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VOL. C NO. 16 APRIL 20, 2020 $5.00

Expect a long and painful slog for the economy and business




C O NT EN TS 04.20.20 VOL.C NO.16

P. 7 P. 27 P. M1

Trader: Small Stocks

Up & Down Wall Street:
A Dangerous Precedent Sheltering in Pharma Stocks Have It the Worst
The federal government is treading The appeal of established drugmakers such as Merck and Pfizer goes beyond their By BEN LEVISOHN
a slippery slope as it increases its potential to deliver a Covid-19 vaccine. By BILL ALPERT
debt to prop up the private sector. P. M4
Big Pharma vs. The S&P 500
Euro Trader: Dividends
Merck Pfizer Eli Lilly S&P 500
P. 11
Do a Disappearing Act
Streetwise: Slamming By PIERRE BRIANÇON

the Brakes on Car Sales 10

P. M4
Auto makers might need assistance
that’s more than triple the size of the
0 Emerging Markets:
2009 cash-for-clunkers program. -10
Weak Currencies Could
By JACK HOUGH Weigh on Stocks
P. 12
P. M5
Buy Big Bank Stocks -30

While They’re Down Striking Price: Is the

Although the ride could be bumpy,
2/20/20 3/2 3/9 3/16 3/23 3/30 4/6 4/13
Worst Really Over?
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

the industry has the strength to By STEVEN M. SEARS

endure this latest blow to earnings. Source: FactSet


P. 16
The 21st-Century Version Reigniting the Debate Commodities: Milk
of the House Call Over Health Insurance Takes a Bad Spill
Don’t Be So Quick to A pandemic pushes telemedicine into Coronavirus changes the calculus for By MYRA P. SAEFONG
End Lockdowns the mainstream. Four stocks to play it. investing in managed-care companies.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

A rush to reopen the economy raises By DAREN FONDA By JOSH NATHAN-KAZIS

the risk of a relapse—and could set
the recovery back even further.

P. 18 Index P. 4 P. 31 P. 32
Review & Preview P. 14
Two Industrials Merge, Mailbag P. 39 Clare Hart Is Bracing Funds: Should You Dive
Three Stocks Emerge Inside Scoop
Charting the Market P. M8
P. M7
for 12 Months of This Into Stocks, or Ease In?
Raytheon Technologies, Carrier Winners & Losers P. M9 Profile: JPMorgan Equity Income By SARAH MAX SPECIAL SECTION
Global, and Otis each look attractive. is emphasizing quality and agility.
Research Reports
Market View
P. M10
P. M12
Top Financial Advisors:
Our Annual Ranking
P. 21 P. 33
Income: Payout Hikes The guidance of a good advisor
From J&J and P&G goes a long way in times of crisis.
How Ford Is Coping The Rising Appeal of By LAWRENCE C. STRAUSS We name the 100 best. Plus, the
With the Shutdown Active Management leading teams serving individuals
CEO Jim Hackett says the auto maker If active exchange-traded funds take P. 35 and institutions.
has many reasons to be optimistic. off, fund managers could win big.
Tech Trader: A Handful
By JACK HOUGH © 2020 Dow Jones & Company,
Inc. All Rights Reserved.
of Stay-at-Home Stocks Barron’s Roundtable
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April 20, 2020
4 BARRON’S April 20, 2020

Our index lists significant companies mentioned in stories and columns, For Customer Service, call 1 (800) 544-0422, or go to
plus Research Reports, and Corrections & Amplifications. The references For reprints of articles,
are to the first page of the item in which the company is mentioned. call 1 (800) 843-0008, or go to

Hertz Global Holdings . . . . . . . . . . . . . . . . . 11,M8 Merck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

A AbbVie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Honeywell International . . . . . . . . . . . . . . . . . . M5 K Kimberly-Clark . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Microsoft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Accor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M4 Humana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Kone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Moderna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,M8
Airbus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,M4 Koolearn Technology Holding . . . . . . . . . . . . . . 37 Morgan Stanley . . . . . . . . . . . . . . . . . . . . 12,M5,S16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,M2 I IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Kraft Heinz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M10 Mylan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
AMC Entertainment Holding . . . . . . . . . . . . . M8 Infinera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M7
American Airlines Group . . . . . . . . . . . . . . . . . . . 16 Innovent Biologics . . . . . . . . . . . . . . . . . . . . . . . . . 37 L Legg Mason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 N NextEra Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
American Express . . . . . . . . . . . . . . . . . . . . 15,M10 Intel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Liberty TripAdvisor Holdings . . . . . . . . . . . . . M8 Nokia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M8
Anthem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Invacare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M10 Livongo Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Nordstrom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5
Apple . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Invesco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Lockheed Martin . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Novartis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Aptiv . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 iRhythm Technologies . . . . . . . . . . . . . . . . . . . . . 23 Lowe's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5 Nucor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ArcelorMittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Lyft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
AstraZeneca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 J Johnson & Johnson . . . . . . . . . . . . . . . . . . . . . 28,34 O Old Dominion Freight Line . . . . . . . . . . . . . . . . 15
AT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 JPMorgan Chase . . . . . . . . . . . . . . . . . 12,14,33,M5 M Masimo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 O'Reilly Automotive . . . . . . . . . . . . . . . . . . . . . . . . 11
AutoNation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Meet Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M7 Otis Worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
AutoZone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Overseas Ship Holding Group . . . . . . . . . . . . . M7
Avis Budget Group . . . . . . . . . . . . . . . . . . . . . . . . . 11
P Peloton Interactive . . . . . . . . . . . . . . . . . . . . . . . M8
B Baker Hughes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Perrigo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Bank of America . . . . . . . . . . . . . . . . . . . 12,M5,S16 Pfizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Biogen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Philip Morris International . . . . . . . . . . . . . . . . 15
Bloomin' Brands . . . . . . . . . . . . . . . . . . . . . . . . . . M7 Procter & Gamble . . . . . . . . . . . . . . . . . . . . . . . . . 34
BNP Paribas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M4 Prologis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Boeing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,M5,M8
BorgWarner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 R Raytheon Technologies . . . . . . . . . . . . . . . . . . . . 18
Rupert Murdoch Executive Chairman, News Corp
Brinker International . . . . . . . . . . . . . . . . . . . . . . 17 Roche Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Robert Thomson CEO, News Corp William Lewis CEO, Dow Jones
Bristol-Myers Squibb . . . . . . . . . . . . . . . . . . . . . . 27 Roku . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M8
C Cadence Design Systems . . . . . . . . . . . . . . . . . . 15 S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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CanSino Biologics . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Sanofi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,28
Capital One Financial . . . . . . . . . . . . . . . . . 15,M10 ASSOCIATE PUBLISHERS, BARRON’S GROUP Mae M. Cheng, Dan Shar Schindler Holding . . . . . . . . . . . . . . . . . . . . . . . . . 18
CarMax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 MANAGING EDITORS, BARRON’S GROUP Duncan Mavin, Dave Pettit Schlumberger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5
Carrier Global . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 HEAD OF INTERNATIONAL, BARRON’S GROUP Francesco Guerrera Schnitzer Steel Industries . . . . . . . . . . . . . . . . . 15
Caterpillar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Silergy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Centene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SL Green Realty . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Charles Schwab . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 EXECUTIVE EDITOR Bob Rose SENIOR MANAGING EDITOR Lauren R. Rublin Southwest Airlines . . . . . . . . . . . . . . . . . . . . . . . . . 15
China Youzan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 DEPUTY EDITOR Alex Eule
Starbucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5
Chipotle Mexican Grill . . . . . . . . . . . . . . . . . 15,M5 Steel Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Chubb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Synalloy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M7
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

Citigroup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,M5 EDITORIAL DIRECTOR, MAGAZINE Phil Roosevelt Sysco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M7

Cleveland-Cliffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 MANAGING EDITOR, DIGITAL Matt Bemer MANAGING EDITOR, FEATURES Jeffrey Cane
Coca-Cola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 MANAGING EDITOR, ENTERPRISE Brian Hershberg
T Target . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5
Commercial Metals . . . . . . . . . . . . . . . . . . . . . . . . 15 Teladoc Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Commvault Systems . . . . . . . . . . . . . . . . . . . . . . M7 ASSISTANT MANAGING EDITORS Mary Romano, Robert Sabat Tesla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,M8
Compass Diversified Holdings . . . . . . . . . . . . M2 Texas Instruments . . . . . . . . . . . . . . . . . . . . . . . . . 15
Costco Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ASSOCIATE EDITORS Andrew Bary, Randall W. Forsyth, Jack Hough, Eric J. Savitz Thermo Fisher Scientific . . . . . . . . . . . . . . . . . . . 15
CSX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SENIOR WRITERS Bill Alpert, Daren Fonda, Reshma Kapadia, Matthew C. Klein, Leslie P. Norton, T. Rowe Price Group . . . . . . . . . . . . . . . . . . . . . . . 33
Al Root, Avi Salzman, Alexandra Scaggs, Lawrence C. Strauss
Truist Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D Darden Restaurants . . . . . . . . . . . . . . . . . . . . . . M5 Twitter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5
Deere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5 REPORTERS Lisa Beilfuss, Carleton English, Nicholas Jasinski, Evie Liu,
Delta Air Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Josh Nathan-Kazis, Teresa Rivas, Connor Smith, Ben Walsh U Uber Technologies . . . . . . . . . . . . . . . . . . . . . . . . . 21
Discover Financial Services . . . . . . . . . . . . . . M10 UBS Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S15
Dow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5 STORY EDITORS Henry Cutter, Ed Lin, Erin McCarthy Ulta Beauty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5
Duke Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5 COPY DESK Michael J. Burlingham, Richard Rescigno, Robert Teitelman Union Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,M7
UnitedHealth Group . . . . . . . . . . . . . . . . . . 25,M10
E Eli Lilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,27 EDITOR AT LARGE Jack Otter United States Steel . . . . . . . . . . . . . . . . . . . . . . . . 15
Emerson Electric . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Equifax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 AUDIO PRODUCER Mette Lützhøft DIGITAL PRODUCERS Robert Cushing, Clare McKeen V Verizon Communications . . . . . . . . . . . . . . . . . . . 15
Exxon Mobil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M5 Chris Mihal ART DIRECTORS Robert Connolly, Sue Ng
DESIGN DIRECTOR Volkswagen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
F Fiat Chrysler Automobiles . . . . . . . . . . . . . . . . . 11 W Walmart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,27
First Republic Bank . . . . . . . . . . . . . . . . . . . . . . . 34 RESEARCH DIRECTOR Pauline Yuelys RESEARCHER Dan Lam Wells Fargo . . . . . . . . . . . . . . . . . . . . . . . . . 12,14,M5
Ford Motor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,21
Z Zions Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
G GameStop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M8 MANAGER, ADVERTISING SERVICESJames H. Balmer ASSOCIATE MANAGER Ward S. McGuiness Zoom Video Communications . . . . . . . . . . . . . . M8
GCP Applied Technologies . . . . . . . . . . . . . . . . M7 NEWS STATISTICS CUSTOMER SERVICE 800-544-0422
General Electric . . . . . . . . . . . . . . . . . . . . . . . . . . M5
General Motors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 GLOBAL HEAD, WEALTH & ASSET MANAGEMENT Sterling T. Shea
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April 20, 2020 BARRON’S 5

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April 20, 2020 BARRON’S 7


Current government policies have been likened
to those once thought dangerously radical—like
“helicopter money” and modern monetary theory.

Government and
ties in funding the private sector, in ing, although, to be fair, they failed to
particular the central bank’s purchase prepare for a downturn in their notori-
of corporate debt. That includes below- ously cyclical business by using excess
investment-grade credits—politely cash to buy back stock instead of hus-

The Private Sector:

called high-yield securities or, more banding it for the inevitable rainy day.
popularly, junk bonds. Small wonder the backlash against
For a central bank to own anything share repurchases has increased fur-
other than top-grade government obli- ther since the current crisis hit. S&P

A Troubling Marriage
gations previously was considered 500 index companies spent a record
apostasy. As issuers of the nation’s $806 billion last year to buy back
currency, central banks were sup- their own stock, a significant factor in
posed to have only gilt-edged assets on the 33% total return for the large-
their balance sheets. There was an stock benchmark. Arguably, much of
unspoken rule against this arm of the cash deployed came from the 2017

government involving itself in private tax cut that lowered the top corporate
olitics makes strange long as the spending can be paid for companies, even as a creditor. rate to 21% from 35%.
bedfellows, and lately, by the expedient of the central bank’s That Rubicon was crossed after the The ability of corporations to bor-
interesting ironies. monetary printing press. financial crisis, when the federal gov- row cheaply to fund buybacks with
Not too long ago, Current government policies have ernment bailed out the major U.S. tax-favored debt is yet another exam-
Democrats rejected been likened to those once thought banks and other entities deemed too ple of government policies that fa-
two presidential hope- dangerously radical—such as “heli- big to fail. But taxpayers eventually vored the private sector, albeit in a
fuls on the left who copter money,” or cash handouts to realized a profit of more than $15 bil- manner that has long been accepted as
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would have increased government’s the public, or modern monetary lion on the Troubled Asset Relief Pro- part of the status quo. But the Fed’s
involvement in the private economy theory—just as the ideas of John May- gram, even though they lost money on purchase of corporate securities, espe-
significantly via a takeover of health By Randall W. nard Keynes were thought to be radi- a bailout of the automotive industry. cially more-speculative classes, has
care, funded by a tax on wealth. More Forsyth cal several generations ago. Another This time around, the Treasury will caused the greatest outcry in the capi-
recently, a supposedly conservative feature of the recently passed $2.3 provide a $25 billion bailout to the air- tal markets. By purchasing bonds of
Republican administration, with trillion Cares Act to support the line industry, following a 90% plunge particular companies, the central
bipartisan support, has embarked on economy—direct payments of up to in passenger traffic to the lowest level bank effectively is allocating capital to
some of the most significant govern- $1,200 for most taxpayers—echoes the since after the Sept. 11 terrorist attacks. a specific entity. Some might call this
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

ment interventions ever into the outlines of another once-radical idea, What’s different from the TARP bail- prudent investment. Others might say
private economy. that of a Universal Basic Income. out is that, unlike the banks and other it is playing favorites.
Crises have a way of doing this. Perhaps the most direct intervention financial firms whose recklessness Buying junk-bond exchange-traded
Franklin Delano Roosevelt went from so far into the U.S. economy has been caused the mortgage collapse, the air- funds, meanwhile, means passively
promising to balance the federal bud- the vast expansion of the Fed’s activi- lines’ plight wasn’t of their own mak- investing in credits. The biggest debt-
get when he ran for president in 1932, ors get the biggest weight in the ETFs.
at the depths of the Great Depression, At the same time, some of the worst
to launching the costly New Deal credits also get lumped into the basket,
when he reached the White House the so the Fed is ultimately using public
following year. money to prop up dicey debtors.
Now, with the U.S. and global

economy in an unprecedented down- icking winners may put the
ward spiral, owing to efforts to con- Fed’s independence at risk,
tain the coronavirus pandemic, the many critics worry, including
federal government has expanded the eminent observers such as
Photograph by Olivier Douliery/AFP via Getty Images

budget deficit—already running at a Henry Kaufman, the former chief

$1 trillion annual rate before the economist of Salomon Brothers.
crisis—massively. Supported by pur- The Fed’s efforts undermine the
chases of securities by the Federal Under Chairman market’s function of allocation of assets
Reserve, the deficit has soared past Jerome Powell, the in the bond market, contends Danielle
$3 trillion and counting. Federal Reserve has DiMartino Booth, CEO and chief strat-
been scooping up
The government has used these corporate debt, egist at Quill Intelligence and onetime
moneys to intervene in the private including high-yield adviser to former Dallas Fed President
bonds. While the
sector beyond what has ever been move arguably
Richard Fisher. Because the Fed is in-
done before, even in the great financial brought order to a terjecting itself into the market, inves-
crisis, arguably distorting asset values crisis-riven market, tors are effectively flying blind as to
it also carries risks,
in the process. What’s more, greater including the distor- true asset values, and might not be able
intrusions seem likely in the future, so tion of asset values. to see clearly after the market’s reset,
8 BARRON’S April 20, 2020

Up and Down Wall Street Continued

she wrote in an email. with the crisis and the collapse in tax reve-

Push Play Veteran bond investor Dan Fuss, vice

chairman of Loomis Sayles, says the Fed’s
intervention into the credit market was
necessary for the market’s continued func-
tioning. No matter that the central bank’s
nues. New York Gov. Andrew Cuomo said
on Friday that if Washington can bail out
the airlines, it should help his state, the
epicenter of the nation’s coronavirus out-
break. The fiscal pressures have extended
efforts have been working against his job to other public agencies. The New York

in Your as a manager of the Loomis Sayles Bond

fund (ticker: LSBRX) and institutional
corporate-bond portfolios.
Fuss’ specialty, honed over six decades
of investing, has been to look for bargains
Metropolitan Transportation Authority,
which oversees the city’s subways and
suburban commuter rail lines, is seeking
$3.9 billion from the federal government,
owing to the collapse in ridership.
in the bond market, just as Warren Buffett Such numbers pale in comparison with

Portfolio buys value stocks for Berkshire Hatha-

way (BRK. B)—but with a difference. The
corporate bond market often becomes illiq-
uid, and individual securities go begging
for buyers and sellers. Fuss has worked
pension shortfalls that state and local
governments face, which have swelled
even further in the Covid-19 crisis. Ac-
cording to Milliman, a consulting and
actuarial firm, the 100 biggest public pen-
that to his advantage by buying when sell- sions were only 66% funded at the end of
ers are desperate for a bid. the first quarter, down from 74.9% at the
The Fed’s entry into this market spurred end of 2019, the sharpest deterioration in
a $6.5 billion flow into investment-grade its records. The pension shortfall was
Video Games bond funds and ETFs, while high-yield
funds attracted a record $7.8 billion in the
$5.355 trillion as of March 31, up from
$5.313 trillion on Dec. 31.
& Esports ETF latest week, according to Bank of America.

