Saturday, October 27, 2012

Review of Barron's -- Dated 29 October 2012

As Florida basks in slightly cooler than normal weather, the urban mid-Atlantic US seaboard has its eyes on Hurricane Sandy which may (or may not) be one the  biggest storms to hit that region our country in years. I am not a weatherman (and their record is not very good anyway), so I do not know.

Barron's, the Wall Street oriented weekend magazine/newspaper has LOTS of stocks discussed this week.

The Cover Story this week "See You Later?" (w/ a picture of a Bear about to drop a Bull into the abyss...) which is this October's edition of their Big Money Poll.  The Big Money Poll is ALWAYS something I look at ever since they made their call in October 2007 (2007, before the election caucuses and primaries had even started) that Barack Obama would be our next president...  I remember thinking (as soon as I read that): "They're crazy!  Hillary will squash Obama like a bug!"  Well of course the Big Money runners were not crazy, they gave Obama LOTS of money (much more than to hapless John McCain or even Hillary).  And they were right.

Jacqueline Doherty writes that the Big Money guys are more worried about a pullback in stocks than they were last time (last spring).  Here are the percentages who are bulls for three polls, time frames in all cases six months into the future:

One year ago: 52% bullish
Six months ago: 55% bullish
October 2012: 46% bullish

Current "neutrals" are 27% and 27% are bearish or very bearish (just 5% of the latter).

The poll also asked them to rate their favorite stock ideas, both up and down.  I always like this, as there are always more than one stock on each list of most liked and most disliked...  This time both Apple (ticker (AAPL) and Googole (GOOG), so the Big Money guys are not monolithic (this is yet more evidence of my thesis for months now that "The Elite" of this country are broken into factions, and so are too fractured to damage our lives yet).  Barron's also asked them to "Thumbs Up" or "Thumbs Down" on the below closely watched companies (where's Google?):
Thumbs
Thumbs
Company / Ticker
Up
Down
AIG (AIG)
54%
46%
Apple (AAPL)
53%
47%
Amazon.com (AMZN)
45%
55%
Bank of America (BAC)
50%
50%
Citigroup (C)
50%
50%
Facebook (FB)
20%
80%
General Electric (GE)
70%
30%
IBM (IBM)
78%
22%
JPMorgan Chase (JPM)
72%
28%
Microsoft (MSFT)
69%
31%
Salesforce.com (CRM)
28%
72%
Sears Holdings (SHLD)
12%
88%


My comments:

1)  Extremes marked by me.
2)  AIG is fairly highly rated as "they say" that they have gotten rid of bad stuff...
3)  AAPL is NOT universally loved despite low P/E...
4)  SHLD and CRM have relatively high share prices, but are losing money
5)  GE seems very highly rated by these guys...

Other questions they answered:

-- Next president:  Obama 74%, Romney 26% (I presume the Poll was taken before Benghazigate broke)
-- Better for the economy:  Obama 21%, Romney 79% (whoa...)
-- Party controlling the Senate:  Democrats 60%, Republicans 40% (naah, the Ds will...)
-- Deal on "Fiscal Cliff"?:  Yes: 44%, No 2%, Kick the can: 54%
-- Like gold: average (among them) is price rise of 9%
-- Greece stays in European Union: 56% Yes (Spain, Ital, Portugal > 90% Yes)

***

Randall W. Forsyth pitch-hits for Alan Abelson (who they tell us is on vacation!) this week.  Most of what he writes about is the upcoming Fiscal Cliff, I sure so see a lot about the Fiscal Cliff that I am NOT seeing at Zero Hedge or Drudgereport.com.  He enlists (over lunch) the opinions of "veteran Washington watcher" Greg Valliere, and they walk us through some of the possible scenarios of how the Fiscal Cliff might be addressed and what would happen under each.

Greg Valliere believes that depending on what is what is changed and what is kept the same that there is likely to be a negative impact on our economy, he believes that it would cut some 3% - 5% off our economy, putting us back firmly into recession.

But, Lombard Street Research (of London, "LSR"), says that going over the Cliff would take us down over 5%..., very bad.  LSR believes that the most likely scenario is that Obama wins, with the R-Team holding the House and the D-Team holding the Senate (with some tax hikes but not all them), with a net loss of 2.25% or so.  LSR believes that a Democratic sweep would lop off 2.75% while a Republican sweep would take us down 2.3% (latter due to spending cuts, hah!).

BCA Research chimes in saying Romney has a 40% chance of winning (again, I presume written before Benghazigate), with Romney being better for stocks and Obama for bonds (?).

BCA also believes a contentious result (an Ohio in 2012 like Florida was in 2000) would be very bad, but he does not quantify that...  I agree, bad, but cannot quantify it either...

