Barron’s Weekend Summary: Cover story asks whether electric-truck makers can duplicate TSLA’s success; Earnings season is off to a rough start for the tech sector
* Cover story: “The future looks bright for electric trucks, but it’s decidedly mixed for stocks of electric-truck companies”; Shares of NKLA and WKHS are up this year as investors increasingly believe in a gas-free future for trucking, and investors are hoping to get in on what could be the next TSLA—but its success “is more easily envied than duplicated.”
* Tech Trader: Earnings season for tech companies is off to a rough start, and two weeks in “the air is leaking from what had clearly become a tech bubble”; For NFLX, the pandemic boost is over, and even the cloud sector isn’t a “cure-all” for companies such as IBM; Major cloud players such as MSFT, AMZN, and GOOGL face challenges, as do chipmakers such as INTC, which is increasingly outsourcing production to companies such as TSM.
* Trader: Continued dollar weakness could have a big impact as investors rotate into other regions that had been left behind, including emerging markets, especially as global markets stop moving in tandem; Positive on MCD: Though the company was hard-hit during the early days of the pandemic, with a quarter of its stores closing and sales falling, signs point to big improvements in the fast-food sector and at McDonald’s in particular, and it may well be on the road to recovery.
* Profile: Daniel Shaykevich, lead manager of the Vanguard Emerging Markets Bond fund and the emerging market portions of other Vanguard bond funds, focuses on macroeconomic country-specific risks and individual security credit risks, but also thinks holistically about the entire portfolio; He doesn’t seek to avoid risk, an impossible task, but does ensure that the fund is appropriately compensated for it (top 10 countries: Brazil, Panama, Mexico, Indonesia, Russia, Colombia, South Africa, Peru, Azerbajian, Urkaine).
* Interview: Joyce Chang, chair of global research at JPM, leads a team that identifies paradigm shifts affecting the global markets; she discusses four with big implications—the decline in market liquidity due to the change in market structure, the rise in unconventional monetary policies by central banks, the Great Power competition between China and the US, and de-globalization and the rise of populism.
* Features: 1) The pandemic has shaken the oil-and-gas industry, causing prices to crash and leading companies to shut down wells and postpone projects; Though at the outset analysts called for consolidation, companies remained focused on preserving capital—but the CVX–NBL deal could reverse the trend; Potential acquisition targets include MTDR, WPX, and LPI; 2) Cautious on PLUG, BLDP, BE: Green-energy projects and hydrogen-fueled trucks have raised the investment profile of all things connected to hydrogen, amid a growing consensus that element will provide green energy in places where solar and wind can’t, but the share prices of hydrogen fuel-cell companies “look priced to disappoint”; 3) Cautious on PFE, AZN: The Covid-19 pandemic muted the drug-pricing debate in Washington, one of the few areas where Democrats and Republicans agree, but the issue could be revived now that Pfizer and AstraZeneca have unveiled promising data on their vaccines—and how the drugmakers proceed could affect their long-term value; 4) Positive on CRSP, VRTX, BLUE: The companies’ genetic therapies for sickle cell could fetch annual revenue of several billion dollars for each, while a recent Bank of America Securities says new sickle cell treatments will surpass $6B in sales by 2028, a huge number for biotechs; 5) Cautious on PCG: The company, now out of bankruptcy protection “has monopoly power, a newly relaxed regulatory regime, reliable future revenue growth, and about $10B of potential future costs prepaid by its customers”—but while shares are cheap relative to peers, it’s difficult to assess how much of its discount is warranted.
* European Trader: Positive on Ørsted: The Danish energy giant is shifting from oil and gas to become the world’s biggest developer of wind farms and is set to become one of the few future renewables majors; Its shares could rise on the back of coronavirus as countries rebuild their economies in more environmentally focused ways.
* Emerging Markets: “If it wasn’t yet obvious that the US-China relationship was deteriorating, this past week crystallized the strain—less clear, however, is when it will matter to stock investors,” especially in companies such as AAPL and TSLA that rely heavily on China for growth, production, or both.
* Streetwise: PM chief Andre Calantzopoulos says the company’s voluminous ESG reporting is an effort to convince ethics-minded investors that tobacco companies aren’t all the same, and that it’s better to engage with Philip Morris than shun it.