Clariant Shares Could Fetch 20% More
Takeover or no takeover, the Swiss chemical maker’s prospects look good.
Swiss Specialty chemical maker Clariant has a good formula for investment success.
Revitalized under current management, it has one of its industry’s most attractive growth profiles. In addition, it has been identified as a possible takeover target, and its shares (ticker: CLN.Switzerland) already have benefited from M&A momentum, despite management’s efforts to damp the speculation. The acquisition of Clariant by another company could hand shareholders a handsome windfall—20% or more. But, even without one, investors could be rewarded over the medium term for their patience.
At Friday’s close in Europe of 19.64 Swiss francs ($20.85), the stock is up 17% in 2015, versus a paltry 2% average gain for Swiss equities over the same period, but pretty much in line with a 20% rise in the Stoxx Europe 600 chemicals subsector. Clariant also has American depositary receipts. Listed under the symbol CLZNY, they were trading at $20.77 at midday Friday.
Clariant fetches about 15 times forecast 2016 earnings, versus roughly 16 for Akzo Nobel (AKZA.Netherlands) and just over 13 for BASF (BAS.Germany). Its shares can climb steadily over the next few years, as the company benefits from a transformation led by CEO Hariolf Kottmann. He has reorganized its divisions, cut costs, shed noncore assets, focused on higher-growth businesses, and improved its product portfolio, raising noncyclical revenues beyond 50%. Revenue is estimated at CHF5.93 billion in 2015 and CHF6.17 billion in 2016.
Analysts are particularly excited about the potential of Clariant’s catalysis and care chemicals units. Catalysis manufactures catalysts for the petrochemicals, plastics, and refining industries. It accounted for only 12% of sales last year, but it is growing steadily and is very profitable; its profit margin before interest, tax, depreciation and amortization is 23.5%. Care chemicals, which produces de-icing fluids for aircraft, and ingredients for detergents and cosmetics, accounted for about a quarter of sales last year and boasts an Ebitda margin above 17%. Clariant’s plastics and coatings unit is its biggest, accounting for 42% of sales, but it is more cyclical than the others and its Ebitda margin is a weaker 14%. The company’s other business, natural resources, supplies products and services to the oil and mining sectors. It accounts for 21% of sales.
In 2014, Clariant’s profit margin was 14.2%, up from 14.1% in 2013, compared with less than 7% in 2009. Its margin target of 16% to 19% by 2015 seems to be within reach if it continues to exploit efficiencies while keeping a lid on costs. Earnings per share are forecast to climb this year to CHF1.14 from CHF0.99 last year. In 2016, EPS are estimated at CHF1.32.
Since 2010, Clariant has struggled to convert Ebitda into free cash flow. That is partly due to its 2011 acquisition of Süd-Chemie, which has a higher need for net working capital, and cash flow tied up in noncore businesses.
Clariant will see an improvement in free cash flow if it can reduce net working capital to a peer group average of about 18% of sales from around 20% now. That could lead to a higher dividend, which has averaged 2.1% over the past five years.
As for a takeover, Kottmann has voiced a preference for independence, but an offer at the right price would be difficult to ignore. Evonik Industries (EVK.Germany) has been identified as a possible bidder, but it might have other targets. But, regardless of what happens, Clariant is headed in the right direction.
Juncker warns Greece that time is running out on bailout
Jean-Claude Juncker, European Commission president, strongly rebuked Alexis Tsipras for his strident dismissal of a new bailout offer from Greece’s creditors and suggested the prime minister had misled his MPs about the nature of the closed-door negotiations.
In his first remarks since Mr Tsipras used an address to the Greek parliament on Friday to reject economic reform measures presented by Mr Juncker on behalf of Greece’s creditors as “absurd”, the commission president confirmed he had turned away a request by the Greek leader to renew negotiations over the weekend and warned Athens that time was running out.
“I don’t have a personal problem with Alexis Tsipras; quite to the contrary,” Mr Juncker said at the start of a two-day summit of the Group of Seven industrial powers in Krün, Germany. “He was my friend, he is my friend. But frankly, in order to maintain it, he has to observe some minimal rules.”
