TheChek News Flow

After a broken hip suffered on a tennis court kept him largely confined to New York last year, Wien is back in his groove, traveling regularly to meet with leading global investors, central bankers, and government officials.

He uses opinions and information gleaned from those encounters to write a lively and insightful monthly investment-strategy essay and to offer his views at what probably will be 100 investor meetings this year, mostly with Blackstone’s (ticker: BX) institutional clients, wealthy individuals, and financial advisors. Few on Wall Street network and travel as extensively as Wien does. His monthly strategy essay has an e-mail distribution list of 17,000, and total readership is probably much more than that.

Blackstone is one of the leading private-equity and real estate investors, with more than $340 billion under management. It also runs funds focused on high-yield investments.

“Byron is an 83-year-old man chronologically, but in temperament, he is 45,” says Jim Tisch, CEO of Loews, who has known Wien for more than 20 years. “His passion is the markets and the world around him, and that comes shining through anytime you talk to him. He’s well connected and well informed and is always looking to gain new insights.”

In the past few months, Wien has been offering a bearish view on the U.S. stock market, which he thinks may have a down year in 2016—and “investors will be lucky to get a 5% to 7% annual return” in the coming years. He also believes that the global economy will grow at just 2% this year, below early-year official forecasts of more than 3%. He’s cautiously optimistic on China and worried about Japan. The U.S. economy will be hard-pressed to expand at more than a 2% annual rate, he says. “I don’t think that’s satisfactory to many Americans who want higher growth and the benefits that come with that,” he told Barron’s during a recent visit to Blackstone’s Manhattan office.

A great raconteur, Wien wins over his audiences with his financial forecasts, observations on recent travels, and one of his most popular creations, his list of “Life Lessons.” He came up with that idea three years ago at a conference in Vail, Colo., when he was asked by the host to scrap his usual financial talk and offer a more personal presentation. Initially annoyed at having to shift gears, Wien quickly came up with 12 ideas, which he has since expanded to 20.

Among them: Network intensely, read all the time, travel extensively, and never retire. And unlike many wealthy Wall Streeters, his approach to philanthropy is “to try to relieve pain rather than spread joy. Music, theater, and art museums have many affluent supporters, give the best parties, and can add to your social luster in the community. They don’t need you. Social service, hospital, and educational institutions can make the world a better place and help the disadvantaged make their way toward the American dream.”

Reflecting his philosophy, Wien has endowed two professorships at Harvard University, his alma mater, as well as made gifts supporting Harvard’s financial aid, including a scholarship for orphans. Wien, who was orphaned at 14, excelled in high school and got a lucky break when a Harvard admissions representative came to his Chicago school and asked the guidance counselor to recommend a single student for an interview with an admissions dean.

“The guidance counselor called me in and said, ‘Wien—they called you by your last name then—you’re our pick. Go downtown and don’t make a fool of yourself.’ That changed my life,” Wien says.

At that time, he notes, “Harvard was looking for smart kids from public schools to offset the prep-school kids that were the base of the student body. That was Harvard’s idea of diversity in 1950.”

At a meeting a month ago with financial advisors and their clients at New York’s 21 Club, Wien was in good form. He spoke to the group of about 100 for an hour without notes, outlining his views on the markets and the economy, and offering some insights from a just-completed trip to Asia, where he had a series of meetings in Singapore, Shanghai, Beijing, Hong Kong, and Tokyo. After a florid introduction in which the host likened him to such greats as Jim Thorpe, Vince Lombardi, Michael Jordan, and even Socrates, Wien said, “I sure wish my first wife could have heard that.”

At the 21 Club meeting, he went through his life lessons, emphasizing some career advice: “Don’t try to be better than your competitors; try to be different.” He also said that while many focus on the importance of diet and exercise, he feels that sufficient sleep is underappreciated. “Sleep is the fuel of performance.”

WIEN’S OFFICIAL JOB TITLE at Blackstone is vice chairman of multi-asset investing, but his real role is as a strategist, advisor, and brand ambassador. He rarely mentions Blackstone products in his presentations. “My job is to advise the firm and its clients on economic, investment, political, and social issues,” he says.

Reflecting his clout and charm, Wien orchestrates a series of lunches each summer in the Hamptons that bring together leading investors and other notables to discuss the markets, the economy, and the world. Participants have included Carl Icahn, Bill Ackman, Wilbur Ross, George Soros, David Koch, and Tisch. Wien then writes about those meetings in a strategy essay, usually without mentioning names.

