Barron’s Weekend Summary: The coronavirus poses an existential threat to the airline industry, and it may put a stop to what was set to be a bumper year for tech IPOs
* Cover story: The coronavirus outbreak poses an existential threat to the airline industry, leaving carriers fighting for survival and trying to reassure Wall Street that they can stay in business even under dire circumstances—but as bad as things are now, they could get worse, though the industry will ultimately survive because it is the backbone of global growth.
* Tech Trader: The IPO market is inherently risky even in the best of times, and while this was supposed to be a big year for another bumper crop of highly valued unicorns, including Airbnb, DoorDash, and Robinhood, none of those are sure things anymore—the coronavirus pandemic has all but closed the IPO window.
* Trader: Despite all the coronavirus-related turmoil, market professionals advise against excessive caution and inaction—Donald Donabedian of CIBC says investors should focus on good business fundamentals and not switch to names with the lowest beta or price/earnings ratio; Berkshire Hathaway chief Warren Buffett has the opportunity to follow his own maxim that investors “should be fearful when others are greedy and greedy when others are fearful” and make what could be some lucrative investments, as he did during the financial crisis.
* Interview: Renowned stock market forecaster Ed Yardeni, who has dismissed previous market jitters as “panics,” downgraded his forecasts for growth and earnings to reflect the new unknowns, and says that “If you have cash, this is the time to buy quality names, some of the dividend-yielding stocks,” and that the coronavirus should dissipate significantly by the middle of the year, ending a recession and bear market in stocks.
* Features: 1) Positive: CXO, COG, PSX, VLO, EURN, INSW, STNG: Analysts recommend these seven stocks as ones that could still prosper amid the slump in oil prices resulting from OPEC and Russia’s moves to dump cheap crude on the market, hammering US shale companies; 2) Members of Barron’s Roundtable offer stock picks for investors betting on a rebound after the coronavirus crisis: Scott Black (ORCL, UPS, MRK, NVS), Todd Ahlsten (AMAT, BDX), Meryl Witmer (SCHW, PSX, NGVT), William Priest (UNH, MRK, AMGN, CME), Henry Ellenbogen (KWR, WST), James Anderson (ILMN), Mario Gabelli (HRI, CR); 3) Positive on LUV, DAL: Airline investors may want to stay on the sidelines until there’s evidence that the coronavirus threat is receding, but a Barron’s stress test on airlines found a few to consider, especially Southwest and Delta Air Lines, both of which should make it through the crisis more or less unharmed; 4) Global governments face growing pressure to introduce measures to ease the coronavirus crisis, but unlike the 2008 financial crisis, the damage from the pandemic is more widespread, globally and across sectors, making it harder than just bailing out a single sector like banks; 5) Cautious on RCL, CCL: The rapidly deteriorating situation in the cruise industry, which is strapped with fixed costs, poses a major test of the financial strength of the cruise companies and could lead to a cash crunch and, by extension, dividend cuts for the two lines that pay them.
* Top Financial Advisors: Story about Barron’s annual list of the 1,200 top financial advisors says they “are scrambling to react to coronavirus headlines—reassuring clients, reviewing allocations, and rethinking how their teams work together,” as well as preparing for Regulation Best Interest, which takes effect in June and bars broker-dealer advisors from placing their own interests, or those of their employers, above those of their clients.
* European Trader: Cautious on Intertek Group: The British product-testing company’s reliance on international trade—which is under pressure from trade wars and fallout from the virus—means it isn’t a good short term bet, and investors should take profits.
* Emerging Markets: “It’s hard to think about dust settling from the Covid-19 pandemic when each day brings a blinding new storm—but the case is building that China and other emerging markets could lead the inevitable rebound in stocks.”
* Commodities: Copper, known as a leading indicator of economic activity, has suffered along with many other commodities on the heels of the spread of the coronavirus, and its price moves “are particularly important for those who look to the metal for hints on where the economy and stock market are headed.”
* Streetwise: “If you’re shopping for stocks now—and there are plenty of reasons to do so—think like a lender,” say columnist Jack Hough. “Look beyond income statements, and what they say about cheapness, to balance sheets and cash-flow statements, and what they show about the ability to weather a collapse in commerce.”