quarantine measures to contain a second wave.
* Tech Trader: “The IPO market is broken—the companies issuing stock don’t seem to be complaining, but they’re paying way too much for the privilege of trading in the public markets, and traditional IPOs have become an exceedingly expensive way to raise money.”
* Trader: Investors shouldn’t be surprised if the S&P 500 remains stuck in a range between 3200 and 3400, according to Macro Risk Advisors technical analyst John Kolovos, who adds that price action above 3425 should start to boost confidence in the recovery.
* Features: 1) Positive on MSFT, SNE, ATVI, EA, TTWO: With movie theaters shuttered because of the pandemic, the next generation of video game machines are arriving with the gaming at the top of the entertainment sector—US videogame sales are forecast to rise 19 percent this year, to $45.6B, compared to the box office, which grossed just $1.9B this year; 2) Positive on IVZ, JHG: Activist investor Nelson Peltz is pushing for more consolidation in the asset-management industry, and having taken 9.9 percent stakes in Invesco and Janus Henderson, he will push for a merger or other strategic combination and seek to create an industry giant; 3) “Due to the latest shift in Federal Reserve policy, finding income in bonds has gone from being exceedingly difficult to nearly impossible, and finding safety in them might be increasingly elusive. Investors in these securities need a new approach—and a reset in expectations”; 4) Cautious on THO, WGO, CWH, PATK, LCII: The recreational vehicle industry is thriving, but some analysts are worried about the trend’s staying power, and supply-chain challenges and a labor shortage in the industry’s capital of Elkhart, Indiana, could hurt profit margins; Camping World may be the best play because it dominates its market and has plans for adjacent business lines; 5) Positive on TEX: The manufacturer of equipment used in construction, mining, maintenance, and other industries is a small-cap industrial with a strong balance sheet, the potential for profit growth, and cheap shares—and a recent streamlining of its portfolio has left it leaner and better able to remain profitable through economic cycles; 6) Positive on EPD, MMP, KMI: With the growth in renewables, oil and gas will likely remain an important part of US energy needs in the coming decades, and the companies play a critical role in the industry; These depressed closed-end funds offers a cheap way for investors to play the battered energy-pipeline sector, get ample yields, and avoid some of the tax hassles that come with master limited partnerships.
* Mutual Funds Quarterly: 1) Dimensional Fund Advisors funds were among the earliest quantitatively run factor-based funds that focused on value and small-cap investing, and while retail investors couldn’t directly buy them, that’s changing with the launch of three ETFs—Dimensional US Core, Dimensional International Core, and Dimensional Emerging Markets Core—in the next few months; 2) Profile of Will Danoff, who for three decades has managed the $131B Fidelity Contrafund, the largest US mutual fund run by a single manager, a fund he has guided through vastly different economic and news cycles, returning 13.7 percent a year on average.
* European Trader: French water and waste company VE’s attempt to acquire a major stake in rival Suez is taking far longer than such deals normally do because of the French water industry’s complex history and shareholding structure—though it’s unclear whether the deal is good for shareholders or not.
* Emerging Markets: Chinese President Xi Jinping ’s recent pledge to make his country carbon neutral by 2060 is an exception to the trend of empty promises from global leaders, and the scope of his ambition is underpinned by actual achievements—from a standing start 10 years ago, China has created seven of the world’s top 10 solar module manufacturers.
* Commodities: “Industrial metals posted gains in the third quarter, with silver up sharply and copper touching its highest prices in over two years, suggesting that the worst of the coronavirus hit to the economy may be over.”
* Streetwise: Value stocks, which have disappointed for a decade, beat growth stocks during September, says columnist Jack Hough—strategists suggest favoring cheap stocks with high returns on equity, such as T, Comcast, GS, ALL, ALK, and LH.