He acknowledges that the consensus view of the smart money can be wrong, as it was this past summer regarding the now likely Republican presidential nominee Donald Trump: “They thought he wouldn’t last until Thanksgiving.”

Wien’s fans include Peter Thiel, the billionaire PayPal Holdings (PYPL) co-founder and new-economy investor, and Facebook (FB) Chief Operating Officer Sheryl Sandberg. She particularly likes Wien’s life lesson about reading. He advises readers to have a “point of view before you start a book or article and see if what you think is confirmed or refuted by the author.”

And, says Henry McVey, who worked with Wien as a strategist at Morgan Stanley for several years and now is head of global macro and asset allocation at KKR (KKR), the private-equity firm, “Byron possesses two traits that distinguish him from others: humor and curiosity. He uses both effectively to engage clients, business leaders, and government officials. He has an ability to simplify the complex, which is a testament to his intellect.”

Wien’s monthly essays are meant to inform and provoke. His latest piece—“China’s Slowing, So What?”—came after his April trip to Asia. Wien wrote that he has been “projecting (guessing) that Chinese economic growth is running at 4.5%, below official forecasts of close to 7%, and arguing with clients and analysts if I am too high or low.” That debate, he wrote, is missing the key point: “If growth in China were closer to 5% than 7%, is that so bad? China will still be able to create 10 million or more jobs annually. The U.S., Japan, or Europe would be thrilled to grow at that rate.”

Wien is also upbeat on the Chinese consumer, drawing in part on Blackstone’s in-house experts. The firm’s real estate chief Jon Gray told him, “Our malls in China had annual sales increases of 18% a few years ago and then that went down to 12%, and now it’s 8%—but 8% is pretty good.”

THE CHINA PIECE included an observation from former Secretary of State Henry Kissinger, with whom Wien had recently dined. Kissinger told Wien that the goal of China’s leader, Xi Jinping, was “to eliminate corruption that resulted in wealth creation, not the corruption that facilitated the ease of doing business,” such as getting delivery of construction materials at opportune rather than government-mandated times. It’s those kind of observations gleaned from influential people that help distinguish his work.

The Japanese mood, however, is downcast amid disappointment with Prime Minister Shinzo Abe’s failed program to stimulate growth. “In conversations with investors there,” Wien wrote, “I got the feeling that many had lost hope that stronger growth and opportunities for wealth creation were ahead.”

Wien is probably best known for his annual list of “10 Surprises” that he has published at the start of each year since 1986; the forecasts involve financial, business, and political events that he thinks have a better-than-50% chance of occurring in the ensuing 12 months, while the consensus puts the odds at 33% or less. The 10 Surprises began after he started work as Morgan Stanley’s chief U.S. investment strategist in 1985. He was looking to showcase his sometimes maverick views and to distinguish himself from a crowd of prominent strategists, including Leon Cooperman, who then worked at Goldman Sachs.

“Morgan Stanley formed a tribunal to review the idea, and they initially turned it down,” he recalls. “They said, ‘Byron, you could get all 10 wrong and you would embarrass the firm and humiliate yourself. Frankly, we don’t give a damn about your humiliation, but we don’t want the firm to be embarrassed.’ ” Under pressure from Wien, the firm relented, and the 10 Surprises became so popular that Morgan Stanley took a service mark on the phrase, which it now licenses to Wien each year for $1.

So far, Wien is looking prescient with his 2016 surprises, with his cautious take on U.S. stocks, the global economy, and the dollar, as well as a benign interest-rate outlook. On politics, his prediction of an election victory by Hillary Clinton and Democratic control of the Senate looks good now, but he forecast the wrong Republican insurgent to win the nomination: Ted Cruz.

With the possibility now of a Trump presidency, he says, “I’m hopeful that the checks and balances in the American political system will restrain Trump from implementing some of his more extreme ideas.”

WIEN MADE HIS REPUTATION during his 20-year stint at Morgan Stanley, where his elegantly written essays gained a wide and influential following. Indeed, he liked the prospect of the Morgan Stanley perch so much that he gave up a successful job in money management and took a pay cut.

After several jobs early in his career, including advertising (which he hated), he was fortunate to get a job as a securities analyst and later a money manager on Wall Street in the 1960s, when entering that clubby world was tough without money, blood ties, or other connections. He joined Blackstone in 2009 after four years as a strategist at Pequot Capital, a New York investment firm.

