Sunday, February 3, 2013

Review of Barron's -- Dated 4 February 2013

Here in the town where I live, it is often not possible to get Barron's at the only store in town which carries it (a local distribution matter I believe).  So while the new edition did not come until today (last week's never came at all), well I can now pass along my remarks.

First, "Mish" already beat to one important thing!  See below this week's cover, the second link is to Mish's new blog piece about how this bullish piece is disturbing...


(link to above picture)

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Link to Mish's piece of today:

http://globaleconomicanalysis.blogspot.com/2013/02/extreme-sentiment-barrons-cover-get.html

In the just above link, Mish quotes Cover Story author Andrew Bary:

The party is far from over. The early-year rally that on Friday took the Dow Jones Industrial Average to within 1% of its record high, set in 2007, could have a lot further to run. For starters, stocks aren't expensive. The Standard & Poor's 500 index is valued at about 14 times estimated 2013 profits and the Dow fetches less than 13 times projected 2013 earnings. At the market peak in 2007, the Dow traded for 16 times forward earnings. Given ultralow interest rates, the market multiple has room to expand even if earnings growth remains modest. 

There's a huge amount of money that could shift into stocks because individuals until recently have favored bonds over equities, based on mutual-fund flow data. "If there is a great rotation going on from bonds to stocks, we may be only in the top of the first inning," says Jason Trennert, chief investment strategist at Strategas Research Partners in New York. Trennert cites the TINA -- or "there is no alternative" -- factor, as yield-starved investors move into stocks.  

Read more at http://globaleconomicanalysis.blogspot.com/2013/02/extreme-sentiment-barrons-cover-get.html#KW5yYXH6yZ6ucQ6f.99 

Mish has an excellent blog, he cranks out 2 - 3 pieces per day.  I read almost everything he writes, and he is clearly knowledgeable.  I highly recommend his blog to everyone.

Mish is now calling a top in stocks, we are at least "close enough" so that he sees this as "the top".  He has a record (see his article) for calling the top in housing as well.

***

But, let me examine some more of Andrew Bary's piece on my own.  Bary brings in experts to cite that because of the low yields in bonds, caution by burned investors (2008 - 2009) and the popularity of alternative investments (private equity, real estate, commodities) that stocks have been neglected.  He cites some interesting examples, such as Yale University (and other big university endowments) and pension funds are light on stocks, Yale has only 6% of its portfolio in US stocks (14% total equities, including foreign stocks).

Bary notes that hedge fund managers UNDERPERFORMED the S&P 500 by some 10% (ha ha ha!) in 2012.  Are hedge fund managers worth that 2% + 20%?  And after 2012, the S&P 500 is up over 6% THIS YEAR.

He brings in professional investor commentators (Jim Paulsen, Jason Trennert and Stephen Auth) who make the case for a rising stock market.  Bary also presents table that shows while this bull run from 2009 HAS been pretty good, there have been OTHER bull markets that have beaten this in the past 50 years.  Well, yes there have been other bull markets that have beaten this one on the past 50 years, THREE of them.

Bary writes "bullishly" (not specifically recommending the following, but coming pretty close) about ExxonMobil (ticker XOM), Chevron (CVX), JPMorgan Chase (JPM), Citigroup (C), MetLife (MET), Wells Fargo (WFC), Microsoft (MSFT), Cisco Systems (CSCO) and Intel (INTC) among large cap companies.  He likes the two oil companies based on prospects for higher oil prices, and he likes the others based low P/Es.

My take?  Although my holdings of stocks are way down from 15 - 20 years ago, I think I will take some profits from this run.  Who will I most consider selling?  Parts of my holdings of:

Caterpillar (CAT, up 19% since October 2007, with a 2.1% yield)
IBM (IBM, up 71% since October 2007, 1.7% yield)

Others too...  "Bulls make money, bears make money, pigs get slaughtered."

***

Before I go with this weekend's Barron's, please allow me a comment or two on LAST WEEK'S.  The Cover Story last week was Kopin Tan's piece "Made in America".  He makes the case that manufacturing is coming back to America big time.  US companies Caterpillar, Apple (AAPL), Ford (F), General Electric (GE) and Whirlpool (WHR) are making more here in the USA.  And that foreign companies Toyota (TM), Airbus SAS and Samsung Electronics (005930.Korea) will be building plants here in the US.  Samsung will spend $4 billion for a semiconductor plant in Texas.

"Barron's" identified eight companies that should prosper here according to Tan.  I would guess that since he chose these eight from eight different industries, that this list is just "representative", and if he is right about a manufacturing renaissance in the USA, then there are many others that could be just as good.

Southwestern Energy (SWN, low cost NatGas producer)
LyondellBasel (LYB, chemical company with low cost NatGas as feedstock)
Nucor (NUE, cheap energy means cheap recycled steel)
Dover (DOV, makes lots of equipment for manufacturers)
Calpine (CPN, large independent electricity producer using NatGas)
CF Industries (CF, fertilizer, NatGas is again the feedstock)
Williams (WMB, owns energy product pipelines)
Union Pacific (UNP, big railroad exposed to manufacturing)

The theme Mr. Tan pushes is that abundant and cheap NatGas will bring us lots of jobs and lots of manufacturing.