As the public jumped on the Fed’s band- iven the support that the Fed
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

wagon, that eliminated the bargains Fuss and other arms of the federal
had been eyeing. Yet Fuss credits the cen- government have extended to
tral bank with bringing order to the corpo- the private sector already, where
rate market, which he says is good news. will Uncle Sam draw the line? That’s a key
Others worry, however, about the slip- question America now faces. Why are air-
pery slope that the Fed might be on by line employees or small-business owners
intervening in the private credit market. more deserving than retired teachers, po-
The next logical step would be for the cen- lice, firefighters, or other first responders, to
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

tral bank to purchase equities, which whom pensions were promised?

would represent government being an And why would the federal govern-
1 (888) 493-8631 owner of, rather than a creditor to, private ment rein in spending when it can, in
GLOBALXETFS.COM enterprise. There is ample precedent for effect, borrow without limit with support
this abroad, with the Bank of Japan ac- from the central bank? The Fed’s balance
tively purchasing Japanese ETFs. The sheet has grown by $2.1 trillion since mid-
Swiss National Bank also has been an ac- March, or roughly by half. In effect, the
tive buyer of U.S. stocks rather than just central bank has created as much liquid-
Beyond Ordinary ETFs TM
holding government securities in its
foreign-exchange reserves.
ity in the past five weeks as the federal
government will need to cover its greatly
Investing involves risk, including the possible loss of principal. Video The BOJ’s equity investments appear to expanded budget deficit as well as the
Game and Esports companies are subject to risks associated with be a logical extension of its monetary pol- Fed’s various programs to inject money
additional regulatory oversight with regard to privacy/cybersecurity concerns, icy to fight persistent economic torpor and into the private sector, John Ryding and
shifting consumer preferences, and potential licensing challenges. The deflation, after having set interest rates to Conrad DeQuadros, economic advisors to
Fund invests in securities of companies engaged in Information Technology, zero and buying Japanese government Brean Capital, wrote in a research note.
which can be affected by rapid product obsolescence and intense industry bonds. But critics contend that, by prop- “This is an economic experiment of a
competition. HERO is non-diversified. ping up Japanese stocks, it has instead magnitude that almost no one imagined,
kept alive zombie companies and pre- with consequences that will be felt for
Carefully consider the Fund’s investment objectives, risk factors, charges vented the reallocation of their assets to years to come,” they concluded.
and expenses before investing. This and additional information can be more competitive entities. The result has Not only is the Fed financing the govern-
found in the Fund’s full or summary prospectus, which are available at been a stagnant economy, exemplified by ment with printing-press money, but also it Read the prospectus carefully before investing. the Nikkei 225 stock index selling at is extending credit to the private sector in
approximately half of its 1989 peak. the same manner. Will there be a return to
Shares of ETFs are bought and sold at market price (not NAV) and are not The U.S. government’s involvement in normalcy when the crisis passes? Given the
individually redeemed from the Fund. Brokerage commissions will reduce the private sector has spurred calls for it to scope of America’s economic problems, this
returns. Distributed by SEI Investments Distribution Co. support beleaguered state and local gov- just might turn out to be the new normal. B
ernments, whose budget deficits are bur-
geoning due to increased spending to deal email:
April 20, 2020 BARRON’S 9

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For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

During these turbulent times, uncertainty seems to dominate the day.

However, an annuity is something your clients can always count on for
a steady monthly income — despite the ups and downs of the market.
Annuities can give them protected income to help cover essential
monthly expenses while the rest of their portfolio has time to recover.
Learn more at
10 BARRON’S April 20, 2020

Some things can endure even

the toughest environments.

To reprint or license content, please contact Barron's reprints department at 800-843-0008 or


Columbia Strategic Columbia Strategic Columbia Mortgage
Income Fund Municipal Income Fund Opportunities Fund
Nontraditional Bond Category Muni National Long Category Nontraditional Bond Category
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

The Overall Morningstar Rating™ is for Institutional shares The Overall Morningstar Rating™ is for Institutional shares The Overall Morningstar Rating™ is for Institutional shares




  ! " 
Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus or a summary prospectus, which contains this and
other important information about the funds, visit Read the prospectus carefully before investing.
Past performance is not a guarantee of future results. Class Inst shares are sold at net asset value and have limited eligibility. Columbia Management Investment Distributors, Inc. offers multiple share classes, not all necessarily available through
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April 20, 2020 BARRON’S 11

Morgan Stanley’s Adam Jonas sees a $10 billion
cash-for-clunkers program coming, which might
spur up to $50 billion in new-vehicle sales.

Pandemic Will Drive

third quarter without the car business program, in which Uncle Sam essen-
reopening—and few expect a shut- tially paid people to trade in old cars for
down of that length. I reached out to new ones, was a $3 billion package that
Ford CEO Jim Hackett, who talked spurred $14 billion in purchases. This

Pain and Change

about lessons learned during the time, he expects a $10 billion package
2008 global financial crisis. “Remem- leading to $50 billion in purchases.
ber, Ford didn’t take any bailout If you more than triple the size of
money,” he says. “We got a lot of com- cash for clunkers, I feel it deserves a

In the Car Business

mendation from our customers be- new name. Hear me out: clunkers gone
cause of that.” That left the company humongers. Let’s see if it catches on.
determined to be ready for the next Jonas recently raised his rating on
downturn, and it is, says Hackett (see Tesla (TSLA) to Equal Weight from
page 21). Underweight. “We think that Tesla’s
Garrett Nelson, who covers a broad relative lead on electric vehicles might

range of car businesses for CFRA, calls actually be improved coming out of
have news that feels exciting sell vehicles into weakness. Even Au- this downturn worse than the 2008 the downturn, as other companies
only because I’ve been house- toZone (AZO), O’Reilly Automotive crisis and fears that discretionary pare back on what they see as nones-
bound for a month. My car (ORLY), and other parts chains, which spending could take longer to come sential spending,” he says.
keys turned up on the floor benefit when cash-strapped consumers back. He isn’t ruling out bailouts. “It Seth Basham at Wedbush, who cov-
near the patio door. They had fix up their old cars for longer, face would probably be some form of tax- ers car dealers and parts chains, says
gone missing two weeks before, crippling store closures as few miles payer money, similar to what the gov- AutoZone is a favorite for its strong
and my usual response to that are put on the nation’s fleet. The ernment is doing with the airlines,” balance sheet and focus on do-it-your-
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

involves retracing my steps, blaming broader problem is that the U.S. car- says Nelson. “You’re taking an equity selfers. Parts chains in general should
others, then raising metaphysical ques- and parts-making businesses employ stake in exchange for taxpayer funds to see healthy sales by the end of this year
tions about things being, yet not being, By Jack Hough nearly a million workers, and the car- keep them afloat.” Nelson has a Hold into next year, he adds. He’s also warm-
where I know that they are. But this and parts-selling businesses, another on Ford and a Sell on GM. He sees a ing to CarMax: “We think they’re going
time, I had the luxury of not needing to two million. These workers are also dividend cut looming for GM, whereas to emerge from this crisis a stronger
go anywhere. So I swung into inaction, buyers, not just of cars, but of smart- Ford already has suspended its payout. company, relative to a lot of competitors
and now my decisive apathy has paid phones, sneakers, and, under happier He rates Fiat Chrysler a Buy for its who are going to be weakened or po-
off. It feels good to be a winner. circumstances, meals out and vaca- “much better situation from a balance tentially end up going out of business.”
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

What doesn’t feel so good is think- tions away. Layoffs and furloughs al- sheet perspective,” and the momentum Ford’s Hackett says ride-sharing
ing about what all this staying at home ready have begun. its new Ram 1500 pickup had gener- services like Uber and Lyft weren’t
means for the car business. Auto sales “We do have a few people that are ated before the shutdown. cutting into his business, although
fell 27% in March, the Commerce De- calling and canceling,” says Mark Boles Analyst Adam Jonas at Morgan pundits cited them as long-term threats
partment reported this past week. Re- of Boles Automotive, a repair shop Stanley expects government help for to car ownership. The pandemic could
member, business shutdowns became outside Charlotte, N.C. “If, when they the car producers, but not bailouts. “We make drivers think carefully about
widespread only in mid-March, so call and cancel, it’s because they’ve lost don’t think that the manufacturers are shared spaces, including cars, he says,
April’s decline is likely to be much their job, that’s terrible to hear. When I going to fail the way they did back in noting that Ford is working on vehicle
worse. Most car dealers are closed. start getting those phone calls more 2008 and 2009,” he says. “But the in- interiors featuring nanosurfaces that
That’s obviously terrible news for frequently, I’ll start to really worry.” dustry is going to need support, and can kill viruses on contact.
General Motors (ticker: GM), Ford Ford this past week warned that it this time around we think the support Morgan Stanley’s Jonas envisions a
Motor (F), Fiat Chrysler (FCAU), and would take a big loss for the first is going to come from the bottom up to long list of changes after the pandemic:
other car makers, and there will be the quarter, but also said it has enough the top, in the form of a consumer stim- less commuting, less car renting, youn-
usual cascade of pain. Falling vehicle cash to make it through the end of the ulus.” The original cash-for-clunkers ger cars, fewer dealers, more digital
sales will hurt component manufactur- and touchless dealer services. “When
ers, such as BorgWarner (BWA) and you think about the car dealer busi-
Aptiv (APTV). As cars continue to roll ness, there are so many unpleasant-
off leases, used inventory will swell; BARRONS.COM/PODCASTS ries,” he says. “The lack of transpar-
prices are already falling. Megadealers, ency, and the different pricings. It’s got
including AutoNation (AN) and Car-
Max (KMX), will be stuck with inven-
tory that is losing value, but they will
Barron’s Streetwise to change. I’m kind of hopeful that one
of the silver linings here is that this
could accelerate a better experience.”
have it better than mom-and-pop deal- In a new weekly podcast by Barron’s, columnist Jack Hough I’m preparing a micro-stimulus at
ers, which lack the same online sales looks at the companies, people, and trends you should be the end of this year, when I’m due for a
savvy and access to capital. watching. This is Wall Street like you’ve never heard before. new minivan. That assumes the kids
Rental companies such as Hertz Subscribe to Barron’s Streetwise on Spotify, Apple Podcast, can’t talk me into a sport-utility vehicle
Global Holdings (HTZ) and Avis or your favorite listening app. by then, and that I’m not locked into
Budget Group (CAR) could have to another standoff with my keys. B
12 BARRON’S April 20, 2020

Bank Earnings confidence—and why shouldn’t they?

Their banks were well-capitalized going
into the Covid-19 crisis, while aggressive
“At the end of the day, the message is
Were Terrible. fiscal and monetary policies put into
place by the Federal Reserve and the U.S.
government were designed to facilitate
clear. Be disciplined about price, don’t
It’s Time to Buy In. lending with little risk to the banks
overreact to headline news and be a Knowing that, however, hasn’t been
enough for investors who sold after the
recent rally.
long-term investor.” Risks aside, banks are well capitalized
and supported by Fed and U.S. policy
“There’s a dichotomy in the market,”
David Konrad, managing director at D.A.
Davidson, tells Barron’s: On one hand, in-
vestors understand that future quarters of
- Jim Cullen, Chairman & CEO By CARLETON ENGLISH loan-loss provisions are likely and that the
banks will have their arms around the

ank stocks opened the earnings situation. On the other hand, he adds, in-
season with a bang this past week— vestors are asking why they should buy in
and not the good kind, as shares of now given the uncertainty and risks.
High Dividend Value Equity the nation’s six largest banks fell
after they released first-quarter results. Of course, there are reasons to be in-
But there may be more hope for the vested in the big banks—it’s just a matter
beaten-down sector than what was implied of having a longer time horizon and under-
Enhanced Equity Income by those drops.
Even amid the coronavirus crisis, there
standing that it will be a bumpy ride.
Consider Bank of America: The bank
had certainly been hope heading into earn- notably struggled in the years after the
ings. After tumbling 28.6% in March, the financial crisis, taking years to work
PHLX/KBW Bank Index gained 25% dur- through legacy issues long after its rivals
Value Equity
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

ing the week ended April 10, its best week had moved on. But these days, the North
since May 2009. Then came the earnings. Carolina–based bank is well-equipped for
One by one the six banks—JPMorgan the crisis—even when those expected loan
Chase (ticker: JPM), Wells Fargo (WFC), losses start to arrive.
International High Dividend Citigroup (C), Bank of America (BAC), “I don’t think people give Bank of
Goldman Sachs Group (GS) and Morgan America enough credit for how much it
Stanley (MS)—reported their results. One derisked its loan book,” Konrad says,
by one their shares tumbled. Through drawing comparisons to JPMorgan Chase,
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

Emerging Markets High Dividend Thursday, the KBW Bank Index had
dropped 8.7% on the week.
which gets credit for its so-called fortress
balance sheet. He has a Buy rating on
It’s not hard to see why. The six banks Bank of America and a Neutral rating on
boosted their loan-loss reserves by a col- JPMorgan.
lective $25 billion this quarter on the ex- And banks won’t be a bad place to put
pectation of large losses on bad loans, your money if the market continues to
causing their profits to drop in excess of rally, says Société Générale analyst An-
30%, with Wells Fargo notching an 89% drew Lim. Yes, areas of concern will per-
fall in profits. Worse still, the banks will sist. Banks can expect to see increases in
almost certainly need to increase their net charge-offs and near-zero interest
loan-loss reserves in coming quarters. rates are doing the banks few favors out-
“It’s like watching a car wreck that side of a cheaper cost of funding. But un-
hasn’t finished,” Chris Marinac, director of precedented measures taken by govern-
For further information, please contact Schafer Cullen Capital Management research at Janney Montgomery Scott, tells ments and central banks are expected to
212.644.1800 • • Barron’s. cushion some of the blows.
If investors were looking for hints from Lim recommends Goldman Sachs, Mor-
CEOs that the bad times might be over gan Stanley, and JPMorgan because of the
soon, they didn’t get any. Morgan Stanley strength of their investment-banking busi-
CEO James Gorman—who, incidentally, nesses. The financial advisory activity may
Schafer Cullen Capital Management is an independent investment advisor registered under the Investment
has just recovered from the coronavirus— be slow, but increases in trading and debt
Advisers Act of 1940. This information should not be used as the primary basis for any investment decision stated the obvious when he said the bank capital markets this year and next will
nor, should it be construed as advice to meet a particular investment need. It should not be assumed that any would not be hitting its aggressive targets serve as offsets. “While the economic im-
security transaction, holding or sector discussed has been or will be profitable, or that future recommendations outlined just a quarter ago. “A CEO who pact of Covid-19 is uncertain, what is cer-
or decisions we make will be profitable or equal the investment performance discussed herein. A list of all stands by their short-term targets that tain is that the policy response from gov-
recommendations made by the Adviser in this strategy is available upon request for the 12 months prior to the were set right before this virus hit, I don’t ernments and central banks is enormous
date of this report. know what planet they’re on,” Gorman and will keep growing,” he says.
said. If he’s right, those banks might just be
The bank CEOs did exude a sense of starting to look pretty good. B
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or
April 20, 2020

with you in mind
Partnership at every step. That’s our commitment to you.
14 BARRON’S April 20, 2020

R E VIEW 24,242.49
Dow Industrials: +523.12
Dow Global Index: +7.21
10-year treasury note: -0.06

The Cure HE SAID

Stocks slid, despite data suggesting
the apex of Covid-19 in New York had “Unless people
passed, rebounded as earnings season
began, and then lost ground as JP- feel safe and secure
Morgan Chase and Wells Fargo pre-
dicted a deep recession, and grim data and confident
on oil, retail, jobs, and manufacturing
piled up. An upbeat early report on around the virus,
Gilead Science’s Covid-19 treatment,
however, dispelled the gloom and the economic
lifted stocks on Friday. And so the
rally continued. For the week, the impact will
Dow industrials rose 2.2%, to
24,242.49; the S&P 500 advanced continue in some
3.0%, to 2874.56; and the Nasdaq
Composite surged 6.1%, to 8650.14. way, shape,
Curves flattened, but the death toll

The Amazon
Goldman Sachs CEO David Solomon,
continued to rise. Unemployment on a quarterly earnings call
THE NUMBERS claims soared past 22 million. Retail
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

sales plunged 8.7% in March. Meat

producer Smithfield Foods closed
three facilities, including a South
Dakota pork plant with over 600
Mortgage Bankers Association Covid-19 infections, and warned of
estimate of mortgages not paid meat shortages. Boeing said it would
More than 20 million Americans have applied for as of April 5, up from 2.73% the call back workers in Washington state
unemployment benefits in the past four weeks. But at week of before to resume airline production, while 10
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

10%, the numbers are moving the other way. of the top 12 U.S. airlines agreed to
The company has hired more than 100,000 people over accept assistance from the govern-
the past month, and just announced plans for another ment. told users seek-
75,000. Its stock is also moving in the opposite direction ing food deliveries that they will have
from the broader market—rising 28% this year, to an Fall in first-quarter year-to-year to join a wait list until it can add ca-
all-time high this past week. sales of PCs, according to IDC, pacity, and stripped its website of Testing the Oil Deal
Amazon now employs 840,000 people, still a distant a result of snarled supply sales gimmicks. U.K. Prime Minister Some 23 nations, including U.S., Russia,
second to Walmart, which has a payroll of more than chains, particularly in China Boris Johnson left the hospital after a and Saudi Arabia, agreed to cut daily oil

$6.3 T
two million. But Amazon increasingly looks like the serious bout with the virus. output by 9.7 million barrels in May and
future of the American workforce: a flexible armada of June; reductions will decline from there.