Wien loves his current job and the platform, influence, and recognition it gives him at an age when few are still active in the investment field. “They are going to have to carry me out of here in a box,” he told Barron’s. “The job is very demanding, and at Blackstone they don’t make adjustments for age. I’m already the oldest person here by more than a decade. As long as I feel physically that I can do it, I will. I don’t feel a whole lot different than I did 20 years ago.” The firm’s second-oldest employee is Wien’s boss, Blackstone’s 69-year-old co-founder, CEO, and chairman, Steve Schwarzman, who calls Wien an “indefatigable worker and provocative thinker.”

Wien does it all with no staff, save for an assistant. He likes it that way. “When I get in front of people, they know it’s the real me,” he says. “It isn’t somebody feeding me material.” His arrangement at Blackstone is similar to what it was at Morgan Stanley. “I can write whatever I want, and they can fire me whenever they want. I have total intellectual freedom here. Blackstone’s strategy is to hire good people and give them a lot of freedom to do their jobs.”

Wien almost never takes as much as a full-week vacation because he likes to participate in the firm’s Monday morning meeting that involves participants from Blackstone offices around the world.

Wien probably will be on the road for two months this year. He plans a trip to Europe next month and the Middle East in September. He always travels commercial, because he likes interaction with people and views private jets as an extravagance. When speaking before audiences of wealthy individuals, he has fielded questions about how to avoid overindulging their children. He warns them about flying their kids in private jets: “It changes them, and not for the better.”

While he lives well, with an apartment on Park Avenue and a summer house in East Hampton, he’s thrifty in some respects, reflecting his Depression-era upbringing. He invariably takes home a doggie bag from lunch, even from Manhattan’s famed Four Seasons restaurant, a Blackstone haunt. And he’s more liberal politically than some of his friends and cares about U.S. economic competitiveness and income inequality. “The world has changed since 1980 due to globalization and technology,” he says. “As a result, the top 20% has improved their standard of living, the middle 60% has held their own, and the bottom 20% has lost ground. Income inequality has been exacerbated since the recession ended.”

He has some regrets, including not having children. He does have a close relationship with his godchildren. And he shares many common interests—reading, theater, sailing—with his second wife, Anita Volz Wien, to whom he has been married for 37 years. She’s chairman of the Observatory Group, an economic and political advisory firm.

Wien loves living in New York and wouldn’t think of moving to Florida or another low-tax state, although he won’t criticize investment managers and other superrich people who have made the move. “I might have a different attitude if I made a few billion dollars a year,” he says. “I’ve made enough money; the taxes don’t hurt. It’s a privilege to live in New York. Besides the theater and culture, there are so many interesting people. That’s what life is about, exchanging ideas with interesting people.”

“Kissinger is a hero of mine because he is still well connected and relevant at 93,” Wien wrote recently. He hopes to follow Kissinger’s lead and be active and influential for at least another decade.

AXA’s shares appear inexpensive and could get a shot of momentum when the French insurer and asset manager unveils a new five-year strategic plan next month.

The company (ticker: CS.France) may not disclose anything groundbreaking when it presents its new road map to investors on June 21, but with a new chief executive and renewed energy it will likely increase its earnings targets, which could give the stock a lift.

Its shares have been in the doldrums lately, along with the rest of the insurance industry, as low or negative interest rates make it increasingly difficult to generate returns, and because of the effects of market volatility.

AXA’s shares have outperformed the Stoxx Europe 600 index’s insurance sector in recent years, but they have tumbled 16% in 2016, while European insurers have retreated 13% on average. AXA closed Friday at 21.24 euros ($23.82) and trades for 8.8 times and 8.5 times estimated earnings for 2016 and 2017, respectively.

In contrast, Allianz (ALV.Germany) trades for 9.3 and 8.9 times earnings projections for this year and next— cheap, but not quite as cheap as AXA. The sector trades at a price/earnings multiple of 9.5 times, which means AXA shares are at a discount of about 10%.

American International Group (AIG) trades for 10 times next year’s projected earnings. At the same multiple, AXA’s shares would be worth €25, or an upside of close to 18%. On a sum-of-the-parts basis, AXA could be worth as much as €27.50, or about 30% more.

A generous dividend provides a plump cushion against any further weakness in the share price. AXA currently offers a yield of 5.2%, well above the Stoxx Europe 600 average of 3.8%. Paris-based AXA has American depositary receipts that trade in New York. Listed under the ticker AXAHY, they traded Friday afternoon at $23.69. Each ADR is equivalent to one ordinary share.

“AXA trades on an attractive valuation relative to its peer group from an earnings perspective,” says Neil Wilkinson, senior fund manager for European equities at Royal London Asset Management, which owns the stock. “Now that the previous strategic period has been completed…a potential boost to the stock comes in the form of its new targets,” he adds.

