Barron’s Weekend Summary: The pandemic underscores the growing burden on families—and on the economy—of Alzheimer’s disease
* Cover story: “The pandemic has cast a harsh light on the inadequacies of the US caregiving system and the enormous emotional and economic burden on families—and ultimately the economy—bringing the fight against Alzheimer’s to an inflection point. It comes as the oldest baby boomers enter the age range where Alzheimer’s is often diagnosed, and against a backdrop where science could be on the cusp of sorely needed victories—including the possibility of the first new drug approval in 18 years, and progress in biomarkers to enable earlier detection.”
* Tech Trader: Positive on AMZN: Shares of the e-commerce giant have appreciated every year since 2014, increasing more than tenfold over that span, and the company has spent years pressing its advantage in e-commerce—but the announcement that Andy Jassy would take over as CEO shows the real value driver has been the emergence of Amazon Web Services, a division that is synonymous with cloud computing.
* Trader: The yield curve—as the difference between short- and long-term bonds is known—has been steepening rapidly, rising above one percentage point last week in the two-year/10-year curve, which in the short term is simply a reflection of stronger growth expectations and more inflation, though it could eventually become a problem.
* Interview: 1) Dr. Jason Karlawish, who works at the Penn Memory Center, primarily focusing his research and writing on the study of Alzheimer's, talks about where the US took wrong turns in its approach to Alzheimer’s, reasons for optimism, and the changes needed as the number of Americans living with Alzheimer’s is expected to more than double to 13.8M by 2050; 2) Savita Subramanian, strategist at BAC, says outperformance could last for years, as it did after the tech bubble burst, and that finding promising investments is even more important today, especially if the market itself delivers lackluster returns, as she expects it to do.
* Profile: George Smith and Chris Pearson of Davenport Small Cap Focus seek small companies with executives who act as “owner-operators”—those with large insider ownership who behave more like the devoted founder of a business than a hired-gun executive who might cash in stock options and move on (top 10 holdings: CNNE, MCRI, AQUA, STC, BLDR, LAMR, CFX, JJSF, NEU, SWCH).
* Features: 1) Cautious on Robinhood: The online trading app’s last traditional round of private fundraising valued the company at $11.7B, and analysts think it could go public for considerably more than the $13B that MS paid to buy E*Trade last year, but to achieve that valuation it will have to prove its revenue stream is secure and consistent; 2) Positive on ANGPY, IMPUY, SBSW: Platinum is generating more interest because of its role in the green economy and its relative scarcity, and bulls argue that platinum could head back toward its old high in the next five years because of supply constraints, resilient automotive demand, new uses such as hydrogen fuel cells, and investment interest; 3) Positive on HLT: Despite problems in the hotel sector because of the pandemic, Hilton runs a so-called asset-light portfolio and relies heavily on recurring, long-term franchise fee agreements, making it less tethered to luxury brands, overseas locations, and big cities than its rivals—and favorably positioned to ride out the storm; 4) With Alzheimer’s disease a growing problem in the US, financial advisors play a key role—they are often the first to spot the signs of dementia, because they’re less likely to be in denial about the symptoms, and trouble with finances is often one of the first problems; 5) Positive on CASY: The retail chain, which owns and operates more than 2,200 stores in 16 states, outperformed the S&P 500 for years before than pandemic, thanks to double-digit earnings and revenue growth and an expanding footprint—but though it underperformed the index last year, growth is likely to accelerate as lockdowns end; 6) Last year, more than two dozen actively managed stock funds returned more than 100 percent, versus the Russell 3000’s 19 percent gain, a remarkable feat because during the past decade, no fund returned more than 100 percent in a calendar year—though it’s not a sign that active management is back; 7) Regulatory actions on the horizon under the Biden administration are likely to give shareholders access to new data to aid their decision-making about companies, including mandatory disclosures of climate risks and board diversity—and rule changes could also give them a louder voice in corporate-governance discussions.
* European Trader: Cautious on Danone: A letter to the company from activist investor Bluebell Capital Partners reinforces the belief that chief Emmanuel Faber has been too focused on sustainable development to the detriment of shareholder value—and some investors may prefer consuming its products but not buying its stock.
* Emerging Markets: The military coup in Myanmar—seen as a growth story among frontier markets in Asia—is bad news in the near term for investors, as supply-chain interruptions threaten everything from luggage manufacturing to energy projects.
* Commodities: “Frenzied trading in silver recently lifted prices to an eight-year high. But fundamentals already pointed to a break out in the metal before the latest rally, some analysts say, and prices remain undervalued.”
* Streetwise: Though the notion of buying shares of office landlords now, when prices remain depressed and their dividend yields are strong, might seem to be a good idea, says UBS analyst Brent Dilts, it may be better to favor what is already working in REITs—in particular, warehouse owners, whose dividends aren’t strong but who are riding an e-commerce boom that should send rents up.