Illusrtation by Elias Stein; photograph by David Paul Morris/Bloomberg

workers trained to respond as quickly to digital com- Debate Over Reopening After the deal, West Texas Intermediate
mands as to in-person ones. New York formed an alliance of seven prices slid, driven by fears that the cuts
The downside of working at Amazon also fore- U.S. commitments to rescue the states to coordinate a ”reopening,” mir- would not be enough to support prices.
shadow bigger worries for U.S. workers. Part-timers economy: $2.3 trillion in fiscal roring West Coast and Midwest coali- Meanwhile, in the U.S., producers began
make up an unspecified portion of the force—the com- funds, $4 trillion from the Fed tions. That set up a conflict with Presi- shutting down active wells. A particular

pany won’t say how much—and have fewer benefits. dent Donald Trump, who declared problem beyond the Covid-19-driven
Warehouse work can be mechanical and repetitive, and “total” authority to determine a re- plunge in demand: rapidly shrinking
some claim the company’s safety processes are uneven, opening, only to backtrack and agree to storage capacity for unsold oil.
putting employees at risk. A “sickout” at Whole Foods “consult” with the governors, outlining
Markets last month called attention to these issues, Estimate of unemployment by guidelines to reopen but no national Politics in a Pandemic
though an Amazon spokesperson called the dissenters a June, from a Wall Street Journal testing plan. Trump also said the U.S. Former Vice President Joe Biden won
“small but vocal group” whose claims are inaccurate. survey of 57 economists would freeze funding to the World endorsements from rivals Sen. Bernie
And Amazon doesn’t expect all of its new hires to stay Health Organization. Stimulus pay- Sanders and Sen. Elizabeth Warren, and
for the long term. The company highlighted one recent To get Numbers by Barron’s ments went out to some taxpayers— former President Barack Obama. In a
hire who will probably leave one day—a Dallas preschool daily, sign up wherever paper checks will have the president’s Wisconsin election conducted during the
teacher it expects to stick around “until she can return to you listen to podcasts or at name on them—as a small-business pandemic, a Democratic judge beat out a
the classroom.” She’ll have a lot to teach the next genera- loan program exhausted its funding, Republican incumbent, endorsed by
tion of American workers. — Avi Salzman and talks on a new stimulus continued. Trump, for the state Supreme Court.
April 20, 2020 BARRON’S 15

P R EV IEW Tuesday Netflix reports first-quarter results. The stock has Sign up for the Review &
been one of the best performers in the S&P 500 index Preview daily newsletter at
this year, and recently a huge beneficiary of social distancing.

Monday 4/20 sus estimates are for a seasonally ad-

justed annual rate of 660,000 new
Cadence Design Systems, Equifax, single-family houses sold, a steep 13.7%
Halliburton, IBM, Truist Financial, drop from February’s 765,000 rate.
and Zions Bancorp report quarterly
results. IHS Markit releases its Manufactur-
ing and Services Purchasing Managers’
The Federal Reserve Bank of Chicago Index for April. Economists forecast a
releases its National Activity Index for 36 reading for the Manufacturing PMI,
March. Economists forecast a minus down from March’s 48.5 figure. The
0.56 reading, below February’s 0.16. Services PMI is seen coming in at 40,
in line with the March data.

Tuesday 4/21 The Department of Labor reports

initial jobless claims for the week end-
Chipotle Mexican Grill, Chubb, ing on April 18. Over the past month,
Coca-Cola, Emerson Electric, 22 million people have applied for un-
HCA Healthcare, Lockheed Martin, employment benefits, roughly double
BEGIN WITH COVID-19 Philip Morris International, the total in all of 2019.
Prologis, and Texas Instruments

Steel’s Big Steel Giants

Nucor and U.S. Steel Stocks
report earnings.
Friday 4/24
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

Versus the Market Charles Schwab webcasts its Spring

Business Update. CEO Walt Bettinger American Express, Sanofi, and Ver-

Meltdown S&P 500 Index

United States Steel
will discuss the firm’s strategic focus.

The National Association of Realtors

reports existing-home sales data for
izon Communications hold confer-
ence calls to discuss quarterly results.

The Census Bureau releases the du-

Credit Suisse last week warned that the steel industry is March. Consensus estimates are for a rable goods report for March. Consen-
facing a “perfect storm.” That may be a cliché, but it’s not an seasonally adjusted annual rate of 5.47 sus estimates are for a 11% decline in
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

exaggeration. Covid-19 is flattening car demand (there’s lots 0 million homes sold, 5.2% below Febru- orders for manufactured durable
of steel in cars), energy prices are down 67% (lots of steel in ary’s 5.77 million figure. goods. It would be the largest monthly
oil production), and more capacity is coming. Credit Suisse decline since orders plummeted 18.4%
analyst Curt Woodworth couldn’t take it; he downgraded -50 in August of 2014. Excluding transpor-
shares of mini-mill Nucor to the equivalent of Hold and Wednesday 4/22 tation, orders are expected to fall 6%,
dropped his price target by $9, to $45 a share. after edging down 0.6% in February.
All of Wall Street is bearish on steel. Only 40% of analyst -100 AT&T, Baker Hughes, Biogen, CSX,
ratings for steel stocks are Buys, compared with the average 2019 ’20 Delta Air Lines, Kimberly-Clark, Coming Earnings
Consensus Estimate Year ago
Buy-rating ratio for Dow stocks of 55%. Steel analysts have to NextEra Energy, SL Green Realty,
pick winners and losers within the sector, and the low ratio
Steel-mageddon and Thermo Fisher Scientific report
IBM (Q1) $1.82 $2.25
signals that no one can find winners right now. Select Domestic Steel Company quarterly results. T
Woodworth thinks that steel use for U.S.-produced cars Values Divided By Steel Chipotle Mexican Grill (Q1) 3.00 3.40
will fall 70% to 90% in the second quarter. Benchmark steel Making Capacity The Federal Housing Finance Lockheed Martin (Q1) 5.81 5.99
Netflix (Q1) 1.61 0.76
prices are off 11% this year, to $520 a ton, far from the over Agency releases its Home Price Index
$800 per ton Philip Morris International (Q1) 1.13 1.09
$900 in 2018, which was boosted by trade-war tariffs. On for February. Expectations are for a Proctor & Gamble (Q3) 1.11 1.06
average, steel stocks are down more than 40%, year to date. . 0.4% gain, similar to January’s rise. Texas Instruments (Q1) 1.02 1.26
Nucor and peers Steel Dynamics, Commercial Metals, 700 The Coca-Cola Co (Q1) 0.45 0.48

and Schnitzer Steel Industries have slid about 35%. Blast- Travelers (Q1) 2.78 2.83

furnace-based producers, such as United States Steel,

Thursday 4/23 More Earnings on Page 36.

ArcelorMittal, and Cleveland-Cliffs are off closer to 50%. Consensus Estimate

Day Consensus Est Last Period
Another measure of the pain: Total market capitalization Capital One Financial, Citrix Sys-
T Mar. Existing Home Sales 5,465,000 5,770,000
of U.S. steel producers is roughly $30 billion, or about $200 500 tems, Eli Lilly, Intel, Invesco, Old TH Mar. New Home Sales 660,000 765,000
per ton of capacity. But it costs $1,000 to $2,000 per ton of Dominion Freight Line, Southwest F Mar. Durable Goods -11.0% 1.2%
capacity to build a new steel mill. And Woodworth sees Airlines, and Union Pacific report Apr. Michigan Sentiment - f 71.0 71.0
some eight million tons of new capacity arriving in 2021. earnings. Unless otherwise indicated, times are Eastern. a-Advanced;
f-Final; p-Preliminary; r-Revised Source: FactSet
Elias Stein

That’s a big number; U.S. mills made only 95 million tons in 2018 ’19 ’20
For more information about coming economic reports—
the past year. That capacity should keep a lid on profits, even Note: Debt and market capitalization The Census Bureau reports new resi- and what they mean—go to Barron’s free Economic
Sources: FactSet; Bloomberg Calendar at
after the economy regains its health. — Al Root dential home sales for March. Consen-
16 BARRON’S April 20, 2020

Why Business Won’t

workforce is employed in 15 of the such thing as remote work or curbside
highest-contact industries—or some service. Of the most contact-intensive
“Even if the
27.3 million people who earn nearly occupations, according to analysis by green light
$1.3 trillion annually. the Federal Reserve Bank of St. Louis,
is given

Come Back So Easily

“Because of the risk of renewed barbers, hair stylists, and cosmetolo-
virus spread, the public will have to be gists top the list. According to market today, it’s
persuaded that any plan for partial data firm Statista, hair, skin, and nail
reopening is safe,” said David Choi and salons in the U.S. generated roughly
too soon. I
David Mericle, economists at Goldman. $5.24 billion in total revenue in 2018. have to look
After all, they added, “most of the in- Sara Turack, owner of a 12-chair out for my
crease in social distancing in the U.S. salon in Omaha, Neb., said she’s plan-
Until there is a coronavirus treatment or vaccine, many industries expect has been a voluntary reaction to virus ning for her stylists to treat customers employees
social distancing to take a toll on sales even after states lift lockdowns fears, not a response to government like hospital patients when the business and my
lockdown orders.” reopens, using protective gear and stag-
While the onus around lifting lock- gering appointments. “We’re right up customers.”
down orders will fall to states, some of there in someone’s personal space,” she David Lamb,
the burden in keeping consumers safe said, adding that a lot of stylists are Alabama
will rest on businesses themselves. questioning whether they should stay in
In Montgomery, Ala., David Lamb the industry after the pandemic. “I’m
has flipped his dine-in Frutta Bowl hopeful that my stylists come back,” she
restaurant to a curbside business, a shift said, “but I can’t be sure.”
he doesn’t expect to fully reverse once While Turack expects some pent-up
Gov. Kay Ivey begins to ease lockdown demand from customers, as people are
restrictions. Recently, business has able to get their hair cut and colored
improved, he said, to about 50% of again, she thinks some changes will be
previrus sales from 25% two weeks ago. permanent. Some people have already
“This area is strongly pro-Trump. gotten used to doing their hair them-
People really pay attention to what he selves, she said, and that’s not to men-
says, and his message seems like it has tion how mass job losses across the
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

been a little more hopeful,” Lamb said. country may affect demand for things
“I can tell from people’s behavior that like salon services. “We all have to
they are not worried.” wonder, will the economic impact
Lamb, though, is worried. Even come later?” she said.
when restaurants are again able to seat The impact, of course, goes well
diners, he says he plans to continue beyond small businesses. There are
operating in restricted ways longer than similar concerns for companies across Barbers, hair styl-
ists, and cosmetolo-
he needs to. “Even if the green light is the travel sector. How, for example, can gists are in the most
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

By LISA BEILFUSS ing prospects and hopes for a Covid-19 given today, it’s too soon. I have to look airlines keep customers and staff safe contact-intensive

cure. out for my employees and my custom- in confined cabin space? industry. Here,
Haircrafters Barber
he grand reopening of the The urge to reopen the economy, ers,” he said. Doug Parker, CEO of American Shop in New York
U.S. economy is at hand. particularly in light of the staggering For many businesses, there’s no Airlines (ticker: AAL), said in a video on a recent day,
Now it’s important to get it number of job losses and probably a
right, or it could be the double-digit decline in second-quarter

Chris Mihal (Illustration); Brittainy Newman/T he New York Times/Redux (photograph)

prelude to a bigger and more gross domestic product, is understand-
economically devastating able. But a rush to get back life back to
closing. normal raises the risks of a relapse—
Thursday brought perhaps the best and setting the recovery back even fur-
news in weeks on the battle against the ther. If confidence isn’t restored, con-
coronavirus pandemic, with President sumers may refrain from spending
Donald Trump unveiling a three-phase even after the all-clear is finally given—
state-driven strategy to reopen America particularly the older Americans who
to commerce, and companies like are most vulnerable to Covid-19. For
Gilead Sciences (ticker: GILD) report- perspective, Americans over 55 account
edly seeing progress on the treatment for 40% of consumer spending, said
front. What’s more, some of the hardest- Torsten Sløk, chief economist at
hit areas like New York believe they Deutsche Bank Securities.
have seen a peak in the number of new Economists at Goldman Sachs say
cases, and states around the country their U.S. Lockdown Index, a measure
are banding together by region to plan of the GDP-weighted share of the coun-
coordinated reopenings. try that has enforced varying stay-home
For their part, investors have been orders, has risen to 86%. A quarter of
buying into the reopening hype. The small businesses across the country
S&P 500 index, already up 28% after were already closed at the beginning of
its bear-market low on March 23, leapt April, with many more shutting since
2.7% on Friday to 2875 on the reopen- then. More than a fifth of the American
April 20, 2020 BARRON’S 17

message on Wednesday that the company their portfolios. That means overweight
would change seating policies and reduce health-care and communications-services
on-board food and beverages to limit ser- holdings and some caution around discre-
vice contact. In particular, Parker said tionary sectors.

that American would block 50% of stan- “The market is pricing in a fairly linear
dard middle seats on board, and would recovery over the next three to nine
give flight crew authority to reassign seats months,” he said, “but it’s likely to be more
to improve distance between passengers. start-stop with progress and setbacks
While measures like those could help along the way.” The market expects the
customers feel more comfortable about air economy to be back to normal by 2021, but
travel, it’s not clear how sustainable such that doesn’t leave much of a margin of
efforts could be for the longer term. “Air- safety, given the uncertainty, he said.
lines aren’t designed to run at half-capac- Some analysts have tried to map out
ity,” said David Lefkowitz, an equity strat- reopen scenarios. Deloitte Consulting and
egist at UBS Global Wealth Management. (CRM) came up with
And when it comes to staying in a hotel,
you can’t be sure who stayed there before
four, though their unwillingness to assign
probabilities speaks to the inability to
you. “There are a lot of questions around predict what happens next. On the bright-
how practical this all is,” he said. “This est end of the spectrum, the analysts think
will weigh on people’s thinking.” it’s possible that the virus could pass
The same is true for many restaurants. without a second wave, allowing the econ-
While takeout and delivery services have omy to begin rebounding later this year as
been a lifeline for restaurants large and confidence slowly returns. At the other
small during the pandemic, for many it’s end is a new world of lone wolves, where INVESTMENT EXPERIENCE THROUGH 30 MARKET CYCLES1
not enough to cover overhead for an ex- rolling waves of the disease continue to
tended period, should consumers con-
tinue to stay away. Brinker Interna-
rock the globe for longer than anyone was
prepared for, creating widespread social
tional (EAT), owner of the Chili’s and
Maggiano’s chains, said on April 2 that
unrest, leading to increased isolationism
and growing government surveillance.
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

virtually all of its restaurants remain open As is often the case, the reality of what’s
for to-go orders, and off-premise sales to come probably lies somewhere in the
have more than doubled from a year middle of this rose-colored-to-dystopian
earlier. Still, that amounts to only 30% to spectrum. The virus will continue to It takes conviction to see beyond the volatility in today’s
35% of prior-year sales, Brinker said. spread, and new waves will probably markets. PGIM brings expertise across asset classes
Given so much uncertainty around how emerge, but consumers will resume some and risk management rigor to the search for consistent
long the virus will linger, how quickly a activities, and businesses will adapt. Those
long-term returns.
vaccine will come and how effective it will that take precautions will be better off, and
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

be, and how the trauma will affect con- so too will the U.S. economy, if officials, Find out more at
sumer behavior in the months and years to customers, and business owners accept
come, Lefkowitz says that he is advising that attempting to resume normalcy too
UBS clients to maintain a defensive tilt in soon will only do more economic damage. B