AXA’s new strategy will be guided by new leadership. Thomas Buberl, formerly head of the company’s operations in Germany, will succeed Henri de Castries, who has led AXA for almost 17 years, as chief executive.

Buberl has big shoes to fill. Under de Castries, AXA focused on developing its core businesses. It sold noncore activities, such as New York investment bank Donaldson Lufkin & Jenrette, and operations in markets where its position was weak. He expanded AXA’s footprint in emerging markets, particularly in Asia, and strengthened the balance sheet, delivering steady profits and consistent dividends along the way.

Today, AXA boasts 103 million clients and a presence in 64 countries. It has a robust Solvency II ratio of 205%. The ratio is intended to gauge its ability to withstand shocks.

In an interview with the Financial Times in March, Buberl made clear that he’s intent on pursuing AXA’s digital transformation, rather than making big acquisitions, which is good news for shareholders.

IN THE NEXT FIVE YEARS, AXA could deliver growth in earnings per share of at least 7% per annum, comprising 5% in organic growth and another 2% from acquisitions, according to Deutsche Bank analyst Oliver Steel. The company has spent €1.7 billion on bolt-on acquisitions in the past three years, not all of which are contributing fully. He estimates AXA is throwing off €1.2 billion a year in excess capital.

A key driver in the next few years will be the life and savings division, which accounts for almost 60% of earnings. The division could see revenue growth of 2.5% to 3% in 2017 and 2018, but earnings could grow at a faster clip due to a focus on higher-margin products, such as protection, rather than lower margins, capital-intensive guaranteed liabilities.

Digital investments, which make use of big data to tailor and price products, could help drive top-line growth above the rate of gross domestic product after 2018.

Low bond yields are a negative for margins, but the impact could be offset by more cost cutting. AXA has trimmed €1.9 billion in the past five years, and it could erase another €200 million this year, sufficient to mitigate lower returns.

Expectations are modest for the property and casualty division. Recent growth has come from price hikes, but they are now slowing. Deutsche Bank’s Steel sees P&C premium growth of 2% a year over the next three years.

According to consensus estimates, AXA is forecast to have net income of €6.05 billion, or €2.42 per share, in 2016. In 2017, net income is projected to rise to €6.12 billion, or €2.50 a share. AXA is a cheap insurance policy in these challenging market conditions.

Warren Buffett’s name makes regular appearances in the pages of Barron’s, but our weekly Tech Trader column tends to be a Buffett-free zone.

That’s no disrespect to the Oracle of Omaha. Buffett, of course, has famously avoided technology during his long run of success, preferring businesses he can easily understand. The exception, a few years back, was an $11 billion bet on International Business Machines (ticker: IBM), which hasn’t exactly panned out.

Last week, Buffett’s Berkshire Hathaway (BRK.A) made another exception, disclosing a $900 million position in Apple (AAPL). Apple investors, looking for any glimmer of hope these days, bid the stock up 3.7% on the news. Apple finished the week up 5.2%, at $95.22, still 28% off its 2015 high. Buffett made it clear that the investment wasn’t his, but rather one of his portfolio managers, whom he didn’t name.

For an investor seeking a simple business, Berkshire’s Apple buy comes at a curious time. Apple has spent years getting increasingly complex, following the paring down that accompanied Steve Jobs’ 1997 return. Retail, music, and mobile proved screaming successes. But the company has struggled for several years with television, and questions still surround the Apple Watch. Even the possibility of an Apple car is a stunning complication for the business.

Financially speaking, Apple faces an array of decisions, thanks to its swelling balance sheet. Dividend payments came to $11.6 billion last year on top of $36 billion for buybacks, swamping its record-high $8.1 billion spent on research and development. Tim Cook’s job is vastly more complicated than Steve Jobs’ ever was. Investors, in trying to evaluate the stock, face a similar dilemma.

The popular bullish case for Apple centers on the Holy Grail of services and the hope that Apple’s massive user base will pay off in a big way. Barron’s made a persuasive case on that basis last month, arguing that Apple shares could be ready to rally

THE SERVICES ARGUMENT MAKES complete sense, but the execution has proved challenging. Take the recent example of Apple Music. Two weeks ago, Apple admitted that some iTunes music was being deleted from users’ Macs. The company cited an issue within iTunes, but the user complaints began with the launch of Apple Music last summer, and that’s unlikely to be a coincidence. Apple has allowed iTunes and Apple Music to exist side by side, but the business models are inherently in conflict: pay-as-you-go owned content versus an all-you-can-eat monthly fee. It’s confusing to use both on the same phone, and it presents a serious marketing problem for Apple. One service undermines the other.

