Barron’s Weekend Summary: The level at which consumers ramp up spending will shape the way companies reopen and how the broader economic output plays out; Tech giants are doing well amid the pandemic, but still face hurdles down the road.
* Cover story: “The $22T US economy rests on people buying stuff; consumer spending accounts for 70 percent of total economic output. How, where, and when people choose to spend their money from here on out will shape companies’ reopening plans—and serve as a harbinger for the broader economic recovery,” though even when the country opens up again, Americans have little buffer—more than half of US households don’t have any emergency savings to tap in a crisis.
* Tech Trader: Positive on AAPL, AMZN, FB, GOOGL, MSFT: The tech giants—which are also the largest companies in the S&P 500—reported better results than expected, and should exit the crisis stronger than they entered it, but while investors breathed a sigh of relief over the first quarter, there is still turbulence ahead.
* Trader: “If Americans are slow to re-engage and consumers decide that they’re better off saving than spending, it could be a very long slog back to anything that resembles normal economic growth—throw in a virus revival, and it would be that much worse”; Positive on HPQ, JCI, NTAP, FOXA: The four value stocks could provide a good opportunity for investors to pick up depressed shares in companies likely to survive the coronavirus-induced economic pause, despite their high debt levels.
* Interview: Dana Telsey, chief executive and chief research officer at Telsey Advisory Group, talks about what retailers need to do in a post-pandemic world, which companies can make the transition, and whether it’s time for consumers to start shopping; she says having a brand, a digital and physical footprint, and cash to engage with customers really matters.
* Features: 1) Positive on CVX, COP, VLO, WMB, PSX, CNQ, BP, WMB, LNG, EPD, MMP: Barron’s Energy Roundtable participants see glimmers of hope for this beleaguered sector—and long-suffering investors—even though things could get worse before they get better, and they picked stocks that offer potential for investors at their current prices; 2) Positive on OXY, WES, CVE, EQT, CLR, MRO, RRC, CRK, SWN, PE: The bonds of Occidental and other junk-grade energy companies offer a high-yield way to play the depressed oil and gas sector and are an alternative to battered energy stocks; these ten companies have debt yields of nearly eight percent or more and look like they will survive the coronavirus pandemic; 3) As drugmakers rush to find a vaccine for the coronavirus, among the first and most challenging task for regulators will be weighing the enormous pressure to approve the next round of Covid-19 vaccines and therapies, against their role in protecting Americans from harmful drugs; 4) Positive on MSGE, MSGS: The companies built around Madison Square Garden and sports are good ways to play an eventual return to normalcy—wealthy investors still see value in landmark arenas, even as they sit empty—and a potential sale of the Knicks or the Rangers, or someone taking a minority stake, could be a catalyst for future gains; 5) These are challenging times for investors filing complaints against their brokers: The wait for a day in court is becoming longer, and the logjam is destined to get worse—a battered stock market can expose bogus products and frauds that weren’t easily spotted in good times, leading to a flood of new FINRA claims; 6) Cautious on CVNA: The company’s fans consider it the AMZN of car retailers, a surging e-commerce business that can’t be compared to bricks-and-mortal rivals, but as more of the latter adopt its “touchless” sales model, it is starting to look like just another used-car dealer.
* European Trader: Cautious on Sodexo: The French caterer, the world’s second biggest food-services company, faces a dent in demand as offices, schools, airport lounges, and sporting events empty out, but because it faced numerous problems before the pandemic, investors may not see much of a boost when restrictions are lifted.
* Emerging Markets: Argentinian president Alberto Fernandez’s “stunningly aggressive proposal for restructuring his country’s mountain of foreign debt” looks even worse than expected, and investors are bracing for big losses.
* Commodities: With US prices on track for a loss of over 69 percent so far this year, there are actions the regulators may take to help stabilize the market, but efforts may come too late, and none are without obstacles.
* Streetwise: “The combination of feverish gains and mounting anxiety is making asset allocation a challenge,” says columnist Jack Hough, who adds that despite the current turmoil, he’s not selling funds—“Valuations are high, but not a deal breaker. And there’s good news afoot.”