Barron’s Weekend Summary: Without a Covid-19 vaccine, a return to normal life will be difficult—and progress in the race to develop one will drive stock prices beyond the pharma sector
* Cover Story: “Even as some states move to ease the lockdowns that have cost tens of millions of jobs and tipped the economy into recession, a safe return to normal life without a widely available Covid-19 vaccine is looking more difficult”; Understanding which among the 100 or so programs under way to find a vaccine offer the most potential will be crucial to predicting what social and economic life will look like in the coming years, and progress and setbacks in the race will drive the stock prices far beyond the pharmaceutical sector; The most promising efforts are coming from MRNA, PFE, BNTX, SNY, GSK, JNJ, AZN, INO, and NVAX.
* Tech Trader: Positive on CSCO: Six takeaways from the company’s recent earnings report: The company is better off than investors think, it’s benefiting from 5G technology, WebEx is serving large enterprises that buy Cisco gear, the company is still buying back stock, it has long been a leader in stay-at-home working (making it well prepared for the pandemic), and growth in the cloud sparked by companies like ZM ultimately requires the kind of gear Cisco sells.
* Trader: “Whenever the market drops, investors start worrying about whether the floor is really in—but they should be worrying about the ceiling instead”; The S&P 500’s ability to bounce back from early-day losses on Thursday and Friday shows investors still want to buy the dip, but it does make it harder to see the market heading much higher just yet.
* Interview: Nancy Lazar, a widely followed economist on Wall Street, didn’t initially grasp the impact of the coronavirus pandemic, but after pivoting and updating her macroeconomic forecasts, she now sees Middle America as the top emerging market, and says there will be a coming boost from onshoring.
* Profile: Mike Trigg and Paul Black, co-managers of the WCM Focused International Growth fund, start with international companies poised to benefit from long-term trends related to technology, health care, or the growing global consumer population, then determine whether their “moats” are getting bigger or smaller over time (top 10 holdings: CSL, CP, Experian, Tencent Holdings, LULU, RMD, LVMH Moet Hennessy Louis Vuitton, Nestlé, CAN, TSM).
* Features: 1) Cautious on T, TMUS, VZ: 5G technology won’t play a major role this year or next on the fortunes of US wireless carriers—network buildout and customer adoption will be slow, and 5G’s impact will take years to show up in the carriers’ financial results; related story on 5G says “Investors betting on 5G should temper their expectations—the rollout will be more evolution than revolution, delaying potential rewards” for carriers and their customers; 2) Positive on ECL, FLIR, ZBRA, HON: Future challenges related to the coronavirus could create opportunities for investors, especially as companies specializing in cleaning supplies, thermal scanners, and tracing technology find their products in growing demand; 3) Communications, artificial intelligence, and data promise to shape the coming decade, which has prompted a new “space race” between the US and China, though China seems to be taking its quest more seriously than America , and no other country comes near China in terms of broad 5G investment and infrastructure deployment; 4) In an interview, QCOM president Cristiano Amon talks about the much-anticipated 5G rollout, global technology competition, and the coronavirus—and says the US is not behind China on the technology, noting the top obstacle to rollout in America is the availability of new sites; 5) Positive on LSXMA, BATRK: Recent setbacks for media mogul John Malone offer investors a rare opportunity to play promising parts of his empire at a big discount; Malone’s investments in live sports and entertainment properties give him a competitive edge over traditional media content, and they aren’t likely to be disrupted by AMZN, FB, or NFLX; 6) Cautious on W: While many businesses can expect sales to improve when lockdowns end, the opposite may be true for Wayfair—when the country reopens, retailers will lure shoppers from their homes with discounts and promotions, which could send the company’s sales back down.
* European Trader: Cautious on Rolls Royce Holdings: The company has resolved a legal issue involving profit warnings and bribery allegations, but it faces ongoing problems with its Trent 1000 engine, and with planes grounded during the pandemic, its engine maintenance fees are plummeting—meaning the stock is best avoided in the short term.
* Emerging Markets: Positive on MELI, PAGS, STNE: Latin American companies are getting a boost as Covid-19 keeps consumers away from brick-and-mortar stores, creating an opportunity for investors to get in before shares go higher in a region some experts see as a “sleeping giant.”
* Commodities: Uranium has outperformed major commodities this year, even as the energy sector has suffered from a drop in petroleum demand tied to the coronavirus pandemic—and as long as producers continue to purchase uranium to cover supply shortfall, the price will keep going up.
* Streetwise: In the long term, making money isn’t VIAC’s problem, says columnist Jack Hough–the company’s problem is that stock investors view TV as a dying business, though if the pandemic continues to spur faster streaming growth, it might help the company win over more fans on Wall Street.