If the two sides are unable to reach agreement by the end of the week, eurozone leaders would likely move to extend the bailout programme again beyond its current June 30 expiry date, according to a French official.
Such a scenario would entail grave risks, however.
Greece is believed to not have enough money to pay a €1.5bn International Monetary Fund bill at the end of the month, and an extension without an agreement on a new set of economic reforms would not include the €7.2bn in bailout funding Greece urgently needs. In addition, it would need to be approved by the increasingly restive Bundestag.
Mr Juncker also said he had been promised a new counterproposal from Mr Tsipras since the pair met in Brussels on Wednesday and did not want to renew talks until he had received the plan.
Eurozone officials have suggested talks involving Mr Juncker and Mr Tsipras, which could also include Angela Merkel, German chancellor, and François Hollande, French president, may resume on Wednesday, when all four are due in Brussels for a summit with Latin American leaders.
But Mr Juncker said he was cautious about such a timetable if Athens did not present a new way forward.
“I would be surprised if I didn’t have any further discussions with Mr Tsipras, but I would like to have the Greek proposal,” Mr Juncker said. “I would like to have time to study it in detail.”
Mr Juncker’s refusal to renew talks with Athens returns the bailout negotiations to a position of stalemate that he and the leaders of Greece’s two other bailout monitors — the International Monetary Fund and the European Central Bank — thought they had broken through just a week ago.
Although the Greece crisis was not formally on the G7 agenda, a White House spokesman said the standoff was discussed during a Sunday session on the global economy.
Mr Juncker and the commission have long been seen as Greece’s strongest advocate around the creditors’ table, and the president made clear he was rankled by the way Mr Tsipras had belittled his efforts during Friday’s parliamentary speech.
“He was presenting the offer of the three institutions as a ‘leave it or take it’ proposal — that was not the case,” Mr Juncker said. “He was presenting the proposal of the three institutions as being mine and mine exclusively and he knows perfectly well this is not the case.”
On the thorny issue of pension cuts, Mr Juncker said the Greek prime minister failed to tell his parliament that creditors’ remained open to Greek suggestions that concerns about poorer pensioners could be addressed.
According to the French official, creditors are open to the Greek proposal to maintain pensions for poorer recipients but they would have to find €800m in 2015 and 2016 in other cuts to compensate for the new deficits the spending would incur.
Over the weekend the outpouring of frustration from EU leaders over Mr Tsipras’s position appeared to come from all quarters.
Johan Van Overtveldt, Belgium’s finance minister, wrote on Twitter that it was “hard to see what [the] Greek prime minister wants to negotiate about with its partners after flatly rejecting their latest proposals.”
Peter Kazimir, the Slovak finance minister, also took to Twitter, writing that after listening to Mr Tsipras’s speech, “I wonder whether this is the same Tsipras who was in Brussels.”
Donald Tusk, European Council president who is also representing the EU at the G7, weighed in, taking a thinly veiled swipe at Mr Tsipras at the press conference with Mr Juncker for oversimplifying the discussions.
“It’s not true that debtors are always moral and creditors are always immoral,” Mr Tusk said. “It’s much more complex and much more sophisticated than some politicians want to say and want to show.”
Turkish Ruling Party Appears to Lose Majority in Parliament
AKP looks to be heading toward its worst general-election result in a decade
With more than 90% of the ballots counted, the governing party, known as AKP, was on course to win 42% of the vote, falling short of the 276 of the 550 seats in parliament needed to form a single-party government, according to partial results published by state-run broadcaster TRT.
The provisional count also showed the pro-Kurdish People’s Democratic Party, or HDP, securing 10.6% support—likely propelling it past a 10% electoral threshold to enter parliament. The HDP’s performance will ultimately determine the distribution of seats in the 550-member Ankara parliament and Turkey’s political future.
A total 56.6 million Turkish citizens, including 2.9 million expatriates in 54 countries around the world, were eligible to cast votes. The participation rate abroad was more than 35%, while some 85% of domestic voters took to the polls, in line with historic averages.
Norway’s $890 billion government pension fund, considered the largest sovereign wealth fund in the world, will sell off many of its investments related to coal, making it the biggest institution yet to join a growing international movement to abandon at least some fossil fuel stocks.