The rest of the music world is moving in a clear direction, toward the rental/streaming model, and rumors have begun to swirl that iTunes might be on the chopping block.

The problem for Apple is that others have a head start in streaming, putting the company in the unusual position of underdog. Last year, this column suggested that Apple Music would be the ultimate test of Apple’s ecosystem. At last count, Apple Music had 13 million subscribers, not bad for a startup, but less impressive for a company with a billion active devices. Spotify has 30 million paid subscribers, many of whom use the service on iPhones.

Whereas iTunes devotees once had to buy iPods and iPhones, Spotify users can move their catalogs between phones, tablets, and desktops, regardless of platform. The cloud has made music and other services platform-agnostic, meaning Apple can no longer fall back on its hardware or software preeminence.

Here’s something to consider: Instead of charging $3 a month for iCloud storage and $10 a month for Apple Music, what if Apple’s new iPhone Upgrade Program, a monthly installment plan that includes a new iPhone every year, also came bundled with iCloud and Apple Music? Apple Music would be a “free” perk, the same way Amazon’s streaming video content is included in the e-commerce giant’s two-day shipping program. Any lost service revenue could be offset by increased iPhone sales, which attacks the key bear case for Apple: the lengthening replacement cycle for iPhones.

ANOTHER SEASON OF EARNINGS is essentially in the rear-view mirror, and it’s one most tech executives would like to forget. All but six of the 67 tech companies in the Standard & Poor’s 500 index have reported first-quarter results, generating an overall earnings decline of 4.4% from a year earlier, according to Thomson Reuters. Analysts now expect tech earnings to fall 6.2% in the current quarter. Just six weeks ago, Wall Street was expecting 1.4% growth.

The common lament that emerged in earnings commentary was the slowdown in enterprise spending. Intel (INTC), Juniper Networks (JNPR), Seagate Technology (STX), Oracle (ORCL), EMC (EMC), and others all talked about reduced macro demand. The weakness was expected to weigh heavily on Cisco Systems (CSCO), as well.

Instead, the one-time tech bellwether reported better-than-expected results last week, driving its shares up 5% on the week, to $27.97. In interviews with Barron’s, CEO Chuck Robbins and CFO Kelly Kramer acknowledged some of the same macro weakness discussed by peers, but they said it was offset by Cisco’s focus on specific customer priorities, particularly in security, where the company’s revenue jumped 17% in the fiscal third quarter, to $482 million. “I think we’re seeing the benefit of being in the right spaces,” Kramer says.

Historically, Cisco has provided network, e-mail, and Web security. More recently, it’s added cloud and malware protection. Granted, security remains a small part of Cisco’s total revenue, which was $12 billion for the quarter. “Security is one of our absolute top priorities. It has been and it will remain so,” says Robbins, noting that it will be a focus of organic investments and strategic mergers and acquisitions.

The company is also talking more about its attempts to move toward subscriptions. For its WebEx conferencing service, that’s a natural option, similar to the new subscription models used by Adobe Systems (ADBE) and Microsoft (MSFT); it’s more complicated for Cisco’s legacy switches and routers. Still, Robbins spoke of the possibility of offering service contracts, in which the equipment becomes part of a monthly subscription fee. “It’s really a financing issue,” he says. “We’ve been pretty active with Cisco Capital, so it’s relatively easy for us to structure those deals.”

Subscriptions, of course, could smooth out revenue and lessen the impact of enterprise spending lulls, like the one that dominated the last month of earnings reports.

--> Boeing's Stock could fall 15% to $108, as aircraft demand weakens, depressing earnings. Shares peaked at $158 and new fetch at $128

Boeing turns 100 this year and has much to celebrate, from steadily growing air traffic to humming production lines. The first few years of its second century could prove turbulent, however, for the aerospace giant and its shareholders.

Sales of wide-body planes have been falling for the past two years, likely because of a supply glut. There are also signs that airlines and leasing companies are using planes longer and delaying orders for new aircraft. Among other things, analysts note, low oil prices have reduced the imperative to buy updated, more fuel-efficient models. Reduced orders and deliveries could cause Boeing’s earnings growth to slow.

