Barrons weekend summary: positive on ADI, AL
Cover story: Europe has seen its share of political and banking crises, but the situation seems to be changing; "Given attractive valuations, diminished political risk, low interest rates, and a pickup in global growth, international markets, and Europe particular, could finally start to outperform."
Features:
1) It may be time for investors to buy emerging markets, which are trading at a hefty discount to U.S., European, and Japanese shares; China, South Korea, India, Peru, and Greece are among investors' favored destinations now;
2) A look at the picks and pans of investors who attended the annual Sohn Investment Conference (short: CLB, SPY, FTR, U.K. government bonds; long: HHC, EEM, CTL, DHXM, ISBC, UniCredit, TSLA 2022 convertible bonds, UAL, DXC, FMC, Q);
3) Positive on ADI: Company may lose share in iPhone screen chips, but it's flourishing in chips for autos and other sectors where it has more exposure, and shares could return 20% or more this year;
4) Positive on AL: A long-term travel boom has helped the airplane leasing company, but despite some concerns about its debt as interest rates rise, shares are modestly priced and have 30% upside.
Tech Trader: Under chief Satya Nadella, MSFT has become a so-called cloud company, but because it combines new and old products on its income statement, cloud-related accounting becomes impenetrable.
Trader: Some earnings reports suggest that the U.S. economy may be stronger than it looks; GS's Robert Boroujerdi is screening for stocks where estimates have moved higher but multiples haven't followed, such as CAT, STZ, CNK, and MA; Barron's suggests staying away from RH until the company can prove it has put its problems behind it and can justify its valuation.
Interview: Columbia professor Bruce Greenwald has trained a generation of value investors, and talks to Barron's about the flaws in discounted-cash-flow valuations, globalization, and other topics.
Profile: Nick Clay, manager of the Dreyfus Global Equity Income fund, prefers stable, cash-rich companies trading at attractive valuations (top 10 holdings: MSFT, RAI, CSCO, PG, PM, DEO, NVS, UL, CA, MRK).
Small Caps: Positive on HMHC: Publisher had a hard year in 2016, but after cutting costs and investing in its business, a rebound appears to be under way and shares could start moving up.
Follow-Up: Cautious on WFM: Investors who bought shares based on Barron's recommendation last year have seen upside only since Jana Partners took a stake this spring, and that won't likely create much momentum; +/- SNAP: Shares still aren't a bargain even after falling by 17% last week, while cash flow figures overstate the company's financial health by excluding hefty stock-based compensation.
European Trader: "France's presidential election reinforced a growing belief that Europe's populist tide has been blocked, but the market's muted performance last week suggests that other issues might still be troubling investors."
Asian Trader: Positive on JD: Chinese e-commerce major lags rival BABA, but as everyday people in China become wealthier, they're replacing a wider range of goods, and avoiding Alibaba over concern about counterfeits.
Emerging Markets: Positive on PBR: "After a solid first-quarter profit, the Brazilian energy giant looks ready to climb by 20% or more," and will sell off assets to ease its debt burden.
Commodities: Recent U.S. government projections about corn, which predict a decline in production this coming season, offer another reason for the grain to move higher.
Streetwise: The increase in AAPL's market value in 2017 has surpassed the entire market cap of DIS, KO, C, two SLB's, or seven APC's.