Parliament voted Friday to order the fund to shift its holdings out of billions of dollars of stock in companies whose businesses rely at least 30 percent on coal. A committee vote last week made Friday’s decision all but a formality; it will take effect next year.
Statoil's Mongstad oil refinery in Norway. The company is coming under pressure for the environmental damage caused by the oil and gas it produces.Norwegians Turn Ambivalent on Statoil, Their Economic BedrockDEC. 30, 2014
Icebergs in Lallemand Fjord in Antarctica. In its research, the National Oceanic and Atmospheric Administration adjusted past data to account for new insights.Global Warming ‘Hiatus’ Challenged by NOAA ResearchJUNE 4, 2015
The decision — which could seem paradoxical, given that Norway is a major producer of oil and gas — is certain to add momentum to a push to divest in fossil fuel stocks that emerged three years ago on college campuses. The Church of England announced last month that it would drop companies involved with coal or oil sands from its $14 billion investment fund, and the French insurer AXA said it would cut some $560 million in coal-related investments from its portfolio.
Members of the Rockefeller family, whose fortune derives from Standard Oil, also pledged last year to remove fossil fuel investments, beginning with coal, from their philanthropic Rockefeller Brothers Fund.
There is no question that the decision by various funds to sell fossil fuel stocks has little or no impact on the vast market capitalization of most companies. For that reason, the divestment movement has long been dismissed by many institutions, especially oil companies, as symbolic.
But divestment decisions from funds like Norway’s are important because they require, as a first step, discussions that once seemed taboo, said Bob Massie, a longtime climate activist and a founder of the Investor Network on Climate Risk, an organization of institutional investors affiliated with the business environmental group Ceres.
“It lays the groundwork for the transformation of cultural and political views in a major topic that people would rather avoid,” he said. “This requires people to say, ‘What are we going to do? What are our choices? What do we believe in?’ ”
Mr. Massie, who was deeply involved during the 1980s in the South African divestment movement and who wrote a well-regarded history of it, said that in both cases, “There’s a mysterious process by which an ‘unthinkable, ridiculous’ proposition becomes ‘possible.’ ”
Divesting from the economically battered coal industry is a more selective move than a broad action against all fossil fuels, of course. But Jamie Henn, a co-founder of 350.org, a group that has promoted divestment, said that coal was the most environmentally damaging fossil fuel, and that the various divestment decisions “send a clear political signal that we think will hasten the industry’s inevitable decline — and push governments to take broader action.”
Marthe Skaar, a spokeswoman for Norges Bank Investment Management, which manages the huge Norwegian fund, said its goal was “safeguarding and building financial wealth for future generations in Norway.” Its reasons for divesting include “long-established climate-change risk-management expectations,” she said.
The fund’s 30 percent threshold for divestment applies to whether a company’s business is based on coal, as in mining companies, or the percentage of its revenue that comes from coal. The second category would include power companies that burn coal.
Norway’s decision underscores its ambivalence about fossil fuels. The fund itself is nicknamed the “oil fund” because its wealth comes from the nation’s oil and gas revenues. But proponents of the move say that it helps prevent Norway from compounding the environmental damage that its own production causes by investing in environmentally destructive companies.
Truls Gulowsen, the head of Greenpeace Norway, called his country’s decision “a great first step” that showed his nation now understood that it was “nonsense to use oil money to invest in coal.” Now the nation must further understand “the nonsense of investing oil money in more oil,” he added.
Svein Flatten, a member of Parliament from the Conservative Party, said that lawmakers acted because investments in coal companies have “both financial risks and climate risks.” He added, however, that this was not a step toward any other action. “The fund shall not be, and they really are not, a tool for political purposes,” he said.
Many institutions have pushed back against the divestment movement. Drew Gilpin Faust, the president of Harvard, has stated that while climate change is an important issue, the university can address it through research, education and its own practices, and that dropping fossil fuel investments is not “warranted or wise.” The endowment, she has said, should not be used “to impel social or political change.” Middlebury College, where 350.org founder Bill McKibben teaches, has also resisted student pressure to divest.
David W. Oxtoby, the president of Pomona College in California, opposes divestment. He said in an interview that schools and institutions that announce divestment decisions often do so in symbolic moves with no real sacrifice or change of policy.