High-Contact Occupations
Percent of
Occupation Proximity Index U.S. Workforce
Barbers, Hairstylists & Cosmetologists 92.17 0.87
Occupational & Physical Therapy Assistants & Aides 90.5 0.08
Home Health & Personal Care Aides 90.25 1.28
Therapists, Veterinarians, Nurses & Midwives 88.09 3.22
Supervisors of Food Preparation & Serving Workers 88 0.67
Health Care Diagnosing or Treating Practitioners 86.19 1.22
Supervisors of Personal Care & Service Workers 84.5 0.09
Health Technologists & Technicians 82.73 2.06
Pilots, Air Traffic Controllers & Flight Attendants 81.6 0.22
Other Health Care Support Occupations 80.2 0.91
Preschool, Elementary, Middle, Secondary 79.54 3.80
& Special Education Teachers
Data as of 12/31/19. 1Represents PFI’s asset management expertise through PGIM and its affiliates and its predeces-
Other Teachers & Instructors 79 0.51 sors. For additional information related to market cycles visit:
Motor Vehicle Operators 75.56 3.24 © 2020 Prudential Financial, Inc. (PFI) and its related entities. PGIM, Inc., is the principal asset management busi-
ness of PFI and is a registered investment advisor with the US Securities and Exchange Commission. PGIM is a
Other Personal Care & Service Workers 75.5 1.96
trading name of PGIM, Inc. and its global subsidiaries. The PGIM logo and the Rock symbol are service marks of PFI
Food & Beverage Serving Workers 75.17 1.48 and its related entities, registered in many jurisdictions worldwide.

Source: St. Louis Fed

18 BARRON’S April 20, 2020
try, Tusa says. Elevators, he noted in a
recent report, “are like the aircraft
engine of the building, a technical,
mission-critical piece of equipment for
Raytheon which failure is not an option.”
Otis notes that about a third of the
16 million elevators around the world
And 2 Units are at least 20 years old. About 80%
of its earnings come from stable ser-
vices revenue. The company’s me-
Take Flight
dium-term goal is high single-digit
annual growth in earnings per share.
Earnings may decline 14% this year, to
$1.94 a share, before rebounding to
$2.20 in 2021.
With a high tax rate of 33% de-
The three stocks that have now pressing earnings, Tusa prefers to
emerged from the United value Otis based on enterprise value
Technologies-Raytheon deal offer (equity market value, plus net debt)
divided by earnings before interest,
investors multiple opportunities. taxes, depreciation, and amortization,
or Ebitda, which is more reasonable at
around 12.5, based on this year’s pro-
jected results, and represents a dis-
By ANDREW BARY count to rivals Kone (KNEBV.Fin-
land) and Schindler Holding (SCHN.
hree industrial companies will consume spare parts.” jets from airline fleets will hurt its Switzerland).
have made their debut at Calling Raytheon Technologies a lucrative spare parts business. But it Carrier is a top maker of air-condi-
possibly the worst time for “lower risk” way to invest in aero- should benefit in the coming years tioning and heating systems. It is the
any business. space, compared with Boeing (BA) from an upturn in profits on its new deep-value stock of the three, trading
Yet the three—Ray- and Airbus (AIR. France), he has a jet engine (called the geared turbofan) at $13, or about 10 times this year’s
theon Technologies Buy rating and a $80 price target on for narrow-body Airbus planes. projected earnings per share. A big
(ticker: RTX), Otis World- the stock. In the merger, Raytheon holders knock against Carrier is its heavy net
wide (OTIS), and Carrier Global During 2019, United Technologies received 2.335 shares of Raytheon debt of $10 billion, or five times esti-
(CARR)—all look appealing, despite a and Raytheon projected $8 billion to Technologies for each of their shares, mated 2020 pretax cash flow (Ebitda).
downturn that will sap this year’s re- $9 billion in free cash flow in 2021 for while United Technologies holders Most companies like to keep the ratio
sults. Their emergence follows the the new Raytheon Technologies. But received one share of Raytheon Tech- of debt to Ebitda to three times or less.
completion earlier this month of the $6 billion now looks more likely, with nologies, one of Carrier, and a half- Wolfe Research analyst Nigel Coe
merger between Raytheon and United $7 billion to $8 billion—about $5 a share of Otis for each United Technol- began coverage of Carrier with an
Technologies. share—possible in 2022. That is ogies share. Outperform rating and a $26 stock
Raytheon Technologies is by far the against $7.5 billion last year and a pro- “Raytheon Otis recently traded at $45, and has price target. He sees “substantial op-
largest of the three, with a market jected $4.5 billion for 2020. the highest valuation among the three, portunities to improve margins and
value of $95 billion. It consists of “Not exactly the way we had ex-
Technologies at 23 times projected 2020 earnings of pay down debt,” according to a note.
United Technologies’ commercial air- pected to start this great company, ran into the $1.94 a share. This reflects Otis’ posi- Coe projects $1.2 billion of free
craft operations, including the Pratt &
Whitney engine business; a defense
but we’ll get through it,” Greg Hayes,
Raytheon Technologies CEO (and
buzz saw of tion as one of the five global leaders in
elevators and the only elevator pure
cash flow this year, rising to $2 bil-
lion by 2022 or 2023. Revenue this
unit, and all of Raytheon, one of the former boss of United Technologies), the biggest play in the U.S. stock market. year is expected to be down 15%, to
leading defense contractors. Its told Fox Business in early April. The downturn in JPMorgan analyst Stephen Tusa $16 billion, with reported earnings off
shares, at a recent $65, trade for 17 company, he said, would rely on its began coverage of Otis with an Over- by a third. Carrier, he wrote, is “best
times projected 2020 earnings of defense businesses, with their $70 aerospace weight rating and a $53 price target. viewed as a deleveraging and restruc-
$3.82 a share. billion contract backlog, for growth history.” “It’s a strong franchise in an attrac- turing story—perhaps not the jazziest
The bull case for Raytheon Tech- in the near term. tive industry and better earnings visi- equity story, but one that we think
Carter Copeland,
nologies is that its relatively stable One risk for Pratt & Whitney is Melius Research bility in the downturn,” relative to can deliver significant upside, if exe-
defense business—accounting for that accelerated retirement of older analyst. others in the building-services indus- cuted well.”
about 65% of projected revenues in Carrier may set a dividend that
2020 and 2021—should anchor the could be 4%, according to Barclays
company until a rebound in the hard- 3 Stocks From 2 analyst Julian Mitchell. Raytheon
hit aerospace units comes in 2022. Deal-making by the former United Technologies has now led to the creation of three industrial stocks. and Otis are each expected to yield
The company “ran into the buzz Recent Market 2020E 2021E 2020E 2021E Net Debt
about 2%.
saw of the biggest downturn in aero- Company / Ticker Price Value (bil) EPS EPS P/E P/E (bil) In sum, Raytheon Technologies is a
space history,” says Carter Copeland, Raytheon Technologies / RTX $62.45 $94.7 $3.82 $4.69 16.4 13.3 $22
mix of a stable defense unit and a re-
an analyst with Melius Research. “You covering aerospace division. Otis offers
Otis Worldwide / OTIS 45.62 19.8 1.94 2.20 23.5 20.8 4.8
have to believe that people will hop on a pure play on an attractive global oli-
Carrier Global / CARR 12.89 11.2 1.40 1.70 9.2 7.6 10
planes again and that the industry will gopoly, while Carrier is an industry
need new jet engines and that planes E=Estimate Sources: Bloomberg; Barclays; company reports leader with a depressed price. B
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April 20, 2020 BARRON’S 19




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April 20, 2020 BARRON’S 21

Ford Will Get

Back Into Gear,
Its CEO Promises
The auto maker’s postcrisis strategy includes alliances that could help
it drive successfully into a future of electric and self-driving vehicles

By JACK HOUGH like that.

arron’s spoke recently with On ride-sharing services, such as
Jim Hackett, CEO of Ford Uber Technologies (UBER) and
Motor, about the com- Lyft (LYFT):
pany’s ability to weather the There were pundits who said, “Hey,
pandemic and the future of your business won’t be as big in the
pickup trucks, ride-sharing future because everybody won’t own a Jim Hackett, above, space is a good thing in the design of you really want to be ready. ” So, we are
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services, electric vehicles, vehicle.” Ask somebody now, “How do says, “We have vehicles. really ready this time.
125,000 people
and more. His edited comments follow. you feel about the impact of the virus working at home Our balance sheet is in exceptional
and your own vehicle?” I haven’t got now. And the pro- On autonomous vehicles: shape. We had a provision that we
ductivity is really
On the scale of the downturn: any data for this, but dynamically, high. On balance,
It has been our estimation that auton- didn’t want to use, but it was there for
This is so unique that the word unique people are going to want to keep con- though, I can’t wait omy would find its application in the taking. So we drew that down. We
doesn’t do it justice. I was in a CEO role trol of their own spaces in the future, to get back and be moving both people and goods. So we suspended dividends so we can con-
among my team.
[at Steelcase, the office-furniture com- and that includes their vehicles. I miss that.” created a dual bet. It’s a little more serve cash. Management took pay
pany] during 9/11. What’s the same expensive, but that’s why we had a deferrals. We did all the kinds of
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

about 9/11 and the pandemic is that it On market share: partner in Volkswagen [VOW.Ger- button-pushing.
altered your sense of reality instantly. The Ford brand imbues this sense of many]. And this explains a little bit of I’m amazed at how fast and how
What’s different is, after 9/11, business extreme reliability and trust in the our investment in [electric-truck solidly all of that worked. I think peo-
continued. We didn’t turn off factories company when all else is kind of up- maker] Rivian, because Rivian an- ple are going to be pleased with Ford’s
all over the world. ended in their lives. It’s a safe bet. Our The nounced that it has won contracts performance through yet another cri-
market share in China went up after from to electrify home- sis. It will just be another chance for
On restarting the economy: the virus outbreak there. So we think
Autonomous delivery vehicles. Now, as we look us to distinguish the blue oval.
If you start too soon, you do more that our market share will go up, too, Advantage back at this pandemic, we’ll go, “Hey,
damage. If you start too late, you do because of this predictability. “As we look back how valuable would an autonomous On working from home during
damage. This is why the turn-on prob- at this pandemic, vehicle have been to run errands for the shutdown:
lem is really hard. I’m really optimis- On how the virus might change cars: we’ll go, ‘Hey, me or to deliver things?” We had roughly a thousand people
tic that when we get to go, we will be Surfaces will have to have micro struc- how valuable working from home before Christmas,
safe, and there will be demand. tures that can’t hold viruses. These would an autono- On the ability of Ford, which ex- just as a part of their normal duties.
things are there. They’re nano-level mous vehicle pects to report a $2 billion first- We have 125,000 people working at
On Ford’s (ticker: F) pickup trucks: structures that are in the fabrics. You have been to run quarter loss, to weather the down- home now. And the productivity is
The F-150 has a dramatic extensibil- can’t feel them, but if you had a micro- errands for me turn: really high. On balance, though, I
ity: It goes down and up really well in scope, they’d look like you’re putting a or to deliver We’ll be 117 years old in June. So the can’t wait to get back and be among
terms of trim levels and features. The virus on top of arrows. The virus can’t things?’ ” company has been through events that my team. I miss that.
F-Series—150, 250, 350—is by far the live. The surface punctures it, literally. are resetting like this—world wars,
Jeff Kowalsky/AFP via Getty Images

[top selling] vehicle line in the world.

Its versatility is one reason that the On electric vehicles: 117th etc. It has an amazing vitality. In the
2008 recession, remember, Ford
On whether he has driven a
Ford lately:
company is so healthy. In the down- I think we’ve got this part right. An The anniversary didn’t take any bailout money. It was I took delivery of a GT500 during the
turn, the pickup has done fairly well event like this causes a re-sorting of Ford will soon really tough and a big challenge. We snow season, and I was able to drive it
because you’ve got to think of it as a what you care about. The bigger oppor- celebrate. It has got a lot of commendation from our this weekend. It was such a relief from
purpose-built product, too. It’s a tunity is the extra [interior] space that survived more customers because of that. They really everything. My wife and I went on a
commercial vehicle for some people. an electric vehicle gives you. The new than a few crises respected the brand. really long ride together. It turned a lot
And it’s being used as an underpin- priority is space, to perform in ways since its founding That influenced us tremendously. It of heads because you can hear this
ning to ambulance bodies and things that pandemics can’t disrupt. Extra in 1903. said, “If you ever face a challenge again, vehicle coming. B
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April 20, 2020
April 20, 2020 BARRON’S 23

avid Newman no longer wears a tie to work. That
hasn’t been necessary since his medical practice went
virtual. A physician in Fargo, N.D., he now uses tele-
medicine to manage patients’ diabetes and thyroid
conditions, whether through his hospital’s video sys-
tem or FaceTime or Snapchat. “We thought that tele-
medicine would be a burden, but it hasn’t been,” says
Newman, 39, an endocrinologist at Sanford Health.
The coronavirus epidemic is catapulting telemedicine
from the outskirts of health care to its core. With the crisis
giving millions of Americans their first taste of virtual

medicine, this may be the catalyst that pushes online care
to the mainstream.
“We were waiting for lightning to strike and, sadly,
lightning struck,” says Roy Schoenberg, CEO of American
Well, one of the largest private telemedicine companies.
STORY BY Investors have a few choices to ride the digital health
wave. One of the biggest beneficiaries has been Teladoc
DAREN Health (ticker: TDOC), the largest publicly traded telemed-
FONDA icine company. Medical-technology companies, including
Livongo Health (LVGO), Masimo (MASI), and iRhythm
Technologies (IRTC), may also benefit.
A telemedicine revolution won’t happen overnight.

