Barron’s Weekend Summary: The sharp drop in bond yields has heightened the appeal of stocks with high dividends; Coronavirus-related guidance reductions from tech companies have been relatively subdued so far
* Cover story: The sharp drop in bond yields has heightened the appeal of stocks with high dividends, and the recent selloff in the stock market has raised their visibility, though high dividend yields can bring risk, and many investors see these stocks as value traps rather than as opportunities; The dividends on a dozen companies with strong balance sheets and durable businesses look secure: MO, DOW, XOM, VLO, PRU, CMA, T, CVX, WFC, ABBV, STX, KMI.
* Tech Trader: Despite the volatility and negative headlines this past week, coronavirus-related guidance reductions from tech companies has so far been relatively subdued and based mostly on other factors; business trends and outlooks could still deteriorate if infections accelerate around the world, but investors should begin to think about buying opportunities.
* Trader: The coronavirus probably isn’t done yet with the market—as more tests are conducted, there is likely to be a spike in the number of coronavirus cases in the US, which could cause another selloff, but which also creates a buying opportunity, says Christopher Harvey of Wells Fargo Securities.
* Interview: Paul Hickey and Justin Walter of Bespoke Investment Group, which helps clients remain mindful of historical market facts and current opportunities, discuss the threat of the coronavirus to the aged bull market and other issues (picks: XLF, KBE, BAC, GS, XLE, ALB, LIT, EA, ATVI, MSFT, SNE, WORK).
* Profile: Bill Nolin and Tom Rozycki, co-managers of the Principal Blue Chip fund, invest in businesses still run by their founders, or where executives behave like founders by thinking long-term and holding significant ownership (top 10 holdings: AMZN, GOOG, Berkshire Hathaway, MSFT, V, AMT, BAM, CHTR, MA, FB).
* Features: 1) Some bond bulls think investors should continue to hold on to their bonds even after yields have dropped, while others see more risk in these low returns if yields were to reverse their recent, stunning decline—but economist A. Gary Shilling remains positive on long-term Treasuries; 2) Barron’s inaugural list of the 100 Most Influential Women in Finance is an unranked list of top players selected because of their accomplishments and leadership, influence in the sector, and the capacity to shape business or industry in the future; related story says that “Though women make up more of the industry’s senior leaders, a closer look shows that many are filling corporate functions—human resources, general counsel, investor relations—rather than the revenue-generating businesses that tend to be the proving ground for roles like chief executive or money manager”; 3) Positive on NEM, GOLD, INIVX: Gold is living up to its reputation as a haven during turbulent times—the precious metal is up 10.7% this year, to a seven-year high, and could be on its way to testing its record high of $1,900, set in 2011; 4) A recent Vanguard Group survey of 44,000 do-it-yourself investors found that many had become more exposed to risks in the stock market during the bull run than they might have intended or that were appropriate for their proximity to retirement; 5) Pamela Rosenau, chief equity market strategist at HighTower, says the market could go down between 15% and 20% from its high, and is telling investors that it’s time to head for master limited partnerships, select opportunistic noncyclical stocks—and gold.
* European Trader: + Carrefour: Europe’s largest retailer has been hit by competition from AMZN and other online rivals, sending shares down, but a turnaround plan launched in 2018, cost-cutting, and online investments are beginning to create the potential to boost earnings and shares.
* Emerging Markets: Investors could be paid handsomely for entering the “risky morass” of Turkey’s market, where ten-year sovereign local-currency bond yields have jumped nearly two percentage points over the past month while stocks have fallen, which looks like a good trade to some managers—for now.
* Commodities: “Demand for transportation fuels has declined significantly along with prices, and both are set to worsen as the coronavirus continues to spread around the world, feeding fears over travel.”
* Streetwise: “What if the economy takes a hit, but our worst fears don’t play out?,” asks columnist Jack Hough. “For its base forecast, GS assumes the Covid-19 outbreak will be widespread but short-lived, with GDP bottoming at zero growth in the second quarter before rebounding, and earnings stalling, while falling interest rates push the S&P 500 to just over 19 times earnings by year’s end.”