***

Alan Abelson notes that Super Bowl tickets in the aftermarket now run some $3398 for the same seat that sold for some $2990 last year (up 13.6%, roughly the same as the S&P 500!) and that hotels and rental cars are 400% + higher than normal there in New Orleans...  (Disclosure: the Super Bowl is about to start, I have the TV on a low rumble in the background as I write...).  Abelson:

"So the next time you hear an economist bellyaching that there's no inflation, ask with proper incredulity if he ever bothered to glance at the trajectory of the price of a Super Bowl ticket."

Abelson goes on to finish with an extended look at recent numbers.  In short, there seems to be slow, very slow, growth in economic indicators.  Very disappointing vs. past recoveries.

***

"Streetwise" author Kopin Tan mentions Jim Paulsen again (what, did he by Barron's offices last week?) who says that cyclical stock beta has come down a bit while defensive stock beta has gone up.  Paulsen:

"You might say risk isn't as risky, and safe isn't as safe."

If stocks are heading up, in other words, cyclical may be the way to go.

***

Reshma Kapadia writes a bullish piece on Tata Motors, the owner of Jaguar and Land Rover.  Tata is perhaps also well known as the Indian car maker that makes the Nano, the world's cheapest car (of, Reshma, you did not mention its cost!).

Jaguar and Land Rover were owned by Ford, but were both losing money.  Tata has apparently turned them around, cutting costs and selling more cars.  While Tata's stock may not rise much this year (she writes), many are convinced that there is good value in this company.  They are selling more luxury cars in China...

***

Alexander Eule writes an interesting (and bullish) article on SanDisk (SNDK).  SNDK's flash drives are now being bought in larger quantity by Apple (who wants to lessen their dependence on arch-rival Samsung).  Flash drive technology ("NAND") has been coming down in cost for years, but it llooks like SNDK and their rivals Samsung, Micron (U) and SK Hynix (0660.Korea). SNDK is the ONLY pure play though.

Flash drives are becoming bigger (higher capacity), I now own one with a 128 gigabyte capacity, and they are becoming more popular more popular in ultrabooks (very light laptops) as they are light and more energy-efficient than hard drives.  Here is the current market share in the flash drive market share of the leaders:

Samsung: 40%
SanDisk and SanDisk/Toshiba: 28%
Micron: 20%
SK Hynix: 12%

(Some of my thumb drives come from CHINA, I wonder if China makes the "NAND" technology, or do they just buy the chips from the above four and assemble the rest there in China...).

***

David Englander writes a bullish piece on GulfMark Offshore (GLF), a provider of boats needed by offshore drillers.  Offshore drillers have a large need for such "work boats" -- I briefly worked in the oilfield services businesses and had the "pleasure" of riding work boats to and from offshore rigs --, and GLF provides a lot of various specialized boats, and has the youngest and highest quality fleet.  GLF has fleets in the North Sea and Southeast Asia as well as the Americas.

Hey, maybe so!  These boats ARE vital to getting the work (offshore drilling) done.

***

Tiernan Ray ("Technology Week") writes about Amazon.com (AMZN).  The stock has performed very well, through thick and thin (for example, it has not gotten beaten lately like Apple when missing a number...).  Amazon does not make much money (lost money in 2012), but its future looks good as they are becoming more of an "infrastructure retailer" ought to serve them well in the future.  Amazon appears to be not followed as much as companies like Google, Apple, Facebook, and Microsoft...

***

Jim McTague ("D. C. Current") writes about "the smartest guy in American politics,"...  And who IS this "smartest guy"?  Governor Jerry Brown!  And who called him the smartest guy?  Vice President Joe Biden!

It seems that Gov. Brown is worried about the costs of Obamacare, more regulations, and cutbacks in federal government spending...

Well, California...  You got what you asked for!  President Obama and Governor Brown!

***

Gene Epstein ("Economic Beat") writes that there has been confusion in spending on defense.  There were reports that defense would be cut 22%, that it was already cut, etc.  Well, no.  The actual cut seems to have been 3.1%, and that helped push GDP into that -0.1% last quarter.

The article is a bit confusing because what the government publishes is confusing.  But, Epstein points to some small, more recent gains in the private sector and a cut in government employment.

All of this fits two memes I have long noted: that government spending is a huge yet slippery concept and that our recovery since the Great Recession has been very slow compared to most recoveries in the past from recessions.

***

PENTA ("Trusted advice  for families with $5 million or more") editor Richard C. Morais writes about Cartier watches.  They will be releasing 113 new models this year.  Price range: $4400 - $1.8 Million.  Actually, the article is interesting, particularly if you like watches or want to see how the 1% in NYC shop...