“We actually don’t have any investments in coal, but to make an announcement of that type didn’t seem terribly useful,” he said. Dr. Oxtoby, a climate researcher, called the divestment activism a distraction from efforts that could bring about real change, such as getting government to tax oil and gas to reduce consumption.
Norway’s decision, Dr. Oxtoby said, is similarly symbolic — especially when compared with the kind of commitment that might involve leaving significant portions of the nation’s oil and gas reserves untapped.
The business trends that have made coal an undesirable investment will ultimately humble oil and gas companies as well, Mr. Massie said. He cited research that suggests averting some of the worst outcomes of climate change will require leaving much of today’s fuel reserves unburned. This means companies with large fossil-fuel reserves could be forced to leave them in the ground.
Those “stranded assets,” he argued, will be a financial burden on the companies. The oil industry has roundly rejected the stranded-asset hypothesis, however.
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Those who resist calls for divestment often say they prefer to pursue a strategy of engagement with fossil fuel companies, which means using their influence as investors to encourage companies to alter their policies.
“The choice of whether to divest or not is good,” said Geeta B. Aiyer, the founder of Boston Common Asset Management, an investment firm with a focus on sustainability, “but it’s only the beginning.” She said that engaging with companies across the board could help bring about a future with lower levels of carbon emissions.
Mr. Massie said he was skeptical that working with the oil industry companies would lead to any major changes in their strategy or policies. “The results are not likely to be substantial,” he said. “And we have run out of time.”
Bevis Longstreth, a former commissioner of the Securities and Exchange Commission under President Ronald Reagan who has become a divestment activist, said that the most compelling part of Norway’s decision was dropping stocks of companies that burn a significant amount of coal. That, he said, is “a really big deal” that could push companies to shift the mixture of their power generation.
He added that his participation in the divestment fight might seem odd given that he was rooted for so long in the financial establishment.
“Am I crazy? No. I’m an advocate,” he said. “And I’ve got nine grandchildren.”
Weekly Index Performance
Dow -0.90% S&P -0.69% Nasdaq -0.03% Russell +1.16% EuorStoxx-1.70% CAC-2.57% DAX-1.90% MIB-2.76% IBEX-1.39% FTSE -2.76% Nikkei -0.50% Hang Seng -0.60% Shanghai +8.92%
Choppy trading in stocks, bonds, and currency whipped the markets around this week. At his post rate-decision press conference, ECB President Draghi warned that people need to get used to heightened volatility, adding more instability to an already unpredictable market. Greece crept closer to the edge, as leaders in Athens held out from agreeing to their creditors' "final offer" and pushed back repayments of IMF debt until the end of June. The US May jobs data was very strong, keeping alive the prospect of a September Fed hike, rekindling jitters that higher rates are in sight. The Atlanta Fed raised its tracking estimate for Q2 GDP by three-tenths to 1.1% after the trade deficit narrowed to $40.9 billion in April from March's six-year high of $51.4 billion, a steeper decline than expected. More breathtaking volatility on the Shanghai Composite ended in a nearly 9% rally on the week after official PMI numbers missed expectations and sustained hopes for more PBoC easing. In the same timeframe, US stocks mostly lost ground: the DJIA slipped 0.9%, the S&P500 fell 0.7%, while the Nasdaq was flat on the week.
