Barron’s Weekend Summary: positive cover story on HON; positive feature on OSK
* Cover story: Positive on HON: Chief Darius Adamczyk effort to transform the company into an industrial-software firm could lead to billions in new business
* Tech Trader: Cautious on UBER: Ride-hailing company’s “net loss of $1.2B in the September quarter just won’t fly in a public market that is no longer giving the benefit of the doubt to companies making big promises about the future”; Uber needs to end its heavy investment mode with excessive promotions and focus on its core ride-hailing business, while divesting e-bike, e-scooter, and autonomous car bets.
* Trader: Positive on JPM, BAC, C, FITB, KEY, PNC: Bank shares stand to benefit from a shift back to value stocks because the sector, while healthier than it was coming out of the financial crisis, is still trading at prices far below those of its heyday—these banks have strong fundamentals and attractive valuations, and will return good amounts of capital to shareholders; Positive on WBA: Story says that Berkshire Hathaway chief Warren Buffett, who has been searching in vain for a large acquisition, should acquire the drugstore chain—it’s an easy-to-understand business with an inexpensive valuation, the kind of company he has always preferred.
* Profile: Mathew Kiselak and Paul Malloy, co-managers of the Vanguard High-Yield Tax-Exempt fund focuses on municipal bonds that are high yield in the sense of their actual yields, not their credit quality; about 15% of the fund’s bonds are rated below investment grade or unrated.
* Interview: Rich Greenfield, who with a few other tech analysts from investment bank BTIG recently launched a new research shop called LightShed Partners, talks about new streaming services on the way from AAPL, DIS, and T’s HBO, and the demise of the cable bundle.
* Features: 1) Positive on OSK: Shares have rebounded in recent week after concerns about a slow fiscal year, but they remain below an all-time high of $96 set in early 2018; the market’s expectations that any slowdown will short and shallow suggest that Oshkosh is undervalued, and some analysts see 20% upside as U.S. allies buy more military equipment and cyclical stocks gain steam; 2) Dividends are a key foundation for many stocks, with their quarterly payouts buffering volatility and enhancing longer-term returns, but many companies prefer to reward shareholders in other ways or simply use their cash to build their businesses; there are 78 companies in the S&P 500 that don’t pay a regular dividend on their common stock; 3) Cautious on Saudi Aramco: The oil giant’s enormous reserves and ample dividend will probably look appealing as its long-awaited initial public offering draws near, but political and governance issues—including a royalty arrangement with the Saudi government—should give investors pause.
* European Trader: Positive on CNHI: If the producer of Iveco trucks, Heuliez buses, and Case farm machinery improves profit-margin and earnings-per-share targets, its stock could get a boost when the company separates into “off highway” and “on highway” companies with separate listings.
* Emerging Markets: “Not much is certain about Chile’s future, as anti-government marches and riots lurch into their fourth week—except that the nation’s status as capitalist poster child for Latin America is in danger.”
* Commodities: The effects of the U.S.–China trade war go beyond the day-to-day dealings in commodities such as soybeans and cotton, as the ongoing conflict forces U.S. trading partners to seek new suppliers, leaving American agriculture at growing risk of losing market share in China and not being able to gain it back.
* Streetwise: Columnist Jack Hough says investors shouldn’t give up on value stocks, but should consider changing the way they look for them: dividends are a welcome sign, but total capital return, including dividends and stock buybacks, has more predictive power.