Emergency measures that have relaxed federal regulations
allowing more virtual visits would need to be made perma-
nent. (Legislation is in the works.) States have varying re-
quirements for telemedicine, including rules that doctors
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be licensed in the state and see a patient in person before

an online visit. Many states waived some telemedicine
rules during the crisis, but they would need to be harmo-
nized and loosened permanently.
The biggest hurdle may be financial incentives that favor
health-care providers seeing patients in person. “Economic
incentives have largely been developed to support and rein-
force a face-to-face model of care,” noted a recent article in
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the New England Journal of Medicine. Telemedicine has

been hamstrung by “heavy regulation and sparse support-
ive payment structures.”
Indeed, an estimated 12 million virtual visits were con-
ducted last year, amounting to just 2% of the 600 million
“addressable visits,” according to PlushCare, a concierge
online doctor service. Telehealth totaled just 0.2% of all
medical claims filed in 2019, reports the independent non-
profit group FAIR Health.

imits aside, the technology puzzle is coming together:
Video chat and remote monitoring devices are being
integrated with electronic medical records, cloud-based
analytics platforms, and clinical workflow processes.
The revenue potential looks vast. The U.S. telemedicine
market, which includes software, medical devices, and
hardware, grew at a 25% annualized rate from 2015 to
The pandemic has accelerated adoption of telehealth. 2020, reaching $2.6 billion in revenue, according to re-
search firm IBISWorld. Teladoc projects that the address-
Here’s how to play it. Plus, the future of health insurance, able U.S. market for telemedicine may be as large as $30
billion, including virtual physician services.
and Big Pharma stocks we like. At the Cleveland Clinic, virtual care has jumped to
60,000 visits a month from just 3,000, says Dr. Matthew
Faiman, an internal-medicine physician with the hospital.
“It will become the new normal when we rethink our prac-
tice,” he says.
ILLUSTRATION BY At Sanford Health, one of the largest rural health-care
KOTRYNA ZUKAUSKAITE systems, more than 1,600 patients a day now use telemedi-
24 BARRON’S April 20, 2020

cine, up from an average of 50 a day in Riding the Digital Wave

February. Here are some companies in the telemedicine revolution that investors may want to consider.
Sanford is also encouraging pa-
Market 2020E
tients to take a crash course in nursing Recent Value Revenue
at home. Patients are being shipped Company / Ticker Price (bil) (mil) Comment
accessory kits made by a company The largest public telemedicine company, it is seeing a surge in
called TytoCare. The kits include a Teladoc Health / TDOC $174.25 $12.9 $727 virtual visits. Growth may slow after the epidemic winds down, but
mobile device and diagnostic supplies should remain strong
to check their throat, hearing, and
Sells pulse and respiratory monitors for in-patient and home use.
heart rate; patients then transmit the
Masimo / MASI 205.03 11.1 1,042 Lower surgical volumes may pressure sales near term, though
data to the hospital, avoiding a trip.
remote respitory monitoring is a new growth area
“This is the Midwest, and we value
a hearty handshake,” says Jeremy Provides remote-monitoring and data analytics for diabetes and other
Cauwels, a physician and senior vice Livongo Health / LVGO 37.36 3.6 295 chronic conditions. Sales are rising steadily. But a spike in unemploy-
president at Sanford. “But people are ment could pressure revenue as fewer workers sign up
discovering they don’t always need Sells a heart patch to detect arrhythmia, including remote monitor-
face-to-face medical care.” iRhythm Technologies / IRTC 89.15 2.4 256 ing and data analytics. Sales are rising more than 30% a year. Insur-
Remote monitoring is also giving ance reimbursement and clinical trial results remain an overhang on
telemedicine a lift. Livongo members, the stock
for instance, receive a diabetes-
Source: FactSet. E=Estimate.
monitoring kit that includes lancets,
test strips, and a touch-screen meter
to check their blood glucose; they get

digital coaching and alerts on their that employers save 28% on health- few companies are likely to capital- accelerated adoption and awareness of
smartphone if their condition changes. benefit costs, including a 35% reduc- ize from the digital-health wave after telehealth, and that is likely to lead to
“My care team knows instantly if tion in visits to medical facilities. the pandemic is contained. But the greater utilization,” he says. “The stock
something is wrong,” says Greg Yet telemedicine is primarily used stocks already reflect high expecta- isn’t necessarily overvalued.”
Schuette, 43, a bank branch manager for things like dermatology, behavioral tions, and none look cheap. But Teledoc faces pressures, too.
in St. Louis who uses the system. health, and basic diagnostics. There Teladoc reported a 100% increase in Online visits may decline because of
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have been concerns it opens the door virtual visits in April, compared with rising unemployment.

et if there is a revolution, it will be to more billing fraud and malpractice the first week of March. The company Livongo recently raised its revenue
gradual. One obstacle is a patch- Virtual lawsuits. Cost savings may be negated said total visits are expected to exceed guidance for the first quarter to a
work of federal and state regula- Medicine if tens of millions of people start log- 1.8 million in the first quarter, up 70% range of $65.5 million to $66.5 million
tions. Medicare previously paid The Covid-19 ging on to Zoom to check in with a from a year earlier. It anticipates a 40% from $60 million to $62 million, and
for telemedicine only in rural areas or crisis has doctor 24/7. increase in quarterly revenue, to $180 said it added a record 620 clients
a medical setting. Those restrictions accelerated the And consumers aren’t convinced million. (such as corporate health plans), tak-
were lifted under emergency mea- growth of they will get better care online. Ac- Teladoc charges subscription fees to ing individual membership rolls to
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sures, and visits are now covered telemedicine, cording to a 2019 survey of 1,000 con- health plans, including more than 40% 220,000 people. “This isn’t a short-
under broader circumstances. A few which could sumers conducted by J.D. Power, 49% of Fortune 500 companies, which offer term bump,” founder Glen Tullman
states, including New York, have flourish in believed the quality of care is lower it as a health benefit. The company also tells Barron’s. “It’s people making mul-
waived licensing requirements for coming years. online than with a doctor’s visit. Just licenses its platform to physician and tiyear commitments.”
out-of-state doctors to practice virtual 6% believed that the quality is higher. hospital groups, and is growing The company has expanded beyond
medicine. Congress would need to Even then, a major obstacle may be through mergers, including the recent diabetes care to manage hypertension,
make these changes permanent, as
would many states.
Regulators are stepping up. The
$2.6 B
U.S. telehealth
economics. Medical offices typically
bill every time a patient is seen. Billing
codes have been expanded for online
purchase of InTouch, which provides
telemedicine between hospitals.
Teledoc generated $32 million of op-
weight management, and behavioral
health. And it is signing up many more
clients, including a recent deal with
Food and Drug Administration issued market in 2020, health care, but they remain a tiny erating cash flow last year, on revenue of Kaiser Permanente.“They’re seeing a
guidance in March to fast-track ap- measured by fraction of the thousands of nuanced $553 million, but earnings per share are significant uptake in new clients,” says
proval for monitoring devices, and revenue codes used for in-person treatment. likely to be nonexistent in the next cou- Canaccord’s Close, who has a Buy rat-
telemedicine recently became eligible “The higher the complexity of the ple of years as the company invests in ing and a $46 price target on the stock,
for Medicare Advantage reimburse-
ment. At least 29 state Medicaid pro-
grams now reimburse for live telemedi-
Monthly virtual-
treatment, the more you’re reim-
bursed by the insurer, but that’s usu-
ally not the case with telemedicine,”
the business. The path to profitability
should come as expenses fall relative to
revenue, and as the business scales.
up 20% from recent prices. Livongo
trades for 12 times 2020 sales.
Livongo is also at the mercy of em-
cine in a patient’s home, up from seven care visits at the says Dr. Hillary Lin, an internist in Teladoc says its platform can handle ployment trends. Lower payrolls may
in 2013. Cleveland Clinic New York City with PlushCare. 50,000 visits a day, up from 10,000 in mean fewer employees and paying
Private insurers, wanting to reduce Only 33% of specialists see definite 2019, and has capacity for 100 million members.
health-care costs, sound eager to pro-
mote telemedicine. “We are seeing an
unprecedented increase in consumers
State Medicaid
advantages in telemedicine (versus
40% of primary-care doctors), accord-
ing to a 2019 survey of more than
members, up from 36.7 million in 2019.
Shares currently trade on the growth
in membership rolls, utilization of the
Masimo makes respiratory- and
pulse-monitoring devices, and sells
primarily to hospitals and clinics, but
utilizing virtual care related to the programs reim- 1,300 physicians by the American system, and operating profit margins, the company is also introducing an
Covid-19 pandemic,” a spokesman for bursing for live Medical Association. Lin sees patients says Canaccord Genuity analyst Rich- oxygen-and-pulse-monitoring wear-
Anthem (ANTM) wrote in an email to telemedicine in a few hours a day and works on a start- ard Close, who maintains a Buy rat- able for home use that was originally
Barron’s. Studies indicate that tele- a patient’s home, up in her spare time. “I would say that ing, even though the stock, at a recent designed to monitor patients on opi-
medicine cuts down on unnecessary up from seven 99% of my colleagues won’t do this,” $170, has blown past his price target oids. Regulators gave Masimo the right
emergency-room visits. Teladoc says in 2013 she says, referring to telemedicine. of $130. “The current situation has to market it in record time. “Because
April 20, 2020 BARRON’S 25

Covid is a respiratory disease, it has million U.S. workers newly out of a

been a huge boon to our business,” job, millions of them, and millions
says CEO Joe Kiani. more of their family members, proba-
Hospitalized patients need oxy- bly received health insurance through
gen monitoring after they go home, their former employers.
he adds. Remote monitoring is just There is no good time to lose your
5% of sales now, but “it could be a health coverage, but it’s hard to imag-
major part of our business,” he says. ine a worse time than now.
At a recent $205, Masimo trades Managed-care stocks may be a
at 52 times forward earnings, well decent bet to ride out the current pan-
above its five-year average of 34 demic, relative to the rest of the stock
times. Revenue could soften near market. But investors shouldn’t as-
term because fewer patients are sume that the political risk, embodied
undergoing elective procedures. over the past 12 months by Sanders
BTIG analyst Marie Thibault has and his Medicare for All proposal, is
a Neutral rating on the stock be- gone. The virus could resurface those
cause of the valuation, but sees it as risks more fiercely than before.
a long-term winner. “They’ll con- “What this virus has exposed is a
tinue to benefit from higher hospi- lot of weaknesses in the U.S. health-
talizations due to respiratory dis- care system,” says Cynthia Cox, a
tress and should benefit when we health policy expert and vice presi-
see a return of surgical volumes,” dent at the Kaiser Family Foundation.
she says.

Thibault sounds more positive on n the short term, the pandemic
iRhythm Technologies. Its Zio might actually lower costs for
heart-monitoring platform includes insurers. Elective procedures,

U.S. Health Insurers

a wearable patch to detect arrhyth- including surgeries like knee re-
mia (a warning for stroke or heart placements, have been suspended at
attacks). It is less intrusive than many hospitals across the U.S. Those
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older technologies; patients can procedures make up a substantial

Face Another Test

wear the patch for 14 days, and it portion of health-care spending in a
takes continuous readings, so doc- normal year.
tors can analyze large sets of data, Even when those procedures do get
including analytic reports from rescheduled, there may be an effort to
iRhythm. The company said re- shift them when possible to cheaper
cently that it has seen “significantly outpatient settings in the coming
increased” uptake of its Home months, according to Ricky Goldwas-
Managed-care stocks have held up well during the pandemic,
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Enrollment program, although ser, an analyst with Morgan Stanley.

iRhythm withdrew guidance for the but its aftermath may put renewed political attention on the industry. Still, she says it is too early to say
year, partly because hospitalizations what the net impact of the pandemic
have declined. will be for insurers.
Thibault rates the stock Buy. The “It all depends on the pace of the
technology’s “remote-monitoring By JOSH NATHAN-KAZIS rent crisis. The S&P 500 index has recovery, and the return of the elective

function works well for this envi- fallen 13.3% so far this year through procedures,” Goldwasser says. “At this
ronment,” she says. Inpatient moni- ust a year ago, American health- Thursday, while the largest private point, it’s a little bit hard to say if it’s
toring should recover as the pan- insurance companies seemed insurer, UnitedHealth Group (ticker: going to be a wash, or if it’s going to be
demic winds down, and the doomed. Sen. Bernie Sanders, UNH), has actually risen 1.5%, at a a tailwind.”
company could break even in 2021 then a leading Democratic presi- recent $298.43 UnitedHealth’s quarterly earnings
on a cash-flow basis. dential candidate, had an- Medicare Advantage specialist “What this report this week did not do much to
Insurance reimbursement for the nounced renewed efforts to re- Humana (HUM) is up 2.9%, to a clarify those larger questions, given
device remains an overhang, how- place private insurance with one recent $377.31, while Centene (CNC), virus has that Covid-19 hit the U.S. in earnest
ever. A decision is due from the big government-sponsored plan, and a major player in the Medicaid mar- exposed, late in the quarter.
federal government in July. And the stocks of the insurers tumbled. ket, has gained 15.9%, to $72.85. But UnitedHealth’s enormous scale
studies are under way to determine A year later, Sanders’ presidential On Wednesday, UnitedHealth is a lot of and diversification put it in a class of its
whether monitoring leads to better hopes have been dashed and inves- shares climbed 4.1% after it reported weaknesses own among insurers, and that has per-
medical outcomes, with results due tors’ fears over Medicare for All have first-quarter results that surpassed suaded analysts that the company will
from a large study in November. faded. Wall Street’s estimates. The company in the U.S. perform well throughout the crisis.
One unknown is whether Ameri- But the coronavirus pandemic that surprised investors by reaffirming health-care Unemployment could hurt United-
cans will focus more on health and has overcome the nation is again rais- earnings guidance that had been set Health’s commercial business, but it
preventive medicine once the pan- ing existential questions about the before the pandemic began, even as
system.” could also boost enrollment in its

Kotryna Zukauskaite
demic ends and the population be- health-insurance industry itself, and other large health-care companies cut Cynthia Cox, government-backed plans, like those
a health policy
comes inoculated or immune. is posing risks that investors may be or suspended their guidance this week. expert and vice available under the Affordable Care
Whether we go back to business as missing. Yet at the same time, untold mil- president at the Act, popularly known as Obamacare.
usual may well determine if the Managed-care stocks have outper- lions of Americans have lost their in- Kaiser Family “We think the diversity of United-
stocks continue to rise. B formed the market through the cur- surance coverage. Of the more than 22 Health’s revenue stream should allow
26 BARRON’S April 20, 2020

Employees’ Costs Rise…

the company to weather the Covid-19 costs for workers and employers.
storm,” wrote Mizuho Securities ana- Covered California, the state’s The average worker contribution for family coverage under employer-sponsored
lyst Ann Hynes this past week. health-insurance marketplace, wrote in health plans.
For smaller, less diversified insur- The average paid an analysis in late March that premium $6000 Worker Contributions for Family Coverage
ers, the calculus could be different. by workers toward increases in the commercial market for Employer-Sponsored Health Plans
Analysts agree that costs will be low the premium of could be as high as 40%. The average
in the second quarter. Questions re- their family health total premium for single coverage in- 4000
main about how the rest of the year insurance cover- creased 4% from 2018 to 2019, accord-
will shake out. age in 2019, ac- ing to the Kaiser Family Foundation.
The chief executive of Centene, cording to the Kai-

Michael Neidorff, tells Barron’s that ser Family large premium bump amid a
health costs will be weighted heavily Foundation. colossal economic disruption
toward the end of the year. “I think it’s would probably mean that
going to be choppy,” he says. “People insurance costs for workers,
2010 ’12 ’14 ’16 ’18
like to talk about, well, there will be which have climbed sharply over the
reduced utilization. There may be past decade, would soar even higher. …And so Do Deductibles
reduced utilization in the next couple In 2019, the average insured worker The average deductible amount for single coverage among workers.
of months, but that will just be pent- contributed $6,015 in health insur-
$1500 Average Deductible for Single Coverage
up utilization we will see in the second ance premiums for herself and her Among Workers who have a Deductible
half of the year.” family, 71% more than she would 1250
Deferred procedures, Neidorff says, have paid in 2009, according to Kai-
will eventually be rescheduled. “If ser. The average deductible across all 1000
somebody has a heart condition, but it plans was $1,396 in 2019, up from
wasn’t to the point that they had to $533 in 2009. 750
have a stent or something today, Employers, worried that deduct-
they’re still going to get it,” he says. ibles were costing them more in the 500
In the months before the virus ar- long term by keeping workers away
rived in the U.S., the health-care pic- from doctors until they were seriously 250
ture looked very different. There were ill, have been working in recent years
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signs that employers were trying to on alternative strategies. 0

break with a decades-old strategy of But if Covid-19 brings steep in- 2010 ’12 ’14 ’16 ’18
heaping a higher and higher share of creases in health-care costs at a time Source: Kaiser Family Foundation
insurance cost onto workers. when employers themselves are strug-
Now, Covid-19 threatens to increase gling, those plans may be deferred.
premiums sharply, and could keep “Quite frankly, will employers be All seems unlikely to rise again with based insurance companies may be
employees’ payments climbing, creat- able to afford to not shift costs?” asks former vice president Joe Biden, an risky for investors.
ing a cost crisis even as the system’s Trevis Parson, chief actuary for health opponent of the proposal, firmly situ- In the meantime, policy experts
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shortages are most brazenly in view. and benefits in North America at Wil- ated as the Democratic nominee. are looking to expand coverage to
Uncertainty over the impact of the lis Towers Watson, a consulting firm Insurers resist the notion that help fill the immediate need.
pandemic could spill over into next that advises companies on their Americans could choose a single- One proposal, floated by House
year’s premiums, which companies benefit plans. payer system. “I think that the U.S. is Democrats, would subsidize health
are already working to set. Unan- Unaffordable premiums could then not ready, and never will be ready, for benefits under Cobra, a federal law
swered questions about when elective become a political issue for managed single payer,” Centene’s Neidorff says. that allows some terminated employ-
procedures will return, and how care, even if cost-sharing decisions are But the enormous wave of job ees to keep their insurance, under
much Covid-19 testing and other re- not directly in the hands of the health losses has created an urgency in pol- normal circumstances by taking on
lated care will cost, could lead insur- insurers. icy circles. Paul Ginsburg, director of the employers’ share. Another, from
ers to set high premiums, driving up The threat posed by Medicare for the USC-Brookings Schaeffer Initia- Biden, would lower eligibility for
tive for Health Policy, says the crisis Medicare to age 60 from 65.
could actually tamp down conversa- For investors, all of that might
A Healthy Focus tions around Medicare for All, in mean that insurers exposed to the
How the publicly traded managed care companies stack up. favor of more-achievable health-care Medicare and Medicaid markets, like
policy goals. Centene and Humana, would remain
Recent Market YTD 2020E 2020E
Company / Ticker Price Value (bil) Change EPS P/E “I think this will shift interests of a safer bet, with a better shot at rid-
Democrats away from Medicare for ing out any changes to the insurance
Anthem / ANTM $271.84 $68.5 -10.0% $21.97 12.4
All, which they perceive as not going to system that come as a result of the
Cigna / CI 195.35 72.7 -4.5 18.33 10.7 happen in the near term, and toward Covid-19 crisis.
building on the Affordable Care Act to “There is an immediate need to ad-
Centene / CNC 72.85 42.7 15.9 4.71 15.5
expand coverage,” Ginsburg says. dress the fact that there are still tens of
CVS Health / CVS 62.56 81.7 -15.6 7.05 8.9 That outcome may not be a nega- millions of people who don’t have
tive one for insurers, which could health coverage,” says Colin Seeberger,
Humana / HUM 377.31 49.9 2.9 18.43 20.5
find space to expand their business who works for the Center for Ameri-
Molina Healthcare / MOH 170.97 10.4 26.0 11.74 14.6 lines. can Progress, a liberal think tank.
Still, a political debate over the fu- “When you put this kind of
UnitedHealth Group / UNH 298.43 283.1 1.5 16.16 18.5
ture of insurance at a time when senti- pressure-cooker situation in place,
E=Estimate. Source: Bloomberg ment has turned against employer- it really forces the conversation.” B
April 20, 2020 BARRON’S 27