Forsyth finishes with an observation or two about economic figures (including the controversial drop in the U3 unemplyment rate to 7.8% last month).  Yet things do not look too good, according to David P. Goldman (head of Macrostrategy at Bank of America)), who believes the only winners in technology will be a handful of near monopolies like Apple, and not be rivals being left in the dust like Nokia (NOK) , Research in Motion (RIMM), Motorola and Amazon.com (AMZN)...

***

Kopin Tan ("Streetwise") writes that just one in five money managers think that the risk of a BAD result re the Fiscal Cliff is reflected in stock prices.  This threat was cited by a poll of money managers by BofA Merrill  Lynch, and is seen as more of a menace that Europe's mess or Iran vs. Israel.

He writes positively of Autoliv (ALV), a Swedish company making auto parts safety systems like air bags and seat belts.  While auto sales are down worldwide, he believes that ALV's global diversification, innovative & high quality systems will do just fine.

***

In "Review & Preview" William Waitzman writes that Romney's tax plan of cutting individual tax rates 20% (so, that would make the range 8% - 28%) as well as eliminating the ALternative Minbimum Tax and Obamacare taxes would actually increase tax revenue in 2015 by some $145 billion, due to higher economic growth, hence more tax receipts.

"She Said":

"It is interesting how some banks say the new regulations would be too burdensome, but then spend hundreds of millions of dollars to kill them."

IMF Chief Christine Lagarde, on financial reform

No mystery here, if the banks would stand to LOSE more than hundreds of millions with her reforms, of course they will lobby and spend to fight such reforms....

***

In "Follow-Up", Andrew Bary still does not like Facebook (FB), following up on a negative piece in September.  The stock is about at the same price as then, but has a very high P/E (compared to Google).  there are many doubts that FB can make money in mobile as well...

On that same page there is an ad.  Quiz time!  Long-time and alert readers may get this one:

"What is $339,561,236,395,252?"

***

Leslie P. Norton writes a bearish piece on General Mills (GIS)!  It seems that GIS is late to the Greek Yogurt Game.  My wife has been eating Greek-style yogurt recently (Greek-style yogurt is now about 1/3rd of current yogurt sales).  Norton sees more competition coming in and wrecking margins...

***

David Englander writes "An Uplifting Story", a bullish piece on Hyster-Yale (HY), the high-end forklift maker.  HY was recently spun-off from NACCO Indsutries.  They appear to have solid management, are looking to sell more overseas (their international business is some 40% of sales), and they are taking a shot at the lower priced markets by having someone in China make a line for them...

***

Andrew Bary writes a bullish piece on a company now close to my heart...: Barnes & Noble (BKS).  The stock has been trending down since 2007, and they are currently losing money, but their prospects are good he writes.  There are some good things going for Barnes & Noble:

-- Borders, their competitor in retail books is gone, so BKS is a near monopoly
-- Microsoft has invested $300 million in their Nook division
-- John Malone and his Liberty Media like the company and made an offer to buy it
-- the company has a market value of $900 million yet sells $8 BILLION in books and Nook products (the devices and the electronic books).

In my opinion, Barnes & Noble is a national treasure that we ought not lose.  Where else can you go to buy books (other than Amazon)?  Physical books are not going to disappear anytime soon either...

Thanks, Mr. Bary!  I hope you are right!

***

"Economic Beat" author Gene Epstein notes that the Pentagon's latest burst of spending represented the major part of the GDP increase (still low) of 2.0% in the Third Quarter (July - September).  That will not be there in the near future...

Epstein tells us of a joke, which I had not heard before:

"An economist is like a guy who knows 50 different ways to make love, but doesn't have a girlfriend."

He offers up this joke before discussing three economists at Applied Global Macro Research who have lately picked some stocks and other investments that have beaten the averages...

***

"D. C. Current" author Jim McTague brings in Bernadette Budde (of the Business Industry Political ACtion Committee) to share her view tha gridlock will not work anymore.  She thinks (newly re-elected) Obama will compromise with the R-Team over a deficit reduction package, probably along the lines of Simpson-Bowles.

McTague did not write about the GOP demographer who thought (still thinks?) that Romney will win big...

***

"Technology Week" author Tiernan Ray writes of the apparent contradiction between Apple and Amazon, in that one (AAPL) has so much better margins than the other yet AAPl is odwn 10% recently and AMZN up...  Net it out, and he writes (with the help of Colin Sebastian at R. W. Baird) that both are good companies.

Tiernan Ray also gives 5 Stars to the new Apple iPad Mini ("Our Gadget of the Week").