Fears of a slowdown haven’t been lost on Wall Street, where Boeing’s stock (ticker: BA) historically has reflected the industry’s cyclical nature. Shares peaked in February 2015 and have slid 19% since, to a recent $128, on a rash of disappointing news. Boeing disclosed in January that it would deliver fewer planes this year than last year’s record 762. The company also said it would reduce production of its 777 wide-body plane, eliminate 4,000 jobs, and earn less in 2016 than analysts had been expecting. Adding to investors’ unease is a reported Securities and Exchange Commission investigation into the aircraft maker’s accounting.

Some analysts think Boeing’s shares have further to fall. Shares currently trade for 14 times next year’s consensus profit forecast of $9.47 a share. If Boeing earns only $9 a share, as some skeptics believe, its price/earnings ratio could fall to 12, in line with multiples accorded other slow-growing industrial companies. That implies a stock price of $108.

Boeing generates two-thirds of its revenue from commercial aircraft and most of the rest from its defense business, which isn’t expected to show gains in the near term. The company’s growth engine is the narrow-body 737 plane, which carries 85 to 215 passengers and appeals to budget carriers, among others. With more than 4,000 unfilled orders, the 737 accounted for 76% of Boeing’s backlog of 5,795 planes at year-end, and two-thirds of last year’s deliveries. Boeing also makes the 747 jumbo jet; the 767 mid- to long-range jet; the wide-body 777; and the 787 Dreamliner, whose composite frame helps reduce fuel costs by 20%.

Since 2000, Boeing has expanded aggressively beyond the U.S. and Europe, taking advantage of a travel boom in emerging markets. Its backlog has surged 68% since 2010. Revenue has risen 50% in the same span, to last year’s $96 billion. Boeing earned $5.2 billion, or $7.72 a share, in 2015, and analysts see earnings rising to $8.50 a share this year.

Boeing is upgrading both the 737 and 777, adding new and more-efficient engines. Although the 737 faces substantial competition from Europe’s Airbus Group (AIR.France) and from Bombardier (BBD.A.Canada), a smaller Canadian company, demand is expected to remain strong. Current 737 orders will keep factories busy until at least 2022, even if the company doesn’t sell more planes.

The 777 and 787, whose cash flow is crucial to Boeing’s growth, are at greater risk, however. “Boeing and Airbus are on a path toward overproduction,” said Michael Ciarmoli, an analyst at KeyBanc Capital Markets.

Delta Air Lines (DAL) announced last week that it is delaying delivery of four wide-body Airbus planes to wait for “international market improvement.”

Boeing employs program accounting, which requires management to estimate the number of planes it expects to produce over a particular period. Costs are charged against the production program, not against individual planes or contracts. This accounting method helps the company avoid a sharp hit to earnings early in the program, but can lead to subsequent write-downs if projections don’t pan out.

The 787 could be vulnerable to write-downs, some analysts say, because initial costs were high and sales have slowed. To meet its initial accounting estimates, Boeing will have to sell an additional 146 planes, which could be difficult at a time when demand appears weak. The company says it expects to sell more than 146.

Leasing rates for various 787 models fell by 5%-13% earlier this year, according to Wells Fargo, citing data from Ascend Flightglobal Consultancy. And Airbus, whose profit margins have benefited from the cheap euro, launched a plane “very specifically designed to put more pricing pressure on Boeing’s 787,” says Ken Herbert, an analyst at Canaccord Genuity.

AS FOR THE 777, Boeing is working on an upgraded version, the 777X. It pinned 777 production cuts, announced in January, on the need to prepare for the transition. But some analysts blame the reduced production—to seven planes per month from 8.3—on a lack of orders, and say things could get worse. Boeing claims it has to sell 40 to 50 more 777 planes a year to keep assembly lines running at full strength before the 777X is ready to go into full production. So far this year, it has sold 12.

Noah Poponak, an analyst at Goldman Sachs, estimates that the 777 accounts for about 30% of Boeing’s commercial-unit operating profit before research and development, indicative of its importance to the company, and he expects further production cuts. Through 2020, he wrote in a recent client note, 111 leases on 777s will expire, offering “a source of young and relatively cheap 777s that might otherwise have been retired by lessors.”

Filling the 50 slots open in the 777 program in 2017 and 2018 years “would be uncommon, even in a strong environment,” he noted. Poponak projects that slumping sales for the 777 and other models will cause earnings to decline. He has a price target of $101.

Boeing executives weren’t available for comment, but a spokesman wrote in response to Barron’s queries that the company expects wide-body sales to “pick up again,” as more than 300 wide-body planes soon will hit retirement age. Into the next decade, the spokesman wrote, the “requirement to replace those older airplanes will grow substantially.”

Separately, in response to a question about the SEC probe, Boeing directed Barron’s to prior comments by CEO Dennis Muilenburg, who said “we are very confident in our financials.”