Where to Shelter in a
By BILL ALPERT immunotherapy that is the world’s

second-biggest drug after AbbVie’s
owen’s 40th annual health- Humira, and top-selling diabetes drug,
care conference in Boston Januvia. Risinger says Merck’s $83
last month was probably shares could reach $89.
one of Wall Street’s last
large gatherings for a long
time. More than 2,000
people listened to pharma-
ceutical executives talking up their
Pandemic? With Pharma Risinger recently raised his rating
on Bristol-Myers Squibb (BMY) to
Overweight. The company can count
on strong demand for its arthritis
drug Orencia and cancer immuno-
stocks. In the weeks that followed, the therapy Opdivo. It got the blockbuster
country shut itself in, and drug stocks The drug industry faces challenges in the crisis, but pipelines of essential products cancer drug Revlimid in last year’s
sank with the rest of the stock market. make the stocks top performers again. And then there’s hope for a Covid-19 vaccine. acquisition of Celgene.
Yet the pharmaceutical industry Bristol-Myers’ “prospects are
may be one of the best places to take solid,” he says, “and it’s one of the
shelter as Covid-19 ravages the econ- least expensive major pharmaceutical
omy, given its focus on new products, companies.” Risinger thinks that the
a promising sales outlook, and low $59 stock is worth at least $64.
price/earnings ratios. Big Pharma’s At Cowen, pharma analyst Steve
treatments for cancer and other life- Scala’s favorite stock is AstraZeneca
threatening diseases are essential by (AZN). The United Kingdom company
any definition. And the industry will has what he seeks in all of his Buy
hopefully deliver the vaccines that will recommendations: a pipeline of prod-
let us gather together again. ucts important enough to command
After lagging behind the market in high prices and boost the company’s
2019, stocks like Merck (ticker: MRK), profits. Its targeted cancer treatment
Pfizer (PFE), and Eli Lilly (LLY) Tagrisso is such a product, Scala says.
have outperformed the S&P 500 index The company recently said that a
since the coronavirus disruption be- Phase 3 trial of the drug showed “over-
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gan. Many of pharma’s growth stocks, whelming efficacy” for lung-cancer

however, still trade for below-market patients. Scala believes that the drug’s
earnings multiples. sales can grow from $3.2 billion in 2019
No one is saying the pandemic has to better than $8 billion by 2025.
left the drug industry unscathed. With Other AstraZeneca cancer treat-
millions out of work, RBC Capital Mar- ments include the immunotherapy
kets analyst Randall Stanicky expects a Imfinzi and targeted drug Lynparza.
significant shift from private drug Behind them are drugs in clinical trials
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

plans to government programs like to treat illnesses like lupus, anemia,

Medicaid, which pay lower prices for and asthma. The Cowen analyst bets
drugs. Governments are already the that they will boost profits enough to
main buyers in most of the world, and lift the company’s American depositary
budgets everywhere will be squeezed receipts to $55 from a recent $49.
in the aftermath of Covid-19 rescue Perrigo (PRGO), which sells mostly acetaminophen. Novartis (NVS) is another favorite
programs. over-the-counter drugs, and is also the Such stockpiling also extends to of Scala’s. The Swiss company has
Pharmaceutical-industry growth dominant U.S. supplier of store-brand prescription drugs, which is why strong franchises in treatments for
will be constrained, Stanicky fears, if staples such as infant formula and Morgan Stanley analyst David psoriasis and heart failure, along with
clinical-trial recruitment for new electrolyte liquids. Some 80% of Per- Risinger increased his estimates for a variety of cancer drugs. Cowen re-
drugs suffers. With medical confer- rigo’s revenue comes from cash sales. the industry’s March-quarter sales. cently raised its target price for Novar-
ences canceled and drug salespeople In a recession, Stanicky thinks that Destocking will hurt the June quar- tis American depositary receipts, now
grounded, the launch of newly ap- Perrigo could increase sales and lift its ter. He also expects sales disruptions trading at $87, to $110.
proved products will be delayed. $50 stock to at least $58.
“People don’t for drugs associated with elective The other Swiss drug giant, Roche
Against those negatives, Stanicky Perrigo CEO Murray Kessler says want to go to procedures, doctor visits, and out-of- Holding (RHHBY), is one of Scala’s
says that a defensive name he likes is that his company supplies over half of pocket aesthetic treatments. But the longtime recommendations. The re-
Pfizer, which is in the process of spin- all U.S. volume in acetaminophen, the
emergency magnitude is hard to predict. searchers at its Genentech unit have
ning off legacy products of its Upjohn Tylenol equivalent, which has been in rooms Risinger likes Merck. Its solid produced the huge-selling cancer
division to Mylan (MYL). Afterward, high demand to treat the pain and fever growth prospects remain under- treatments Avastin, Rituxan, and Her-
only about 20% of Pfizer’s global port- of Covid-19, along with Perrigo’s cough
or their valued, he believes. If you put a 30- ceptin. Scala expects new approvals to
folio will be exposed to U.S. commer- syrups and asthma remedies. “People doctors’ times multiple on its earnings from follow data readouts on other Roche
cial payers, the analyst figures. That
portfolio includes the vaccine Prevnar
don’t want to go to emergency rooms or
their doctors’ offices,” Kessler says.
offices.” vaccines like Pneumovax and the
human papillomavirus-preventive
treatments for kidney, lung, breast,
and uterine cancers. He foresees no
Kotryna Zukauskaite

Perrigo CEO
and the cancer drug Ibrance, two of At the urging of retail partners like Murray Kessler on
Gardasil and a 25-times multiple on interruption in the sales and earnings
the industry’s top-selling products. Walmart (WMT), Perrigo has shifted his company’s its animal-health earnings, that growth that he hopes will lift Roche’s
Stanicky thinks that Pfizer stock can production lines from inessentials, like sales of pain implies just a single-digit earnings $42 ADRs to $50.
relievers, cough
rise to $44 from a recent $35. minoxidil for hair loss, to products that syrups, and multiple for Merck’s drug unit. AbbVie (ABBV) has a different
Another defensive play he likes is consumers are stockpiling, such as asthma remedies That business includes Keytruda, an appeal for the Cowen analyst. Its sales
28 BARRON’S April 20, 2020

and earnings are dominated by the Safe and Effective

world’s biggest-selling drug, Humira,
Here are some of the Big Pharma stocks favored by Wall Street analysts.
which treats autoimmune disorders
like arthritis, psoriasis, and the intes- Recent Value 2021E 2021E 2021E
tinal illness known as Crohn’s disease. Company / Ticker Price (bil) Rev (bil) EPS P/E Comment
The stock has sold off to a recent $82 AbbVie / ABBV $81.86 $121 $38 $10.44 7.8 Cheap stock on Humira expiration, but pipeline unappreciated
as Humira’s patent expirations near,
but that leaves it at less than seven- AstraZeneca / AZN 49.13 129 29 2.45 20.1 Cancer blockbusters like Tagrisso
times the earnings that Scala predicts Bristol-Myers Squibb / BMY 59.56 135 45 7.37 8.1 Cancer and immunology strongholds, pipeline offers upside
for 2021. AbbVie’s dividend yield has
risen to 5.8%. Eli Lilly / LLY 154.73 148 26 7.79 19.9 Diabetes franchise, cancer and migraine drugs, pipeline promises growth
And although Lilly’s stock has Merck / MRK 83.00 210 52 6.22 13.4 Keytruda cancer blockbuster, aquisition and vaccine opportunities
surged lately, Scala remains a big fan
and thinks its $154 stock can hit $160. Novartis / NVS 87.54 221 53 6.27 14.0 Targeted cancer drugs and opportunities in neurology, sickle cell
“When I see pipelines with a Perrigo / PRGO 50.84 7 5 4.21 12.1 Over-the-counter drugs like acetaminophen, plus private-label staples
bunch of letters and numbers, with-
out a lot of data yet,” the Cowen ana- Pfizer / PFE 35.88 199 51 3.04 11.8 Cancer drugs like Ibrance, vaccines, and acquisition growth
lyst says, “I can have more confidence Roche Holding / RHHBY 41.79 287 67 2.82 14.9 Broad anticancer portfolio, and great pipeline
that Lilly will make those letters and
numbers into real products, than Sanofi / SNY 46.13 116 43 3.72 12.5 Vaccines, hemophilia treatments
most other companies.” B Source: Bloomberg

The Race for a Covid-19 Vaccine Picks Ups Speed, but Still Has Far to Go

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mong investors, the conventional lators need to be confident that the vaccine won’t Two of the biggest vaccine makers,
wisdom is to expect a Covid-19 vac- put healthy people at risk. “We have to be really GlaxoSmithKline (GSK) and Sanofi (SNY),
cine in no more than 18 months. But careful here,” Porges says. announced on Tuesday what could be a vi-
that may be a wildly optimistic time- Others are more bullish on timing. The bio- tally important collaboration. It combines a
line. “I think there is a negligible chance that tech company Moderna (ticker: MRNA) says Sanofi effort to identify a Covid-19 antigen
we will have a vaccine that is suitable for that its vaccine could be ready to administer to with Glaxo’s vaccine adjuvant technology,
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

widespread administration in 2021,” says health-care workers by this fall under an emer- which makes a vaccine more potent. They
Dr. Geoffrey Porges, an analyst at SVB gency use authorization. The company dosed its say their vaccine could be ready by the sec-
Leerink. first patient with its vaccine on March 16, and ond half of 2021, and they would be able to
A vaccine for the majority of the popula- hopes to begin a Phase 3 trial, involving thou- make hundreds of millions of doses a year.
tion—necessary to end the social distancing sands of subjects, by early in the fall. More than 80 other vaccine programs are
restrictions that will remain after the lock- Moderna CEO Stéphane Bancel says that the in various stages, according to the Milken
downs are lifted—will not come until 2022 odds that one of the Covid-19 vaccines under Institute. That diversity of efforts notionally
or 2023, Porges says, although an unproven development will be widely available within 18 gives the scientific community a greater
vaccine approved for health-care workers months are “pretty high.” The company said late chance of finding one or more vaccines that
could come next year. on Thursday that the federal government had work. Experts say that more than one
To stop the virus that causes Covid-19, a committed up to $483 million toward develop- Covid-19 vaccine will probably be needed.
vaccine would need to be administered to ment of its vaccine. There is some good news. Moderna’s Ban-
billions of people worldwide. Under normal Hopes for a quick vaccine surged when John- cel says that the virus that causes Covid-19 is
conditions, vaccines generally go through a son & Johnson (JNJ) said its Covid-19 vaccine relatively simple, improving the odds of
decade or more of testing, and up to 96% of could be ready for emergency use by early 2021. finding an effective vaccine. “This is a virus
experimental vaccines fail to reach the mar- But regulators would need to decide who could that the scientific community believes is not
ket. Of course, the timeline for a Covid-19 access the vaccine, which would have only a few that complicated from a virology stand-
vaccine will be more compressed. But regu- months of testing by then. point,” he says. JOSH NATHAN-KAZIS
April 20, 2020 BARRON’S 29

answer questions about the company’s

tech platform or the productivity of its
agents. As a private company, Com-
pass isn’t required to disclose finan-
cials, and it declined requests to make
financial data available.
Co-founder and CEO Robert Reffkin
has said that his goal is for Compass to
be a “platform to power all real estate
decisions” made by buyers, sellers, and
agents. His operation, he says, is
unique in the real estate industry be-
cause it creates a network effect
through technology that focuses on
both agents and consumers.
Using the Compass platform, real
estate agents and prospective buyers
are able to share listings and ideas.
The realty company also provides
agents with technology tools to help
with marketing.
In September 2018—the month in
which the company announced a
$400 million investment from Soft-
Bank, the Qatar Investment Author-
ity, and others—Compass classified
two-thirds of its agents as active us-
ers of its technology, according to an
internal document reviewed by Bar-
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ron’s. Compass considered any agent

who used its technology for at least
one minute, once a month to be an
active user, the document makes
The company declined to provide
other usage metrics to Barron’s.

Real Estate Start-Up

15,000 agents completed about Compass

For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

112,000 transactions worth $88 bil- ompass’ plan to upend residen-

lion. The company says that it’s now
the largest independent brokerage in 15,000 tial real estate using technology
comes as WeWork, another

Loses Its Bearings

the country. But the richly valued Agents highly valued SoftBank realty
Compass remains far behind Realogy, investment, struggles to fulfill its own
whose 300,000 agents closed 1.4 mil-
lion transactions worth $505 billion in
$88 B
2019 Transactions
technology promise. In trying to go
public last year, WeWork told potential
investors that it had “the power to ele-
“They are a residential real estate vate how people work, live, and grow.”

