Barron’s Weekend Summary: Getting students back to school is crucial for an economic recovery; ORCL’s bid for TikTok seems misguided
* Cover Story: “The only thing standing between a recovery and a double-dip recession might be the back-to-school season”; Schools are vital to the US economy, providing child care for working parents, fueling spending at retailers, and funding businesses that provide food for cafeterias and dispose of the garbage they create—and their absence could cost the economy $700B in lost revenue and productivity, not to mention potential long-term damage to the labor market.
* Tech Trader: Analysts are uncertain why ORCL is making a bid for TikTok, which offers few synergies with the company's businesses, while rival bidder MSFT has experience in teen-focused consumer products, sells advertising, already owns a social network, and has a far stronger balance sheet—and though chief Larry Ellison may have Trump’s support, “winning this battle might not be his best move.”
* Trader: Some observers claim that a successful vaccine is already priced into the market, but UBS strategist Keith Parker contends there may be more room to go—he looked at how the S&P 500 performed when there was well-above-normal vaccine sentiment and found that it returned 1.6 percent on those days; Positive on GM: While TSLA shares continue to soar, General Motors might be the better buy—it has a legacy car business, a growing electric-vehicle division, and an autonomous driving unit, and the EV business alone could be worth up to $100B.
* Interview: Jim Osman, founder of boutique research firm The Edge, focuses on special situations—underfollowed companies, unique circumstances, or difficult-to-understand investments, which aren’t meant to compete with the broader market, but to complement it.
* Profile: Judith Vale, co-senior portfolio manager of the $10.7B Neuberger Berman Genesis fund, takes a risk-averse approach to managing small-cap stocks, noting that big gains won’t necessarily offset big losses; the fund’s hallmark is minimizing how much of a broader market fall it experiences (top 10 holdings: POOL, WST, FICO, MANH, MKTX, TECH, TYL, POWI, CHE, AZPN).
* Features: 1) Positive on SYNA: The company has rallied almost 150 percent in the past 12 months, reversing the prior four years’ losses, and more gains could lie ahead as chief Michael Hurlston and his team continue to restructure and grow the business, which analysts seem to underappreciate; 2) NYU finance professor Aswath Damodaran says that higher education is an example of stakeholder capitalism run amok, that it should serve students but instead serves overlapping and sometimes conflicting interests, and that it is long overdue for a restructuring; 3) Positive on NKE, WMT, TGT, TJX: Back-to-school spending—second in importance on the retail calendar only to the holiday shopping season—is expected to end up about flat with last year’s, at $28.1B, or $529 per student, according to Deloitte, and large retailers that have continued to thrive during the pandemic are likely to continue to outperform as the school season starts up; 4) Positive on WH: “Hotel companies may not look like a smart bet during a pandemic that has driven a sharp decline in travel, but the world’s largest chain of franchised hotels could be an exception” because its focus on budget hotels and leisure customers puts it in a strong position.
* European Trader: Cautious on Securitas: Swedish security company, the world’s largest, had been struggling with a number of issues before the coronavirus pandemic, and the combination of those problems and coronavirus-related challenges means investors may want to avoid the stock for now.
* Emerging Markets: The Trump administration’s latest action against Huawei marks a significant escalation in the tech cold war—no components or software with any US content produced anywhere can be sold to the Shenzhen-based company without a license from Washington, a move that puts the company in the same camp as Iran or Venezuela in the eyes of Washington.
* Commodities: “Two different diseases on two different continents are set to leave the world without enough pigs to fulfill the demand for pork and other related meats. That, in turn, should cause a rally in the price of lean hogs over the next few weeks.”