Barron’s Weekend Summary: Ultralow interest rates and ultrahigh spending by the Federal Reserve and the federal government helped the U.S. economy not only survive the devastating impact of the Covid-19 pandemic, but also thrive in its near aftermath
* Cover Story
“Ultralow interest rates and ultrahigh spending by the Federal Reserve and the federal government helped the U.S. economy not only survive the devastating impact of the Covid-19 pandemic, but also thrive in its near aftermath.” The members of the Barron’s Roundtable discuss “with their customary candor and zest” the state of the markets and suggest 42 ‘bargain’ stocks to consider in this midyear investment update.
* Tech Trader:
The tech earnings season begins in the coming week, and Barron’s has a preview of what might be expected as “IBM, Netflix, Intel, Twitter, SAP, AT&T, Seagate, Texas Instruments, and Snap all due to report June-quarter results.” Barrons says investors can “expect strength across the tech landscape, but there are considerable cross currents: Hardware and chips companies will be hampered by component shortages. Stay-at-home plays will likely see moderating growth. It should still be a strong quarter for handsets, cloud computing, online advertising, and e-commerce.”
* Trader
Barron’s suggests that “the easy money has long ago been made in the postpandemic bull run, and that markets and the economy are entering more uncertain, midcycle times.” Consequently, quality stocks have gained favor again, “kicking some of the recent quarters’ biggest winners to the curb.” The suggestion is to consider “quality, predictability, and safety,” according to Robert Phipps, director at Per Stirling Capital Management. “Phipps points to Big Tech stocks like Apple (AAPL), Alphabet (GOOGL), and Facebook (FB) as beneficiaries of such an environment.”
* Features:
While retirement “spells the end of the prototypical 40-hour workweek for many Americans, for some it marks the start of a second act in coaching or consulting.” But, starting a new career is “not as simple as hanging up a shingle and waiting for the business to roll in.” Rather, argues Barron’s, “Managing a successful transition takes planning, which could mean laying the groundwork a year or more before leaving your full-time job.”
Zoetis (ZTS) shares “closed down marginally after Raymond James downgraded the company from Outperform to Market Perform while maintaining the same $192 price target.” Zoetis claims to be “the world’s largest animal-health company” has enjoyed a good year so far, “with shares gaining 22% compared with the S&P 500 index’s 17.4% return.” And, Raymond James analyst Elliot Wilbur said “the stock has outperformed the ProShares Pet Care exchange-traded fund (PAWZ) by 11% year to date.”
Bill Gates, Cathie Wood, and venture capitalist John Doerr are investing in synthetic biology companies. And the proponents suggest that this sector has a total addressable market of over $1 trillion. “Synthetic biology is in its infancy, but it’s drawing comparisons to the internet of a generation ago.” Synthetic biology has attracted investors with its promise of “programming the DNA of microorganisms like yeast as if they were computers and getting them to produce products more cheaply and with a lower carbon footprint than traditional manufacturing. Synthetic biology could reduce the need for petroleum-based chemicals as well as for plant- and animal-based products, benefiting the environment.”
* Europe :
The Barron’s Roundtable (see this week’s feature) addresses a question many are asking: “Why should investors pay attention to the cryptocurrency market? Does crypto belong in an investment portfolio?”
The Roundtable, better known for analyzing companies and stocks realize that these ‘traditional’ investments “must now compete for investors’ attention with lots of new-ish assets, some based on novel technologies and prone to extreme volatility.” That’s why the panelists suggest that “anyone interested in markets, technology, and disruptioncan’t help but follow developments in crypto, blockchain, nonfungible tokens, central bank digital currencies, and decentralized finance.”
Ericsson (ERIC) shares fell by around 8%. The problem is that Ericsson, a manufacturer of both 4G and 5G telecom equipment, has a big problem in China because of geopolitical tensions related to 5G equipment that “have put the Swedish telecom company under pressure in a key market, with a significant decline in Chinese business in the second quarter of 2021 weighing down otherwise strong financial results.”
The Delta variant of the coronavirus has all but eliminated optimism for a stock-market recovery of UK based travel companies. For example, Whitbread (WTB.UK), which owns the Premier Inn hotel chain, has dropped 17% over the past three months, which is 41% below January 2020 levels. Nevertheless, Peel Hunt analysts believe at this price, Whitbread is a buying opportunity.
* Emerging Markets:
Covid’s so-called Delta variant is moving across the East Asian growth belt, and affected growth in key regional economic centers. “Indonesia lately seized the crown of pandemic epicenter, with cases quadrupling in a month. Markets remain largely unperturbed. “Our baseline scenario is that this won’t be very disruptive,” says Alejo Czerwonko, chief investment officer for Americas Emerging Markets at UBS Global Wealth Management.”
* Commodities:
There’s no time like the present for homeowners and home builders to stack up their lumber supplies. After a bullish 2020, when prices doubled, “lumber futures have dropped to their lowest level of 2021, on track to suffer a third-straight monthly decline—potentially offering a ‘small window’ for buyers to benefit from cheaper prices.”
* Streetwise:
“The coming week could bring new clues about whether subscription fatigue is setting in faster than expected.” Some key entertainment platforms are reporting their quarterly results in the coming week. Netflix (NFLX) reports on Tuesday evening, and AT&T (T), which owns HBO, reports Thursday morning. “In April, Netflix said it had added four million subscribers during the first quarter, but Wall Street was looking for six million, and the shares fell 7% in a day. Since then, the second-quarter new subs estimate has fallen to 1.8 million from 4.4 million.”