Residential brokerage firm Compass was valued at $6.4 billion on the

promise of new technology, but the reality has been more complicated
brokerage, just like everybody else,”
Susquehanna analyst Jack Micenko
says of Compass. “They make their
$6.4 B
2019 Private Value
The company’s S-1 filing said,
“Technology is at the foundation of
our global platform.” But the same
money the same way Realogy does filing disclosed massive losses. We-
and Re/Max does.” Re/Max Hold- Realogy Work ultimately pulled its planned
ings (RMAX) is a franchisor with initial public offering and needed a
By BEN WALSH Century 21, Coldwell Banker, Corc- some 130,000 agents operating un-
300,000 rescue plan from SoftBank, which

oran Group, and Sotheby’s Interna- der its brand. later took a $4.6 billion write-down on
ast summer, the SoftBank tional Realty. Some former Compass employees Agents its WeWork investment.
Vision Fund and other ven- Compass maintained that its tech- say that the company’s technology Compass could face its own reckon-
ture-capital investors put
$370 million into Compass,
nology would make its agents more
productive and profitable than tradi-
falls short of being a disruptive force
in the industry or providing a signifi- $505 B
2019 Transactions
ing, especially with Covid-19-related
shutdowns putting a crimp on real
a real estate firm promising tional brokers. But so far, the com- cant advantage to agents. Former estate transactions. The company’s
to shake up the residential pany, which was founded in 2012, Compass employees and real estate current value is likely to be a fraction
brokerage industry. The
deal valued Compass at $6.4 billion,
hasn’t fundamentally disrupted the
real estate business, and it continues
professionals with knowledge of the
company’s operations told Barron’s $384 M of its July 2019 fundraising figure,
given changing private-market dy-
Doug Chayka

which at the time made it 10 times to play catch-up with industry leader that Compass often struggles to get its Market Value namics and the performance of public
more valuable than Realogy Hold- Realogy (ticker: RLGY). own employees to use its technology. companies in the residential broker-
ings, the public company that owns Last year, Compass’ approximately A Compass spokesman declined to age arena. WeWork’s struggles have
30 BARRON’S April 20, 2020

weighed on overall private-company valu- evidence to support that Compass’ tech-

ations, while Covid-19-related shutdowns nology is making its agents more produc-
are hurting real estate stocks. Shares of tive than the industry average,” he says.
Realogy and Re/Max have fallen 62% and “By whatever measure, Compass is among
41%, respectively, this year. its peers, whether it’s traditional broker-
Several new entrants have struggled to ages or luxury.”
disrupt the real estate market in a profit- Micenko, who covers Realogy, Redfin,
able way. Zillow Group (ZG) and Redfin and the home-building sector for Susque-
(RDFN), as well as SoftBank-backed hanna, says he was shocked by a demon-
Opendoor, have poured a huge amount of stration he saw in January of Compass’
resources into remaking real estate. Zil- customer relationship management, or
low, which grew as a new way for bro- CRM, technology platform. Despite the
kers to advertise their services, has hype and the resources poured into the
pushed into buying and selling homes project, Micenko recalls thinking: “You
outright, a service it calls Zillow Offers. can buy this off the shelf for $2 million a
The company has lost money in seven year. Realogy and Re/Max and everybody
consecutive years on a generally accepted else has a CRM, too.”
accounting principles basis, and Wall

Street analysts expect it to lose $427 mil- ather than impressing with tech-
lion in 2020. And that forecast came be- nology, Micenko says that Compass
fore the full impact of Covid-19 was mod- recruits agents by offering more
eled in. attractive splits on commissions.
In a statement to Barron’s, Zillow said: “There’s always a food fight for the best
“We are operating within the investment agents,” he says. “The market had been,
framework that we laid out for ourselves let’s say, 60% to 70% and then Compass
as we have scaled our Zillow Offers busi- came in and was hiring people for a con-

ness, and our core business has generated tract period of two years at 85%, 90%, 95%
strong earnings that we have been able to splits,” he says. “What’s going to happen is
invest in making it easier and more seam- you are going to get a lot of agents to come
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

less for our customers to move.” over and sell homes, but you’re not going
Smaller Redfin also has struggled to to make any money on it.”
turn a profit; in 2020, analysts expect the Compass has been on an acquisition
company to lose $80 million for a second binge in the past few years. Its purchases
consecutive year. have included real estate companies Pa-

The travails of these realty operations cific Union in the San Francisco area and
show just how resistant the U.S. residential Stribling in New York, plus Contactually,
real estate industry is to fundamental a Washington, D.C.–based client relation-
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

change. The core of Compass’ pitch to ven- ship management software company.
ture capitalists is straightforward: Real es- Compass now has more than 15,000
tate agents are expensive, and the whole agents and an enviable market share in
home-buying process is a hassle. To re- certain locations, including more than
shape the industry, Compass says it focuses 40% in San Francisco.
on making agents better at their jobs. The But the Covid-19 crisis has halted the
Find a Barron's-ranked advisor at company claims its technology can help expansion plans. At the end of March,
agents sell properties more quickly than the Compass laid off 15% of its employees, or competition. “One of Compass’ competitive about 375 people. In a letter to its staff,
advantages is that every employee has a Reffkin said he was expecting revenue to
singular focus on agent productivity,” CEO fall by 50% over the next six months.
Reffkin told Barron’s in 2018. As recently as last September, Reffkin
The company declined to make Reffkin was still talking about a “likely” IPO some-
available for this article. time in the future. Those plans are now in
Mike DelPrete, a scholar-in-residence doubt. Existing home sales could be down
focused on real estate technology at the 40% to 50%, year over year, through the
University of Colorado Boulder, says that third quarter of 2020, Micenko warns,
Compass has struggled with the produc- adding: “This is coming at the worst time
tivity enhancements. “I’ve yet to see any of the year for a cyclical business.” B

“I’ve yet to see any evidence to support that Compass’

technology is making its agents more productive
than the industry average.”
©2020 Dow Jones & Company. All Rights Reserved. 2E203
Mike DelPrete, scholar-in-residence at the University of Colorado Boulder
April 20, 2020 BARRON’S 31

FUND PROFILE Talking With Clare Hart, Lead Manager,

JPMorgan Equity Income


lare Hart, the longtime manager of the $28
billion JPMorgan Equity Income fund, is fac-
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ing a challenge like no other in her more than

20 years in money management: the fallout
from the global coronavirus pandemic.
The fund’s return over the past month is
about 2.2%, a solid result considering the S&P
500 is up about 5%. Hart has used the market’s volatility
to stick with bets she believes in, and to abandon less
certain ones.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

“We are adding to favored names, but slowly, as we

don’t know when the market will bottom or if we retest
new lows,” Hart said in a written response to Barron’s.
She has added to “core holdings in the fund that have
come under unwarranted price pressure” and invested in
three new stocks, while selling some “lower-conviction
names.” She declined to discuss any specific holdings
related to those changes, citing disclosure rules.
This agile approach might be necessary for a while.
Hart doesn’t expect a quick return to normalcy: “The vi-
rus will persist, in health and in the markets, for at least
the next 12 months.” She foresees “a stop-and-go, start-
and-restart recovery from the virus globally as we learn it either dies out, reinfects or evolves.”
Long before social distancing, lockdowns, and
Covid-19 became part of everyday conversation, Hart was
on a clear pathway to a career in law, studying political
science at the University of Chicago.
But Hart quickly came to a crossroads. After starting
out in accounting, she worked as a paralegal in her sec-
ond job after college. Though Hart enjoyed the challenges
of a trial she was assigned to, one of the law firm’s part-
ners offered her some advice: Many trials involved bank-
ruptcies or divorce cases. “You should seriously think
about whether you want to spend your life with people
who basically are going through the most miserable time

Photograph by CELESTE SLOMAN

32 BARRON’S April 20, 2020

of their life,” the partner said. ment philosophy: “We look for quality com-
Hart took the advice. She returned to panies with a reasonable valuation that pay
accounting and eventually pivoted to equity a dividend.” To get into the fund, a stock’s
research and then portfolio management. yield must be at least 2%—a requirement
Since 2004, Hart, 49, has helped run the Hart sees as a safety net and not something
JPMorgan Equity Income fund (ticker: OI- that constrains her stock-picking.
EIX) —one of the largest mutual funds over- Although the majority of the fund’s
seen by a woman. She is the lead manager.
The fund, which is in Morningstar’s U.S.
large-cap value category, has a 15-year annual
shareholders opt to reinvest monthly distri-
butions, some take the cash out—retirees,
perhaps, who need income. “In the back of
So You’re Ready to Invest:
return of about 7.5%, besting more than 90%
of its peers. That compares with a 6.3% an-
nual return for the Russell 1000 Value index.
my mind, I imagine this person going to the
grocery store,” she says.
The investing landscape has shifted dra-
Dive In, or Average In?
The fund’s A shares carry a 5.25% load. matically since Barron’s first spoke with
How Hart went from a paralegal to a sea- Hart in February. The S&P 500 is down
soned fund manager required foresight, per- about 16% since it peaked in mid-February.
severance, and a willingness to change “We have many unknowns but in short, By Sarah Max be a more successful strategy, on average.”
course—qualities that are especially valuable investors need to be thinking not just about But this market hasn’t exactly been aver-

in today’s tumultuous markets. the quantifiable earnings impact, but what aybe you’ve been waiting to age. During March, the average absolute
Back in her postcollege days in Chicago, we will learn about the consumer—who is make your IRA contributions, daily change for the Dow Jones industrials
Hart earned a master’s degree in accounting, such a crucial element of U.S. GDP—and just got a windfall (or a big was 5.3%, according to an analysis by Nick
but didn’t love the work—particularly visits probable structural changes to other indus- severance package), or have Maggiulli, a data scientist for Ritholtz
to companies to examine their books. “You tries as well,” she observes. been hoarding cash in anticipation of a Wealth Management. There were days of
came to their office, and they got nervous,” As of March 31, the fund held 95 stocks, market selloff. The question now is: Do big drops—notably, when the S&P 500 fell
she remembers. A friend likened her job to at the lower end of its typical range. The you plug your nose and jump in feet first, 12% on March 16 on the heels of the 9.5%
an “archaeological dig of what happened at a portfolio’s second-largest sector weighting or wade your way into the murky water? decline on March 12—but there were also
company over the previous 11 months. If you was health care at nearly 16%, behind finan- The answer depends on market volatility— several big single-day gains: The index rose
take that and flip it forward, that’s what we cials at 22%. and how nervous a swimmer you are. more than 9% on both March 13 and 24.
do on Wall Street in equity research,” she One of the fund’s top holdings is Bristol- Research shows that, mathematically “With earnings season coming up and
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

recalls her friend saying. Myers Squibb (BMY), whose top sellers in- speaking, a lump-sum investment is prob- everything else in the news, markets are
That conversation led her back to New clude cancer drugs Opdivo and Yervoy. The ably the way to go. As they say, time in the likely to be volatile,” says Rajeev Sharma,
York in late 1998 as a sell-side real-estate stock, which trades at less than 10 times the market makes a bigger difference than managing director and head of taxable
investment trust analyst at Salomon Smith 2020 consensus earnings estimate of $6.14 a timing the market. Big gains can be made fixed income at Key Private Bank. “Lump-
Barney. She eventually moved to Robert share, per FactSet, yields about 3%. on single days, and the sooner your money sum investing may do better when markets
Fleming, a British asset manager, in its New Last November, the company closed on its is invested, the more likely you’ll partici- are stable, but dollar-cost averaging makes
York office. Chase Manhattan acquired the $74 billion acquisition of Celgene, which pate fully on those days. Dollar-cost aver- a lot of sense in volatile environments.”
firm not long afterward, and that was fol- “was actually bringing a different kind of aging—investing smaller amounts over a Let’s say you invest $12,000 in the mar-
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

lowed by Chase buying J.P. Morgan. pipeline” that includes hematology and im- longer period—is a behavioral strategy that ket, which plunges 5% the very next day.
In an interview in mid-February, Hart munology, says Hart. keeps investors disciplined, but can also What’s now $11,400 will be worth
offered a succinct description of her invest- The market wasn’t too high on the deal, result in lower returns. $46,000 in 20 years, assuming a 7% aver-
sending shares of Bristol-Myers lower. Hart In an analysis that covered 1926 age annual return. On the other hand, if
says the stock was “unduly punished.” through 2015, Vanguard found that an you spread your bets by investing $1,000 a
JPMorgan Equity Income Another holding is UnitedHealth Group immediate, lump-sum investment outper- month for one year—and in doing so, aver-
Total Return (UNH), a large managed-care concern. Hart formed a six-month series of investments age out that immediate 5% drop—you’ll
1-Yr 3-Yr 5-Yr had followed the company for about five 64% of the time. For investments strung have about $47,000 in 20 years.
OIEIX -10.1% 3.7% 4.8% years, but its dividend yield never reached out over 36 months, the lump-sum option You might also have less gray hair.
Large Value Category -14.2 0.7 2.6
her 2% threshold until last fall. “The valua- did better 92% of the time. In fact, the emotional benefits of dollar-
tion got smacked because people thought the Research by Ayco, a Goldman Sachs cost averaging are a big part of the equa-
Top 10 Holdings
Company / Ticker % of Assets
industry was going to go away,” she says of company that offers company-sponsored tion, especially in volatile markets. “Many
the recent political rhetoric. financial counseling programs, also makes clients feel more comfortable establishing a
Bank of America / BAC 3.0%
The yield has since slipped to 1.6%, as the the case for going all-in, all at once. From systematic implementation strategy, even if
Chevron / CVX 2.6 stock rebounded somewhat. Hart expects 1992 through then end of 2019, the annual- it means they may be giving up upside over
CME Group / CME 2.5 that health-care reform “is going to be evolu- ized total return for the S&P 500 was the long term,” says Rivers, who adds that
Bristol-Myers Squibb / BMY 2.4 tionary, not revolutionary.” 9.8%. But if you missed the best 10 days of deploying cash slowly also offers an “es-
Johnson & Johnson / JNJ 2.2 Looking ahead, Hart observes that “the market performance, the total annualized cape valve” if investors decide the waters
damage is done to some companies, but roll- return was 7.1%, says James Rivers, Ayco’s are too treacherous.
BlackRock / BLK 2.1
ing bankruptcies and consumer credit stress head of financial counseling for the West “For a lot of investors it comes down to
Microsoft / MSFT 2.1
are yet to fully manifest themselves.” And Coast. If you missed the best 50 days, the how would you feel if the markets went
PNC Financial Services Group / PNC 2.1 she is keeping an eye on how “consumers total annualized return was just 1%. down right after you invested,” says Greal-
Comcast / CMCSA 2.0 change their behavior coming out of this “By dollar-cost averaging, you are tim- ish. “One of the biggest benefits of dollar-
McDonald’s / MCD 1.8 self-isolation.” ing the market in some way, even if it’s cost averaging is minimizing that regret.”
Hart has spent a lot of time assessing the systematic,” says Adam Grealish, director By offering investors a way to ease in,
Total 22.8%
riskiness of stocks in all kinds of markets— of investing at Betterment. “If you are try- moreover, it can help avoid what might be
Note: Holdings as of Feb. 29. Returns through April 13; three- and
five-year returns are annualized.
and she has compiled an enviable record ing to maximize your expected return over the biggest risk of all: sitting on the side-
Sources: Morningstar; J.P. Morgan Asset Management doing that. B time, deploying it all at once has proven to lines indefinitely. B
April 20, 2020 BARRON’S 33

New Active ETFs May Look

portfolio a secret for months at a time. growth and value portfolios for Amer-
The rule changes have enticed ican Century. The growth ETF is a
some of the biggest names in mutual close version of Focused Dynamic
funds to the ETF world. And launch- Growth (ACFOX), while the value
ing an active stock fund during a ETF bears similarities to separately

A Lot Like Existing Funds bearish market can set it up for im-
pressive future returns. “This is the
time that active management makes
sense,” says Ed Rosenberg, head of
ETFs at American Century. “A lot of
managed accounts. The ETFs can’t
hold foreign stocks, and they’ll be
managed to minimize capital gains,
says Rosenberg, but they’ll trade and
hold almost all of the same stocks.
sectors and stocks are moving in dif- T. Rowe’s funds will essentially be
A volatile market has sparked interest in active management, and new rules have made ferent directions, and an active man- clones of existing large-cap growth
actively managed ETFs easier to launch. What to watch for as big firms roll out new ETFs. ager can select what he or she believes and dividend funds. Fidelity’s will
is best.” resemble its active equity strategies,
Active managers haven’t racked up says Greg Friedman, head of ETFs at
superior records in bear markets, on Fidelity. “You won’t see ETFs of Low
average, as Barron’s recently reported. Priced Stock and Contrafund coming
Nonetheless, the new ETFs may take out of the gate,” he says, referring to
hold, partly because they’re being two of Fidelity’s biggest stock mutual
launched by some of the biggest funds. “But you’ll see us with stand-
brands in the industry. “The heavy- alone strategies and similar ones.”
weights in the space will be able to Fund companies are launching the
gather assets because of their strong products thanks to more flexible rules
fundamentals and brands,” says Todd for ETFs, enabling managers to shield
Rosenbluth, senior director of ETF some of their trading and portfolio
and mutual fund research at CFRA. holdings from daily disclosure require-
Nearly half of all ETF issuers are de- ments. That change is critical to stock-
veloping actively managed products, pickers, who have long worried about
according to research firm Cerulli “front running”—whereby traders can
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Associates. That could make for a see what a manager is buying and sell-
“momentous shift” in a market where ing, exploiting the fund’s strategy. Tim
97% of ETF assets are in index funds. Coyne, head of ETFs at T. Rowe, says
If active ETFs take off, it would be a that requirements for full transparency
big win for active managers. Fees for in an ETF was the key roadblock for
active management have been falling years. “This is something we have been
as lower-cost index funds continue to after for some time,” he says. “What
lap up assets. Active U.S. equity funds stopped us were concerns about front-
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

have seen $1 trillion in outflows over running.”