Macro :
- Greece Euro Exit Would Be ‘Worst Catastrophe’ for Greeks: Sapin
- Nouy Says ECB to Stress Test Banks in 2016: Welt am Sonntag
- ECB’s Nouy Says Greek Banks Are Solvent: Welt am Sonntag
- Greece to Seek Piraeus Port Binding Bids in Sept.: Kathimerini
- Russian Economy Minister Says GDP to Fall 2.5-2.8% in 2015: RIA
Keep an eye on :
- AC FP : Accorhotels Has Had Hard Time in 2015: CEO Tells France Inter
- ADS GY : Shareholders Say Adidas Should Weigh Ending FIFA Contract: Welt
- AIR FP : Airbus May End GKN Contract as A320 Parts Supplier: Sunday Times
- AIR FP : To develop reusable space rocket launcher that should be ready in 2025
- AREVA FP : Areva Will Need Recapitalization, French Finance Minister Says
- ATLN VX : Actelion Declines to Comment on Shire Approach Report http://reut.rs/1Qg3oDA
- AZM IM : Azimut CEO Says No Buyers in Sight for Co.: Milano Finanza
- BAS GY : BASF bid for Syngenta could require leverage jump to avoid dilution
- CRG IM : Carige to Decide on Ponti, Creditis Sale End June: Repubblica
- CA FP : Carrefour CEO Says Diniz Hasn’t Asked For Board Seat: JDD
- DGE LN : Brazil Billionaire Lemann Said to Consider Buying Diageo: Veja -->DEO US +7.96%
- DGE LN : Diageo Bid ‘Highly Unlikely’ N-T; Buy TAP on Pullback: Evercore
- DBK GY : Deutsche Bank’s Jain, Fitschen Said to Forgo Remaining Pay
- FCA IM : Fiat CEO: Ferrari IPO Can’t Be Done Before Oct. 12
- FCA IM : Fiat’s Marchionne Sees Auto Industry Investors Interested in M&A
- GEA GY : GEA CFO Sees Two to Three Acquisitions in 2015: Boersen Zeitung
- GKN LN : Airbus May End GKN Contract as A320 Parts Supplier: Sunday Times
- JPM US : JPMorgan Planning $9b Bid for Worldpay, Sunday Times Says
- SGO FP : Apollo Said to Make Preferred Bid for Saint-Gobain’s Verallia
- SHP LN : Shire Approached Actelion in Recent Weeks: Sunday Times http://reut.rs/1Qg3oDA
- UHR VX : Swatch CEO Says SNB Has Wrong Leadership Team at Work: NZZ
- TATE LN : Tate & Lyle Wants EU Exit Unless Sugar Rules Changed: Telegraph
- TEVA IT : Teva Held 2.15% in Mylan as of June 4, According to RNS Filing
- TIT IM : Tel. Italia Should Play Role in Broadband Plan: Official to Sole
- WLT US : Could enter bankruptcy within the month - financial press
- VOW3 GY : VW’s Piech Successor Choice Needs Time, State Minister Says: FAZ
- WPP LN : Standard Life to Protest Over WPP Boss Sorrell’s Pay: Times
Dow -0.90% S&P -0.69% Nasdaq -0.03% Russell +1.16% EuorStoxx-1.70% CAC-2.57% DAX-1.90% MIB-2.76% IBEX-1.39% FTSE -2.76%
Choppy trading in stocks, bonds, and currency whipped the markets around this week. At his post rate-decision press conference, ECB President Draghi warned that people need to get used to heightened volatility, adding more instability to an already unpredictable market. Greece crept closer to the edge, as leaders in Athens held out from agreeing to their creditors' "final offer" and pushed back repayments of IMF debt until the end of June. The US May jobs data was very strong, keeping alive the prospect of a September Fed hike, rekindling jitters that higher rates are in sight. The Atlanta Fed raised its tracking estimate for Q2 GDP by three-tenths to 1.1% after the trade deficit narrowed to $40.9 billion in April from March's six-year high of $51.4 billion, a steeper decline than expected. More breathtaking volatility on the Shanghai Composite ended in a nearly 9% rally on the week after official PMI numbers missed expectations and sustained hopes for more PBoC easing. In the same timeframe, US stocks mostly lost ground: the DJIA slipped 0.9%, the S&P500 fell 0.7%, while the Nasdaq was flat on the week.