AT THE MOMENT , however, plane retirements are trending down. Indeed, 25% fewer planes were retired in the past 12 months than in the prior 12-month period, according to data analyzed by Canaccord Genuity. “If airlines commit to these older aircraft, eventually it could put pressure on the backlogs of Boeing and Airbus,” says Canaccord’s Herbert.

At the same time, evidence is growing that Boeing’s newer, more fuel-efficient planes don’t hold the same appeal, with oil at $48 a barrel, that they did a few years back, when crude topped $100. “The economics of new aircraft don’t work in the current environment,” says an aircraft-leasing executive.

Bullish analysts and investors argue that Boeing’s backlog insulates it from current market swings, and the company’s considerable free cash flow—an estimated $7.4 billion in 2016—will enable management to reward investors for years to come. Boeing has committed to returning all of its free cash to shareholders, and bought back 4% of its shares in the first quarter alone. The company currently pays a dividend of $4.36 a share, for a yield of 3.4%. Moreover, air traffic is on the upswing globally, and canceled and deferred orders have been well below average in the past year.

But that doesn’t mean the backlog is bullet-proof. In addition to oversupply issues and pricing pressures, Boeing is vulnerable to a further downturn in emerging markets. Herbert estimates that between 30% to 35% of the backlog is in Asia, with the bulk of that in China, where economic growth has decelerated. “If things turn significantly worse from a macro standpoint, that backlog can evaporate fairly quickly,” he says.

Boeing deserves to celebrate a century of innovation and growth. But its near-term flight path might not be smooth.

PayPal (PYPL): Hedge funds like Omega Advisors, Pennant Capital, Coatue Management, and Lone Pine Capital all bought PYPL shares during the first quarter. Now an independent publicly traded company for a few quarters, more funds have had a chance to digest PayPal’s results on a standalone basis. The mobile payments company recently was spun-off from eBay (EBAY). PYPL was featured in the equity analysis section of the Q3 2015 issue of the newsletter if you want to play catch up on the thesis.

Baxalta (BXLT): Funds such as Paulson & Co, Third Point, Farallon Capital, and Lone Pine Capital all disclosed brand new stakes in Baxalta during the quarter. This is a risk arbitrage play as the company received a takeover offer from Shire (SHPG).

Gaming & Leisure Properties (GLPI): Hound Partners, Third Point, JANA Partners, and Omega Advisors all built new stakes in GLPI during Q1. GLPI is basically a real estate company that acquires and leases back gaming properties to casino companies. GLPI recently acquired the real estate assets of Pinnacle Entertainment (PNK). During Q1, shares of Gaming & Leisure surged from $25 to $30 and have since headed even higher to $33.

Facebook (FB): Andreas Halvorsen’s Viking Global bought a massive $2.29 billion stake in the quarter, making it its top position. Other managers that initiated FB positions include the likes of Appaloosa Management and Paulson & Co. The company has really been firing on all cylinders by monetizing mobile, rolling out ads on its Instagram app, and further developing its WhatsApp messaging service and Oculus virtual reality platform. The company has garnered more incremental dollars from advertisers due to its massive audience and targeting.

Liberty Global (LBTYA): Paulson & Co, Greenlight Capital, Glenview Capital, Coatue Management, and Berkshire Hathaway all added to their pre-existing positions during Q1. The company is a collection of cable assets across Europe. Liberty recently announced a joint venture with Vodafone (VOD) in the Dutch market that will combine LBTYA’s broadband with VOD’s wireless operations in order to better compete with rivals. Shares of LBTYA have also been under arbitrage pressure as the company recently acquired Cable & Wireless (CWC.LN) to boost its operations in Latin America. (Liberty Gobal also has a separate tracking stock for its Latin American assets with the tickers LILA / LILAK.)

Alphabet (GOOGL): This is the third straight quarter that Alphabet has been accumulated by prominent funds. The only difference this time around is that they favored GOOGL shares versus the GOOG share class they previously had been buying. Coatue Management, Glenview Capital, Lone Pine Capital, and Viking Global all boosted their holdings. New CFO Ruth Porat has taken many ‘Wall Street friendly’ steps in terms of capital allocation and transparency to better help the company show investors just how much its Google cash cow is generating. A reminder: Alphabet is the new name for the holding company that owns Google, YouTube, and all of their other ‘moonshot’ businesses like self-driving cars that are now run as separate entities.

