Barron’s Weekend Summary: With a coronavirus vaccine on the horizon, small-cap stocks, which typically outperform over the long-term, are worth a look
* Cover Story: “Small companies typically outperform over the long-term, even more so at the beginning of an economic rebound. With a vaccine on the horizon, these stocks are worth a look,” partly because of their record-low valuations—Small-cap value is trading at a 60 percent discount to its average valuation in the postwar era, according to Leuthold Group, and it has been this inexpensive only one other time.
* Tech Trader: Positive on MU: With the global datasphere set to grow to 175 zettabytes (that is, 175 plus 21 zeros) in 2025 from 33 zettabytes in 2018, storage is an increasingly crucial element of the tech landscape; Investors have long viewed memory as a commodity, which explains the low valuation for Micron, the sector’s biggest pure-play bet—but the outlook for the company is brightening, and the stock could double from here.
* Trader: JPM’s Dubravko Lakos-Bujas believes that it’s now time to start gradually making the shift to value stocks—for growth stocks, the pandemic accelerated gains that should have come over two to three years and compressed them into one, and while growth will continue to be good, the rate of growth will almost certainly slow; Positive on TGT: News of the possible arrival of a Covid vaccine sent department store stocks such as M and KSS up, but Target—classified as a big box retailer but more like a department store—is the company to own; The company is booming during the pandemic, and the shares look undervalued.
* Profile: Mark Egan, lead manager of the Carillon Reams Core Plus Bond fund, says it can invest as much as 25 percent of its assets in below-investment-grade, high-yield debt; The fund can also hold cash—12 percent of assets now—when Egan can’t find enough opportunities, enabling him to pounce and buy when markets fall, and provide sufficient liquidity to process shareholders’ redemptions.
* Interview: C.J. Muse of Evercore ISI, the top-ranked semiconductor analyst in Institutional Investor’s annual survey, talks about trade issues and China’s headway in the sector, mergers and acquisitions, Moore’s Law—and why he likes NVDA, TER, AAPL, MU, and ASML.
* Features: 1) Positive on INTC: Though Intel has stumbled, lagging rival TSM, which makes chips for fabless players AMD and NVDA, and losing its role as a provider to AAPL, the company could announce a new hybrid manufacturing approach in January, one of a few signs of a rebound—and the stock is a rarity in the tech sector: cheap, with better days ahead; 2) Favorable news on PFE’s Covid-19 vaccine sparked a market rally and spurred a rotation into value-oriented stocks from growth stocks that could persist for months and years; Other reversals that might continue to play out are better showings by small stocks, compared with larger ones, and by international issues, relative to the S&P 500 index; 3) “The Consumer Financial Protection Bureau, under fire for its response to problems raised by the pandemic, will almost certainly have new leadership under Joe Biden’s administration. But those looking for it to rebuild protections for Covid-19-hit consumers may have a long wait”; 4) Positive on PFE: The efficiencies that enabled Pfizer to ready a Covid vaccine in months instead of years will help other vaccines it will launch in the next few years, including a successor to pneumonia preventive Prevnar, vaccines for teen meningitis and a virus called RSV that hospitalizes infants and the antibiotic-resistant c. difficile infection.
* European Trader: Positive on LOGI: The company “has been one of the big winners of the coronavirus crisis, raising guidance twice already this year thanks to strong sales of webcams, keyboards, and software to workers locked down at home,” and shares are set for further growth.
* Emerging Markets: “Turkey, the long-running train wreck of emerging markets, is reminding investors it can sometimes get back on track, lucratively” after president Recep Erdogan replaced his central bank governor and finance minister, but investors still need to remain cautious.
* Streetwise: Positive on V: The company, which has returned more than 1,000 percent to investors over the past decade, faces a host of electronic payment rivals, but winning over push transactions that use bank rails—like tuition, rent, and wages—and leveraging the tap-to-pay trend should help it continue its growth momentum.