Macro :
- Greece Euro Exit Would Be ‘Worst Catastrophe’ for Greeks: Sapin
- Nouy Says ECB to Stress Test Banks in 2016: Welt am Sonntag
- ECB’s Nouy Says Greek Banks Are Solvent: Welt am Sonntag
- Greece to Seek Piraeus Port Binding Bids in Sept.: Kathimerini
- Russian Economy Minister Says GDP to Fall 2.5-2.8% in 2015: RIA
Keep an eye on :
- AC FP : Accorhotels Has Had Hard Time in 2015: CEO Tells France Inter
- ADS GY : Shareholders Say Adidas Should Weigh Ending FIFA Contract: Welt
- AIR FP : Airbus May End GKN Contract as A320 Parts Supplier: Sunday Times
- AIR FP : To develop reusable space rocket launcher that should be ready in 2025
- AREVA FP : Areva Will Need Recapitalization, French Finance Minister Says
- ATLN VX : Actelion Declines to Comment on Shire Approach Report http://reut.rs/1Qg3oDA
- AZM IM : Azimut CEO Says No Buyers in Sight for Co.: Milano Finanza
- BAS GY : BASF bid for Syngenta could require leverage jump to avoid dilution
- CRG IM : Carige to Decide on Ponti, Creditis Sale End June: Repubblica
- CA FP : Carrefour CEO Says Diniz Hasn’t Asked For Board Seat: JDD
- DGE LN : Brazil Billionaire Lemann Said to Consider Buying Diageo: Veja -->DEO US +7.96%
- DGE LN : Diageo Bid ‘Highly Unlikely’ N-T; Buy TAP on Pullback: Evercore
- DBK GY : Deutsche Bank’s Jain, Fitschen Said to Forgo Remaining Pay
- FCA IM : Fiat CEO: Ferrari IPO Can’t Be Done Before Oct. 12
- FCA IM : Fiat’s Marchionne Sees Auto Industry Investors Interested in M&A
- GEA GY : GEA CFO Sees Two to Three Acquisitions in 2015: Boersen Zeitung
- GKN LN : Airbus May End GKN Contract as A320 Parts Supplier: Sunday Times
- JPM US : JPMorgan Planning $9b Bid for Worldpay, Sunday Times Says
- SGO FP : Apollo Said to Make Preferred Bid for Saint-Gobain’s Verallia
- SHP LN : Shire Approached Actelion in Recent Weeks: Sunday Times http://reut.rs/1Qg3oDA
- UHR VX : Swatch CEO Says SNB Has Wrong Leadership Team at Work: NZZ
- TATE LN : Tate & Lyle Wants EU Exit Unless Sugar Rules Changed: Telegraph
- TEVA IT : Teva Held 2.15% in Mylan as of June 4, According to RNS Filing
- TIT IM : Tel. Italia Should Play Role in Broadband Plan: Official to Sole
- WLT US : Could enter bankruptcy within the month - financial press
- VOW3 GY : VW’s Piech Successor Choice Needs Time, State Minister Says: FAZ
- WPP LN : Standard Life to Protest Over WPP Boss Sorrell’s Pay: Times
Dai-ichi Life Research Institute: Today's Japan GDP data will confirm gradual recovery but still not something to be happy about - financial press
- Says: "There is a risk that the economy over April-June will notbe good, especially for private consumption."
pect a pickup in capital investment.
Shire considers takeover of Swiss biotech group Actelion: Sunday Times http://reut.rs/1Qg3oDA
Pharmaceutical company Shire (SHP.L) is considering a 12 billion pound ($18.32 billion) takeover of Actelion Ltd (ATLN.VX) Europe's biggest biotech firm, Britain's Sunday Times newspaper reported, citing unnamed sources.
An informal approach by Shire was rebuffed several weeks ago, the newspaper said, citing financial industry sources.
Shire was willing to pay 160 Swiss francs a share for Actelion, the sources said, a hefty premium to the stock's Friday closing price of 132 francs.
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Asked by Reuters for comment, a spokeswoman for Shire said the company did not comment on speculation. An Actelion spokesman said the company did not comment on market rumors.
Earlier this year, Actelion raised its full-year guidance after strong sales of its new heart and lung drug helped its first-quarter earnings exceed analysts' estimates.
At the time, the company's chief executive told Reuters it had not received any outside interest to buy the company.
In April, Shire reported a better-than-expected 20 percent rise in first-quarter earnings, helped by the launch of the first drug to treat binge eating disorder.
Gea Group working on two new acquisitions
Gea Group, the listed German maker of machinery for the food industry, is working on two new acquisitions, according to an interview published in Boersen-Zeitung.
As part of a conversation with the German-language daily, Chief Financial Officer Helmut Schmale said two prospective takeover deals currently are very close. He said Gea may make two or three takeovers this year.
