Barron’s Weekend Summary: Millions of workers who have seized control of their professional lives in the post-pandemic economy and leveraged historically tight labor markets into raises, promotions, and a litany of intangible benefits
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Cover Story:
-Millions of workers who have seized control of their professional lives in the post-pandemic economy and leveraged historically tight labor markets into raises, promotions, and a litany of intangible benefits: more-flexible scheduling, more remote work, cheaper healthcare, subsidized child care. With unemployment close to a 50-year low and nearly two job openings currently available for every one unemployed worker—the largest disparity in the US economy on record by far—American workers are enjoying more power than they’ve had in decades. And the results are piling up.
Interview:
Jean Hynes researches the building blocks of human life and invests in companies shaping the future of healthcare. In July, Hynes became the first woman to lead Wellington Management, a Boston-based firm that oversees more than $1.3T in assets for Vanguard Group and other institutional clients. Its healthcare group manages more than $67B.
Hynes specializes in pharmaceutical and biotechnology companies, and is a portfolio manager of the $49B Vanguard Health CareVGHCX, the largest healthcare fund in the US. She was recently named to Barron’s annual list of the 100 most influential women in US finance for the third consecutive year. Hynes spoke with Barron’s from her Boston office about the outlook for healthcare investing. An edited version of the conversation follows.
Tech Trader:
Historically, companies like Western Digital and Micron Technology, which make digital storage, have been lousy investments. So, at a time of nearly unprecedented tech stock volatility, “you should now buy them both.”
The disk drive business has long featured boom and bust cycles. Demand surged, typically triggered by a spike in personal-computer sales, driving up prices. That spurred the players to boost capacity beyond all rational levels. Overcapacity would trigger price declines, and bankruptcies. A hard-drive industry that once included hundreds of players has been whittled down to three, and just two— Seagate and Western Digital—control the vast majority of sales.
The Trader:
-Andrew Addison, a veteran market technician, proprietor of the Institutional View research service, and a sometime contributor to Barron’s, sees more downside ahead for the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite, given the dearth of stocks resisting this year’s selling pressure.
-Since the end of 2019, companies have dealt with lockdowns, supply-chain snarls, rising costs, and higher interest rates. Now they might have to cope with the possibility that they expanded for demand that might not arrive. For example, Amazon.com’s Chief Financial Officer Brian Olsavsky acknowledged that Amazon had “built toward the high end of a very volatile demand outlook,” only to realize that it has an “opportunity to better match our capacity to demand.” Olsavsky used the word “overcapacity,” admitting that Amazon had expanded too quickly.
Features:
-Stablecoins are the bedrock of trading and lending activities, providing liquidity to individual traders, funds, and market makers on both centralized exchanges and decentralized-finance, or DeFi, networks. More than 90% of trading volume in crypto occurs in stablecoins, according to CoinMarketCap. Without stablecoins doing their job—holding their dollar pegs through periods of extreme turmoil—the crypto market may face a loss of confidence, affecting trading activity and prices for tokens ranging from Bitcoin to Dogecoin.
-Carvana, the online car seller, has had its statewide dealer’s license suspended on Thursday after an investigation by the Illinois authorities in response to customer complaints, Secretary of State office spokesman Henry Haupt said in an interview Friday. It is the latest in a series of similar moves in other jurisdictions.
-Shell has some of the most attractive assets in the global energy business, notably the world’s largest liquefied natural-gas business and the biggest network of service stations. But at a recent $55, its U.S.-listed shares trade for just 6X projected 2022 earnings of $9 a share. Exxon Mobil, at $86, fetches nine times estimated 2022 profits, while Chevron, at $164, trades for nearly 11X earnings.
European Trader:
-Steel, essential for making cars and constructing buildings, is closely tied to the economic outlook. Steel prices, having jumped as much as 50% after Russia invaded Ukraine, are predicted to weaken somewhat in the coming months. Inflation, rising interest rates, and geopolitical turmoil are increasing the risk of a recession. ArcelorMittal, based in Luxembourg, also engages in mining and has operations in North America, Brazil, and Africa. Shares have slipped 7.4% this year to 26.05 euros ($27.02). But the average price target among 14 analysts is €43.41. The company’s first-quarter earnings and sales rose on higher steel prices.
Emerging Markets:
Cryptocurrency is in a rough patch right now. But it’s failing in one good way, too—as a mechanism for Vladimir Putin’s Russia to evade war-related financial sanctions. Speculation was rife that Russian oligarchs or defense contractors, severed from most of the fiat banking world, would regroup through anonymous, unregulated crypto transactions. That hasn’t happened in any critical mass. “It has demonstrably played out that crypto is not a sanctions-busting tool,” says Michael Mosier, a former acting director of the US Treasury’s Financial Crimes Enforcement Network, now a senior advisor at Oliver Wyman.
Commodities:
-Prices of soybeans, the key ingredient in tofu, look set to drop this year as supply increases and demand declines. Investors should also benefit from the move.
“We’re set up for potential record yields along with record acreage,” says Shawn Hackett, president of Hackett Financial Advisors. He sees soybean prices fetching as little as $12 a bushel in this fall, 27% lower than the recent price of $16.37.
Streetwise:
Jack Hough has “developed feelings” for Bumble, the dating app, and its stock. Bumble began trading at $76 early last year, and has fallen to $22, costing investors 71% of their money. But who among us doesn’t have flaws? This past Thursday, Bumble gained 27% on earnings, which comes after a 42% jump following last quarter’s report. How can a stock be so giving and destructive at the same time? I’ll tell you how.”