Here's a one page summary of leading stories from this weekend's (April 29) Barron's (paid sub. req.), noting stocks to watch for Monday morning when the market opens and brief comments on the Barron's articles. Note: clicking on a stock ticker pulls up opinion, analysis and a quote for that stock.
Headed For Dow 12,000 by Jack Wiloughby
- Thesis: With the market at a six-year high, the majority of leading money managers see even more upside. In the annual Barron's Big Money poll of institutional investors, 57% of respondents say they're bullish or very bullish about the stock market's prospects through the end of this year, up from 47% who held such conviction last fall. But it's geting harder to find compelling bargains.
The managers expect capital goods, energy and technology sectors to outperform in the coming 6-12 months, and consumer cyclical, financials, and utilities to underperform. The asset classes managers are most bullish about are Asian Stocks, Gold and Oil, with bearish sentiment highest for Real Estate, the U.S. Dollar and Corporate Bonds.
The survey results found the following stocks named most often among the managers' favorite stocks:
And these named most often as the most overvalued stocks::
Google (GOOG) -- named by nearly half of managers as overvalued, General Motors (GM), Yahoo (YHOO), Apple Computer (AAPL), Intuitive Surgical (Nasdaq: ISRG), Overstock.com (OSTK), Red Hat (RHAT), Research in Motion (RIMM), Sirius Satellite Radio (SIRI), United Healthcare (UNH)
Warming Up the Copier by Sandra Ward
- Highlighted companies: Xerox (XRX), Canon (CAJ), Hewlett-Packard (HWP)
- Thesis: Xerox is in 'better shape than it's been in for years', with lower debt, higher cash flow, share buy-backs and a better outlook for credit rating. Despite a poor report last week (revenues were down Q/Q), the company still looks 'tempting' due to its improved balance sheet, prospects for the high-margin color printing sector, and its low multiple vs. Canon and HP. Sympathetic interview with CEO Anne Mulcahy.
- Quick comment: Xerox may get a jolt on Monday after this positive write-up.
Where Lenovo's Fortune Lies by Leslie Norton
- Highlighted companies: IBM (IBM), Dell (DELL), Hewlett-Packard (HPQ)
- Thesis: After buying IBM's PC unit last year for $1.25 billion, Hong-kong traded Lenovo is down 19%, despite that market's strong rise. They are losing market share due to brutal industry price-cutting, but Dell doesn't show signs of growth at Lenovo's expense. The decline in Lenovo is 'closer to its end than its beginning'.
- Quick comment: The article doesn't mention Lenovo's much-criticized recent marketing move to dump the association with IBM.
Imax's Real Picture Show by Bill Alpert
- Highlighted companies: Imax (IMAX)
- Thesis: In the past six years, the digital theater company's stock has moved from about $30 to 60 cents, then back up to the recent $10/share. The company recently put itself up for sale. Cash-flow reports showing substantial growth are in significant extent due to adjustments on leasing deals, and therefore don't tell the real story of the company -- an unimpressive operating performance. 18% of the float in IMAX is short.
- Quick comment: When Imax's general counsel learned that Alpert had intervied co-CEO Richard Golfond, he sent a 'blistering letter' to parent Dow Jones that Barron's was about to publish 'misleading information' supplied almost entirely by parties who are short Imax stock. This one could get interesting... and IMAX might well trade lower on Monday and throughout the week.
The $675 Million Solution by Jonathan Laing
- Highlighted companies: UnumProvident (UNM)
- Thesis: UnumProvident is the country's largest disability insurer. Credit Suisse analyst Thomas Gallagher, a skeptic on UNH, recently found a 'pearl' in UNM's schedule H filing -- the company unloaded $827 million in future claims losses to a reinsurer for a mere $152 million premium. The company can claim the $675 million difference as immediate credit toward assets, though that categorization is highly questionable. UnumProvident officials responded to Barron's that they didn't do anything improper. Amidst other issues with the company, insurance-industry arbiter A.M. Best has a "negative outlook" on Unum.
- Quick comment: UNM may well trade lower on Monday following this report.
Ethanol Ethos by Susan Buchanan
- Highlighted companies: Archer Daniels Midland (ADM)
- Thesis: Oil Refiners are adding more corn-based ethanol to gasoline -- by the end of this year, gas containing 10% ethanol will be sold in much of the US. Ethanol is replacing MBTE, a groundwater pollutant and suspected carcinogen. There's not enough domestic ethanol to meet demand, so U.S. imports of cane-based ethanol will double this year, coming largely from Brazil and Central America.
- Quick comment: See more ethanol stocks reviewed on Seeking Alpha.
A Metal Like No Other by Gene Epstein
- Thesis: Gold is flying high at $650 an ounce, but it could go up to $2000 -- which is merely the January 1980 high of $850 in 2006 dollars. A report from the CPM Group indicates that mine production is expanding significantly, secondary recovery from scrap has been rising, and gold exploration investment has reached record levels. Demans side shows little sign of ceding, with speculators now owning more than central banks for the first time in history. Comparisons to the 1980 runup are striking. The author has a 'sentimental attachment' to this market, but would 'probably take my profits at some point before $2,000.'
- Quick comment: See more coverage of the Gold ETFs and on our Gold Stock Blog.
Inside Info Isn't Always Right by Jack Adamo
- Thesis: Though monitoring insider buying of company stock was once a great indicator of future stock performance, that's no longer true, as companies have discovered the PR value of the insider stock buy. 'The vast majority of heavy insider buying is (now) heavily orchestrated' says Adamo, who once wrote a newsletter that aimed to capitalize on insider buy/sell trends.
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