He said that the company can certainly spend a further EUR 1.5bn on takeovers. However, he said Gea will proceed with caution and not buy at unreasonable prices.
Gea is striving for a regional spread in emerging markets and may add technologies, and M&A is its preferred method, he said.
Schmale said Gea management has identified certain fields in which the company should grow, including body care and pet food.
In general, Gea prefers not to compete with other bidders in auction situations, but to bring about acquisitions through its own contacts, Schmale said. A potential takeover candidate would typically be a company with turnover of between EUR 50m and EUR 100m, and Gea would only look at a more valuable company in a very special case, he said.
Boersen-Zeitung
Value
Barron's summary: positive on GLW, LH; cautious on LC, ONDK
Cover story: Barron's looks at the field of 19 Republican presidential candidates and picks the strongest seven from among them, noting that though Marco Rubio and Ted Cruz will have staying power, the final contenders are likely to be Jeb Bush and Ohio governor John Kasich.
Features:
1) Positive on GLW: Company has a strong pipeline of new products-including glass for new 4K ultrahigh definition TVs, which could usher in a new era of technology-and $1.50 per share in net cash on the balance sheet;
2) Positive on LH: The second-largest U.S. medical-testing firm offers investors much to like as a shift toward specialty drugs drives companion medical tests, and company has better returns on invested capital than rival DGX;
3) Positive on GE, GMCR, CVX, NWL, BID, GM: Board members have lately been buying shares in company, which could be a sign for investors of upcoming deals or market events that will send shares up;
4) Cautious on LC, ONDK: Online lending firms, which have different models, remain unprofitable, and shares trade at multiples typical of Internet stocks, a sign investors may want to hold off for now.
Tech Trader: The next step forward in high-definition TV is so-called 4K technology, which promises even crisper pictures with greater detail; Networks and cable operators have been slow to offer content in the format, but NFLX, GOOG's YouTube, and other online streaming sites are stepping in; The technology "may mark a turning point in the cord-cutting pundits have long predicted," benefiting companies such as GLW and NVDA.
Trader: Most market strategists continue to believe the Fed will raise rates in September; Cash returns to investors through buybacks could hit $1T this year, according to Yardeni Research, nearly equal to all the operating earnings produced by S&P 500 companies; Positive on SBAC, AMT, CCI: Cellular-tower companies that transmit the majority of U.S. wireless data should benefit from DISH-TMUS tie-up.
Small Caps: Positive on IGT: Tie-up with Italy's Gtech should benefit both gaming companies and offer investors some benefits if the combined company restructures and expands its business.
Profile: Vassilis Dagioglu, portfolio manager, Dreyfus Dynamic Total Return fund, which uses income-producing investments to bolster capital gains for a higher total return; Dagioglu likes Germany and Japan, but is shoring the U.K. stock market.
Interview: Bo Knudsen, fund manager, Carnegie Asset Management (top picks: UNP, MCK, Fanuc, Keyence, Rakuten, Sensata Tech, HDFC).
Follow-Up: Positive on BKS: When company spins off its education division investors will see "an attractive business with good growth prospects that is buried inside the bookseller," with AMZN a potential suitor; Positive on TMUS: Barron's admits it made a wrong call on carrier, whose shares have returned nearly 41% since a cautious story last November.
European Trader: Positive on Clariant: Following a reboot, Swiss company "has a good formula for investment success" and an attractive growth profile; a takeover could offer investors a handsome windfall, but they stand to benefit even without one.
Asian Trader: Investors, including Paul Singer's Elliott Management, remain skeptical about the all-stock merger between Cheil Industries and Samsung C&T, with many observers suggesting there are few potential synergies.
Emerging Markets: With a number of international markets-including those in Brazil, Russia, China, Greece, and Turkey-in turmoil, currency remains the big wild card; "The spread between winners and losers in emerging markets is going to be wider than normal," says SCHW's Liz Ann Sonders.
Commodities: "Observers of the rice market worry that there could be a repeat of the food crisis of 2008. If there is, prices could soar from current depressed levels."
Streetwise: Cautious on C: Bank "stands out as the poster child for too-big-to-succeed," though it is aware of its problems and has been trimming down to transform itself.