EMC (EMC): This is a risk arbitrage play as privately held Dell submitted a takeover for EMC. Funds such as Greenlight Capital, Farallon Capital, and Baupost Group all boosted their exposure to the name during the quarter. This is a large takeover and EMC also owns VMWare (VMW). If the deal completes, then Dell would control VMW operationally via 87% of voting rights but only own around a 28% interest. The deal is supposed to close before October of this year but first EMC shareholders must vote in June and it must pass various regulatory approvals as well.

Pfizer (PFE): Funds like Paulson & Co, Appaloosa Management, and JANA Partners bought more shares in the open market during Q1. However, it’s hard to know for sure whether they’ll keep them. This is because this was an event-driven and transformational play as PFE and Allergan (AGN) were set to merge. However, the US government implemented rules to discourage tax inversions, which made the PFE/AGN, deal unlikely to go through. As such, the companies went their separate ways.

Apple (AAPL): Once upon a time, this stock graced the ‘consensus buy’ list but those days are now long gone and the company finds itself on the other side of the spectrum. Hedge funds that liquidated their AAPL positions include Appaloosa, Coatue, Tiger Management, and Carl Icahn. That last name is probably the most notable as he built a massive stake in the company in 2013 but had become increasingly worried about China and the company’s exposure there which caused him to exit his stake. The company’s first quarter results showed a year-over-year slowdown in revenue for the first time since 2003 as its flagship iPhone product has started to saturate the market.

Valeant Pharmaceuticals (VRX): Like Apple, this was once a company that was being heavily accumulated by hedge funds but now finds itself being dumped en masse. Coatue, JANA, Lone Pine, and Viking Global all exited their stakes. To oversimplify: the company was attacked by Hillary Clinton for its drug pricing practices, short sellers flagged its use of specialty pharmacies, and investors began to worry about its massive debt load. Over the course of the past few quarters, VRX has fallen off a cliff, diving from $260 to current levels of $27.

American International Group (AIG): This has been a successful investment for numerous managers, but none more than Bruce Berkowitz’s Fairholme Capital. They built up a stake during the financial crisis but finally sold their last shares of common stock in Q1. As the company has rebounded from the financial brink, other funds that sold out include Glenview, Hound, and JANA.

Williams Companies (WMB) and Energy Transfer (ETE): These two stocks are grouped together because the reason funds were selling is the same. Williams and Energy Transfer were set to merge but the deal has become doubtful as ETE seems to be looking for ways to exit. As oil prices cascaded lower over the past year, so did shares of each. Funds that threw in the towel on WMB include Coatue, JANA, Lone Pine, and Perry Capital. Managers that dumped ETE shares include Coatue, JANA, Perry, and Viking.

Allergan (AGN): This has been one of the more crowded hedge fund trades in recent memory. Funds such as JANA, Pennant, Omega, Farallon, Blue Ridge, Viking, Third Point, and Paulson all reduced their exposure to the name. This stock could possibly appear on this list next quarter as well considering that the company’s merger with Pfizer (PFE) was recently called off, eliminating the primary catalyst some had invested under. That said, AGN has now shifted from a risk arbitrage stock to a capital deployment optionality story. It should soon close on the massive sale of its generics business to Teva Pharmaceuticals (TEVA), which will substantially deleverage its balance sheet. AGN has recently announced a $10 billion buyback as well.

Charter Communications (CHTR): Shares of this cable company have steadily risen from $160 to now well over $230 as news hit that the company’s takeover of Time Warner Cable (TWC) has been approved by the FCC and other regulators. Funds that trimmed their stakes in the first quarter include Glenview, Farallon, Coatue, Blue Ridge, and Lone Pine.

TransDigm Group (TDG): This is probably a case of profit taking as this has been a longstanding position for

numerous hedge funds. Just pull up a chart of TDG and you’ll basically see a straight upward march from the bottom left of the chart to the upper right. Funds that took some profits include Hound, Pennant, Maverick, Viking Global, and Lone Pine. This is an aerospace roll-up that’s been executed nicely by CEO Nick Howley though the company is quite levered.

Mastercard (MA): This is likely another case of profit taking given that MA has also been a longstanding holding for many of these managers and shares have been climbing higher ever since its IPO years ago. Blue Ridge, Tiger Global, Berkshire Hathaway, and Lone Pine all reduced their position size in this payment processing company.

Cover story: Profile of BX strategist Byron Wien, who for the past few months has been bearish on the U.S. stock market, which he thinks may have a down year in 2016, after which investors will be lucky to get a 5-7% annual return; Wien thinks the global economy will grow at just 2% this year, and is cautiously optimistic on China and worried about Japan.