***

"Other Voices" (Barron's occasional column written by people not employed by them) is written by Milton Ezrati.  The author hopes to show that the Fed can help prevent booms & busts by "sterilizing" excess inflows and outflows of liquidity from overseas.  I am oversimplifying..., but it is the nature of my Reviews to simplify.

The Fed ought to involve itself EVEN MORE in economic policy?  Ahh...  Ahh, no, IMO.

***

Editor Thomas Donlan writes about immigration.  He notes that Republicans lost big in the Hispanic vote last November, and that the R-Team is trying to figure out a policy that will work for them.  Bipartisan policy in the decades to date has been something of a blend pf benign neglect and hypocrisy...  We talk tough but do nothing serious.  Onyango Obama (the president's uncle) received deportation orders in 1986 and 1989, and lost an appeal in 1992, yet is still here...

Donlan thinks we should let in only those who would benefit the USA as a whole.  Well, yes, OK.  But he offers few specifics...

Immigration reform is a tough and difficult issue, but at some point we have to resolve this in a positive manner, that is, HAVE an explicit policy and stick to it.

***

Barron's has been running their "Roundtable" in three parts.  I covered Part I two weeks ago.  Since I was unable to review Barron's last week, I will look at the comments and stock picks of the investment pros for both weeks now.

Last week featured Abby Joseph Cohen, Scott Black, Oscar Schafer and Brian Rogers.  As I do not want to be writing forever while lsitening to the Super Bowl, I will just list their picks and then move on to this week's participants:

Abby Joseph Cohen

Bristol-Myers Squibb (BMY)
Mosaic Co. (MOS)
Expeditors Int'l of Washington (EXPD)
Hankook Tire Worldwide (000240.Korea)  <---  !
Noble Energy (NBL)

Hankook makes me feel good that we are working with KOREAN auto parts companies...

Brian Rogers

PNC Financial Servs (PNC)
Kohl's (KSS)
Apache (APA)
Avon Products (AVP)
Legg Mason (LM)
General Electric (GE)

Hey!  It's Half Time at the Super Bowl, and HALF of the Superdome just lost power!  Call GE!

Oscar Schafer

Hertz Global Holdings (HTZ)
Lazard (LAZ)
Western Union (WU)
Owens Corning (OC)
Quiksilver (ZQK)
Verint Systems (VRNT)

Scott Black

Qualcomm (QCOM)
McKesson (MCK)
Ensco (ESV)
Medical Properties Trust (MPW)
Titan Int'l (TWI)

THIS weekend's pros and picks (remember, the conference was held about three weeks ago in ONE DAY):

Bill Gross (who says long-term bonds are overpriced, but sees no bubble in short-term bonds)

SPDR Gold Trust (GLD)  <--- I would stick with the real physical gold
Pimco Total Return (BOND)  <--- talking his book?  Bonds?
BlackRock Build America Bond Trust (BBN)
Pimco Corporate and Income Opportunity (PTY) <--- talking his book?

Meryl Witmer

Spectrum Brands (SPB)
Chicago Bridge & Iron (CBI)
Tribune Co. (TRBAA)

(Where's Tronox?)

***

In the Market Week section, Vito J. Racanelli let us know that stocks are up 6% in January...

Assif Shameen ("Asian Trader") notes that Tokyo's Nikkei is up 20% (in Yen) while the Yen has fallen 14% vs. the dollar (since late November).  There is an ETF that buys Japanese stocks yet hedges out the Yen exposure (the problem is that I could not find the ticker just now on Google, but it is advertised all the time on CNBC...).  He is bullish on Japan.

Ben Levisohn ("Emerging Markets") writes that although Brazil gained 101% last year (less than the S&P 500) that he expects this year to underperform as well.  Why?  Government meddling.  Again.  Example?  Petrobras (PBR, which ought to be a great stock, I know someone who sells capital goods to PBR, he tells me that the company itself is excellent with good engineers) is being meddled with, again.

"European Trader" author Jonathan Buck writes about the two flavors of Heineken...  The holding company is at a larger than normal 17% vs. Heineken itself.

Alexandra Wexler ("Commodities Corner") writes that sugar may be affected by changes in the Brazilian and US markets for ethanol.  Our EPA just mandated that more "advanced" ethanol must be used in gasoline/ethanol blends.  And US corn ethanol does not count as "advanced", perhaps because ethanol from sugar burns more cleanly.

Michael Aneiro ("Current Yield") writes that even bond gurus are having trouble finding worthwhile bond investments.  One sector that seems to be gaining traction is the corporate bonds sector, this would include junk bonds.  Bonds from companies in the housing and energy sectors are getting a bid.  Aneiro notes that for the first time in a while the yield on the 10-Year note is (a hair over) 2%.

Multiple insiders sold shares in several companies, but only the NINE insiders at American Express (AXP) sold a TOTAL of over $30 million.

The Mighty Peruvian Sol finally has declined vs. the US dollar due (I presume) to the Peruvian Central Bank weakening its currency, last week it lost 1.0%.

***

Verdict: I am really curious to see if Mish is right about the Barron's cover being a contrary indicator!

1 comment:

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