***

Barron's sponsored an event there in NYC: "The Art of Successful Investing Conference".  They had nine speakers, many of them familiar from their "RoundTables" that they have every six months.  Here are the six names who listed what they currently recommend, other than the guy who speculates w/ options (the group as a whole was bullish on gold, ruh-roh?):

Felix Zulauf:

iShares FTSE China 25 (FXI)
SPDR S&P China (GXC)
Gold

Scott Black:

Bonanza Creek Energy (BCEI, new and growing producer of US oil & gas)
Medical Properties Trust (MPW, health care REIT yielding 7%!)
Qualcomm (QCOM, selling more chips for smartphones than Intel is)
EMC (EMC, leader in data storage)

Fred Hickey:

Apple (AAPL)
Gold

David Herro:

Daimler (DAI.Germany, maker of Mercedes cars & trucks)
BNP Paribas (BNP.France, safe balance sheet & strong capital position) <-- ???
Intesa Sanpaolo (ISP.Italy, safe balance sheet & strong capital position) <-- ???
Canon (CAJ, low valuation yet generating lots of cash)
Toyota Motor (TM, their new CEO is a "modern business thinker")

Meryl Witmer:

Spectrum Brands (SPB, consumer products / housing related)
Colfax (CFX, welding equipment maker that is cheap and well run)

William Priest:

Anheuser-Busch InBev (BUD, a "global champion", he likes global champions)
Nestle (NESN.Switzerland, another global champion)

(Marc Faber owns all kinds of stuff, including gold)

***

Jack Hough writes that we should not be scared of the below companies that appear to be risky but really are not according to him):

AIG -- no thanks
Ingram Micro (IM, a distrbutor of tech, adding higher margin products)
ManTech Int'l (MANT, tech spending will overcome defense cuts)
Valero Energy (VLO, he expects heavy crude / light crude to spread)

VLO, maybe...

***

Guest author John Marshall, a small-business owner and Libertarian writes this weekend's edition of "Other Voices".  In a hard-for-me-to-understand piece he writes that big business is too scared to use their $2 trillion cash piles overseas to invest.  They lack confidence in Obama and the whole US economy (inc. regulatory uncertainty).  He says the only ones having courage and confidence are small entrepreneurs...

While I am fairly Libertarian myself, I would be VERY SCARED to invest anything in a small business or other similar investment here.

And I have read that Obama and Big Business are such great buds...

???

***

Speaking of entrepreneurs, Editor Thomas Donlan laments the fact that we educate so many bright students from overseas, and then tell them to go home...  There is a similar story with skilled foreign workers getting "H1B" visas, they can work here for up to six years then they have to go home...

Donlan says, if they have a great skill set or if they create good businesses, we should ENCOURAGE those immigrants!

Yes, damn right.

***

In the Market Week section we can note the loss of about 1% in the indices last week on Page 3.

"European Trader" author Jonathan Buck writes that Germany's BMW could rise 30% in a year.  Their P/E is higher than other European peers, but their worldwide sales (vs. Renault and Fiat for instance) are doing fine, along with margins.  They may be in a "sweet spot" (my words).  One of our neighbors recently bought a new BMW to replace their old one, so maybe the fan-base of BMW will keep them doing better than the other car companies...

"Asian Trader" author Assif Shameen thinks KOREA will do well, especially consumer products companies (which in some cases are beginning to export their cosmetics to other Asian countries).  Domestic Korea is hard to invest in, however.  [Our two bearing suppliers are both privately owned, the BIG chaebol conglomerates make up most of Korea's wealth producing companies]  Perhaps Mr. Shameen should have recommended and ETF...

"Emerging Markets" this week is written by Michael Shari, he says there is long-term value in Russia.  Well, maybe so, but not for me.  Again, if interested, I would look at an ETF first...

"Current Yield" author Michael Aneiro writes that muni bonds might not be a great investment if things break the wrong way re the Fiscal Cliff.  I like the way Aneiro summarizes the change in 10-year and 30-year bond yields each week, please keep that up!

Simon Constable ("Commodities Corner") writes that iron ore stocks may benefit...  If China gets back on their feet.  he suggests that Vale (VALE, the Brazilian giant) and Cliffs Natural Resources (CLF, our big iron ore miner) are worth a look.

INSIDERS sold large amounts of stock in two companies recently: $60 million worth (by six insiders) of Palo Alto Networks Inc. (PANW, who?) and $48 million of Pepsico (PEP).  Because Pepsico is so much bigger than PANW, I would be VERY CAREFUL of buying PANW...

By popular request (one reader, THANK YOU, a very kind comment), I will include the performance of Peru's currency: the Sol each week.  This week it was not so might though: down about 0.3%.

***

Verdict:  Yes, buy this issue if you want stock ideas...

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