the past five years. ETFs took in $633 Most ETFs are required to disclose
billion in that span, according to their portfolios daily; mutual funds
Morningstar. The last time active have quarterly disclosure require-
stock funds had more net inflows than ments. Broad-market index-based
index funds was in 2010, according to ETFs change their underlying hold-
Morningstar’s director of manager ings when an index is rebalanced,
research, Russel Kinnel. typically once or twice a year, making
By DAREN FONDA has filed to launch “growth,” “value,” More than 75 active ETFs now front-running less of a concern. Bond

and “opportunistic” ETFs. And more trade, but they have amassed only ETFs can live with daily transparency,
he battle between stock- are coming from JPMorgan Chase $100 billion in assets—a tiny fraction partly because bonds trade over the
pickers and index funds is (JPM), Natixis, and other sponsors. of the $3.7 trillion ETF industry. Most counter, making them inherently
shifting to a new arena— Active ETFs have existed on the active ETFs are in fixed-income, quan- harder to front-run. The bond market
the world of exchange- fringes for years, mostly in fixed- titative, or “factor”-based strategies. is also more heterogeneous than the
traded funds. income and quantitative strategies. But Three bond funds—JPMorgan Ultra stock market, since bonds come in all
American Century In- regulatory changes late last year and Short Term Income (JPST), Pimco varieties of maturities, coupons, and
vestments launched two new ETF structures have opened the Enhanced Short Maturity Active other characteristics, making copycat
active stock ETFs in early April, fo- door for a wave of “nontransparent” or (MINT), and iShares Short Maturity trading less of a concern.
cusing on large-cap growth and value “semitransparent” active ETFs—with “This is Bond (NEAR)—account for $28 bil- One key change is that fund spon-
stocks. Legg Mason (ticker: LM) is stockpickers at the helm. The new something lion in combined assets, more than a sors can now use “proxy” baskets of
close to launching an active ETF funds don’t disclose their holdings quarter of assets in active ETFs. stocks that don’t precisely match the
through its ClearBridge brand. daily or use “proxy baskets” to shield
that we have The new active equity ETFs are fund’s underlying holdings. The bas-
T. Rowe Price Group (TROW) has some of their trading, revealing their been after designed to look like traditional stock kets are used by market makers as a
won preliminary approval for ETF
versions of four large-cap mutual
actual holdings only to market makers
on a daily basis. American Century,
for some funds. American Century Focused
Dynamic Growth (FDG) and Ameri-
pricing signal, enabling them to keep
the ETF’s underlying securities
funds, including two of its biggest for instance, is disclosing holdings for time.” can Century Focused Large Cap matched to the fund’s share price.
Dan Page

names: Blue Chip Growth (TRBCX) the new ETFs on a quarterly basis, Tim Coyne, Value (FLV) are run by the same Proxy baskets are also used in the
and Growth Stock (PRGFX). Fidelity with a 15-day lag, keeping the actual T. Rowe Price managers who oversee large-cap creation/redemption of ETF shares, a
34 BARRON’S April 20, 2020

mechanism that adjusts the supply of Of course, more important than trans-
shares to market demand and prevents parency is whether a fund generates “al-
share prices from diverging sharply from pha,” beating an index through skilled
underlying holdings. stock-picking. Alpha isn’t easy to find, no
Fund companies are taking different matter the fund wrapper; more than 65% of
approaches to the new transparency rules, active equity funds trailed their bench-
aiming to give stockpickers flexibility to marks over the past five years, according to
trade without revealing their full hand
right away. American Century is using
technology developed by Precidian that
S&P Global. Hardly any categories of stock
funds had success rates above 50%.
Other challenges abound for active equity
J&J and P&G Rise Above
shields its daily portfolio holdings from the
public; only “authorized participants” that
keep the ETF share price aligned with its
ETFs. For one, the market has consolidated
among a handful of giant players—Black-
Rock’s iShares, Vanguard, and State Street
The Din of Dividend Cuts
holdings and market demand for the shares control more than 80% of ETF assets. Going
know the actual trades. up against these fund giants isn’t easy. Davis
T. Rowe plans to publish its ETF hold- Funds has racked up about $600 million in
ings every quarter, on a 15-day lag. Its assets for its four active equity ETFs, less By Lawrence C. Strauss against debt of $27.6 billion.
proxy baskets will be published once a day. than 5% of the firm’s $19 billion under man- Meanwhile, Procter & Gamble on

But they will reflect only 80% (or slightly agement. “It’s still early days,” says Dodd ontrary to the trend of dividend Tuesday declared a quarterly dividend
more) of the actual portfolio, using place- Kittsley, national director at Davis. cuts and suspensions during of 79.07 cents a share, up 6% from a
holder stocks for the rest, says Coyne. A Most advisors use ETFs for asset alloca- the coronavirus crisis, some little below 75 cents. It marks the 64th
trader trying to front-run the ETF wouldn’t tion and broad market exposure, moreover, companies are still raising their straight year in which the company has
know which are the actual holdings or de- and active ETFs may be a tough sell, espe- payouts or at least maintaining them. And boosted its payout. P&G has a broad
coys. “The proxy will shield names that cially if the managers aren’t beating bench- if you blinked, you might have missed portfolio of products, including Bounty
we’re currently buying or selling,” he says. mark indexes. “It’s not like, if you come out several such moves this past week. paper towels and Charmin toilet paper—
Fidelity plans to publish daily “tracking with a new ETF, an advisor will just use it,” Health-care conglomerate Johnson & items that are in great demand right
baskets” of its ETF holdings, including up to says Ryan Issakainen, ETF strategist at Johnson (ticker: JNJ) and consumer- now. P&G earned $1.12 a diluted share in
50% in other ETFs as placeholders for some First Trust. “It’s a challenge to reach advi- products giant Procter & Gamble (PG), the first quarter, up from $1.04 a year
stocks; a separate technology-sector ETF, sors when you’re competing with 2,500 whose shares have held up during the earlier, on a net sales gain of 5%.
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for instance, may substitute for the fund’s other ETFs on the market,” he says. recent market tumult, declared dividend Two other companies that announced
full weightings in stocks like Apple (AAPL) One advantage for the new ETFs may be increases—helping them maintain mem- dividend increases this past week are
and Microsoft (MSFT), according to Fried- lower costs for retail investors. T. Rowe Blue bership in the S&P 500 Dividend Aris- Costco Wholesale (COST) and First
man. The tracking baskets should give mar- Chip Growth ETF will have an expense ratio tocrats club of companies that have Republic Bank (FRC). Costco is raising
ket makers enough information to manage of 0.57%, and Growth Stock ETF will be raised their payouts for at least 25 its quarterly dividend to 70 cents a
the creation/redemption process and allow 0.52%. Those fees are identical to the institu- consecutive years. share, up more than 7%, from 65 cents.
arbitrageurs to keep the ETF’s share price tional share classes of the mutual funds, J&J’s quarterly dividend increase, to First Republic declared a quarterly dis-
aligned with its holdings, he says. whereas the retail expense ratios are 0.7% $1.01 a share from 95 cents, marked the bursement of 20 cents a share, up 5%
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

Granted, some managers say they’re and 0.65%, respectively. 58th straight year in which the company from 19 cents.
quite comfortable with full transparency. ETFs are also more tax-efficient than has raised its payout. J&J boasts a strong Dividend increases are welcome, of
Ark Invest has gathered $3 billion in assets mutual funds. Most ETFs distribute mini- balance sheet, as evidenced by its AAA course, but it’s a victory of sorts these
for five active equity ETFs, for instance. mal or no capital gains, thanks to their credit rating from S&P Global Ratings. days for a company to simply maintain
The firm publishes its full portfolio hold- backstage mechanics. Rather than buying During the company’s first-quarter its payout.
ings daily and doesn’t use proxy baskets or or selling securities in the open market (like earnings conference call on Tuesday, Caterpillar (CAT) said recently that
decoy securities to shield trading activity. a mutual fund), ETFs swap securities “in CEO Alex Gorsky said the dividend boost it would keep its quarterly dividend at
Tom Staudt, chief operating officer at Ark, kind” with market makers. The process reflects “our stability” and is a “strong $1.03 a share. And Goldman Sachs
says its ETF managers trade so often that enables ETFs to avoid capital gains that example of the confidence we have in our Group (GS) on Tuesday declared a
copycat algorithms would have a 50% would otherwise have to be distributed to business now and in the future.” quarterly disbursement of $1.25 a share,
chance, at best, at front-running. Many shareholders. Mutual funds must shell out On an adjusted basis, J&J earned the same as it has paid out previously.
fund companies want nontransparency as a capital gains after they’re realized. Mutual $2.30 a share, compared with $2.10 a Still, these companies look more like
business strategy, he adds. “They sell their funds must also hold some cash for share- year earlier. Reported sales grew by anomalies than trendsetters. The fu-
proprietary research and treat it like a se- holder redemptions, dragging down re- 3.3%, to $20.7 billion. It generated about tures market was recently pricing in a
cret sauce,” he says. “They would have turns, and they can be forced sellers of se- $3 billion of free cash flow, or operating roughly 15% drop in dividends paid out
trouble justifying their fees if their ETFs curities if the markets tumble and investors cash minus capital expenditures, in line by S&P 500 companies this year.
were fully transparent.” cash out in droves (generating capital gains with the first quarter of the previous The S&P 500 Annual Dividend Index
Nonetheless, ETFs that lack full trans- along the way). two years, the company said. Futures contract for full-year 2020 divi-
parency are largely untested and may suf- Big brands like Fidelity and T. Rowe may J&J isn’t immune to the pandemic’s dends has fallen from a high of more
fer mechanical problems, especially under have an advantage because they’re well impact, especially if it lingers. However, than $61 on Feb. 21 to just below $40 on
extreme market circumstances. Nontrans- known in the fund world. Their active finance chief Joseph Wolk said during April 2, according to Charlie Toole, a
parent funds are more vulnerable to pric- ETFs are likely to attract advisors and in- the call that “coming out of the second portfolio manager at Adviser Invest-
ing anomalies—they may trade at a wider vestors, simply because of their brands and quarter, we assume an improving global ments. It had recently recovered to
spread between the bid and ask price, and large distribution networks. But don’t ex- economy with lower unemployment.” about $58, suggesting a little more
their share prices can diverge sharply from pect their active ETFs to take off if they While that’s uncertain right now, the optimism about dividend strength.
the value of their underlying holdings, es- suffer the same fate as most actively man- company does have financial strength. “It’s really tough to call what’s going
pecially if those values aren’t fully known aged funds: falling behind the market over As of March 31, its cash and marketable to happen,” Toole says. “It really de-
to investors or market makers. time. B securities totaled about $18 billion pends on when the economy restarts.” B
April 20, 2020 BARRON’S 35

The content delivery networks
aren’t household names, but they
help to keep the internet running.

There’s Life Beyond

helped customers handle the spikes in forecast to have more total revenue
online activity, smoothing the shift to than Zoom this year, it’s market value
home-based work. “The heroes of this is less than 1/20th of Zoom’s.
crisis are the medical responders and Vonage says that its peak video

Zoom–7 Overlooked
scientists, but the cloud is like the traffic soared 435% in March from the
faithful sidekick,” Prince says. “Had level a month earlier. 8x8 CEO Vik
this happened 10 years ago, we’d all be Verma told Barron’s that his company
in a lot worse shape.” has seen monthly active video users

Stay-at-Home Stocks
The document storage companies spike from about 150,000 before the
have largely been ignored in the virus to more than 13 million today.
scramble for work-from-home plays, “Adoption has been awe-inspiring and
with both Box (BOX) and Dropbox tragic at the same time,” Verma said in
(DBX) trading for roughly three times an interview conducted via 8x8’s
2020 estimated revenue. But the value video platform.

of their services is underlined in a Verma thinks the current crisis
oom Video Commu- traffic in March from February, with work-from-home world. will trigger a “seismic shift” in the
nications has become peak traffic doubling to historic levels. Meanwhile, Zoom’s success has way companies handle communica-
the poster child for This past week, RBC Capital’s overshadowed other communications tions. “It’s become a board level
the work-from-home Mark Mahaney upped his estimates companies that have become newly topic,” Verma says, in the same way
economy, and my on the company to reflect “our more relevant. that network security took center
house is no exception. bullish view of internet traffic and RingCentral (RNG), an internet- stage a few years ago following a se-
My wife teaches a accelerated adoption of remote access, based telephony firm, recently un- ries of high-level corporate hack at-
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class on Zoom and holds a weekly of which we believe Akamai would be veiled its own videoconferencing ser- tacks. He thinks we’re headed into a
Zoom happy hour with friends. My a direct beneficiary.” vice, replacing the licensed version of period in which physical offices will
daughter is Zooming to college. I un- By Eric J. Savitz Cloudflare (NET), the newest ad- Zoom it was selling. fade in importance, and companies
fortunately had to Zoom into a memo- dition to the CDN sector, went public RingCentral rivals Vonage Hold- will be defined by their communica-
rial service a few weeks ago. last September at $15 and has since ings (VG) and 8x8 (EGHT) are also tions backbones. “If you have a com-
Yes, Zoom (ticker: ZM) has become rallied 40%, setting a new high this pushing hard on their video services. munications platform you can be
a verb. It’s also become an absurdly past week, as well. Both have been around for a long effective,” he adds. “A building is nice
expensive stock. At a recent close of In an interview with Barron’s, time—I wrote about them in a May to have,” but not a necessity.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

$150.06, the company had a market Cloudflare CEO Matthew Prince said 2004 Barron’s cover story about the

value of $42 billion, some 45 times his company has taken steps to ease rise of internet-based communications. etflix reports first-quarter
this year’s estimated sales. the onboarding process for new cus- Vonage and 8X8 don’t have Zoom-like earnings after the close
At that valuation, the stock makes tomers. Prince says Cloudflare and growth, but they don’t have a Zoom- Tuesday. Never have the
sense for only the most speculative other infrastructure providers have like valuation either. While Vonage is company’s results been this
portfolios. Fortunately, there are ways closely watched. Netflix’s shares have
to play our new stay-at-home economy rallied 30% this year versus a 12%
at far lower multiples of sales. The Other Stay-at-Home Stocks drop in the S&P 500.
I’m particularly intrigued by the Zoom Video now trades for a pricey 45 times estimated sales. But not every stay-at-home play fetches Last week, the stock (NFLX) set an
content-delivery networks, a group of quite so premium a price. all-time high, as investors anticipate a
companies that help balance loads Company / Ticker Description YTD % Change Price/Sales* big Covid-related pickup in subscrib-
around the internet, while providing ers. In January, Netflix projected that
security services for content and e- Zoom Video Communications / ZM Videoconferencing 120.8% 45.0 it would gain seven million global
commerce firms. The CDNs are hardly Cloudflare / NET Content delivery network 49.0 19.9 subscribers in the March quarter, but
household names, but their services Slack Technologies / WORK Chat 30.7 19.1 the Street consensus prediction is 10%
are crucial in keeping the internet higher—and some estimates are now
RingCentral / RNG Cloud communications 38.1 18.1
running smoothly. as high as 10 million.
The biggest public player is Aka- DocuSign / DOCU Electronic signature 35.9 14.5 In recent quarters, almost all sub-
mai (AKAM), up 22% on the year. The Fastly / FSLY Content delivery network 14.5 8.5 scriber growth has come from outside
stock hit an all-time high this past Citrix / CTXS Virtualization software 36.2 6.0 the U.S. Investors will be looking for
week, but relative to Zoom, Akamai’s strengthening international demand—
valuation remains modest. It trades at Akamai / AKAM Content delivery network 22.5 5.6 and perhaps a re-acceleration of U.S.
less than six times estimated revenue 8x8 / EGHT Cloud communications -6.8 3.9 growth. Other key questions: When
for this year. And the outlook looks Limelight Networks / LLNW Content delivery network 69.1 3.6 will Netflix resume production of new
bright. content and is the company seeing any
Box / BOX Cloud storage -8.2 3.1
Akamai CEO Tom Leighton said at impact from new competition? And, of
a virtual customer event recently that Dropbox / DBX Cloud storage 4.6 2.8 course, how many people watched
the company had seen a 30% jump in *Based on 2020 estimated sales Source: FactSet Tiger King. B
36 BARRON’S April 20, 2020

Q& A An Interview With Tiffany Hsiao

Manager, Matthews China Small Companies Fund

What’s Next
For China’s

iffany Hsiao’s focus on small Chinese compa-
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nies gives her an unique view as to how

China’s domestic economy is faring as the
country tries to recover from the Covid-19
pandemic. That perspective has also helped
the Matthews Asia fund manager build a
resilient portfolio in the face of the pan-
demic—and before that, the trade war.
Taiwanese-born Hsiao grew up in Silicon Valley,
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

where she watched her father help reinvent a calculator

company and build the world’s first laptop computer
using Intel’s 386 CPU—an early lesson on the power of
innovation. Hsiao has used that in hunting stocks for
the Matthews China Small Companies fund (ticker:
MCSMX). The $200 million fund has beaten 99% of its
peers over her five-year tenure as lead manager. The
fund’s 18% gain this year has trounced peers again, as
well as the Chinese market and the S&P 500 index.
Barron’s spoke with Hsiao to get her views on how
Chinese consumers and businesses are recovering after
the country eased restrictions, the risk of a second wave
of outbreaks, and why the portfolio has been so resistant
to a black swan development that has rattled markets.
Here’s a condensed version of our discussion; a longer
version can be found at

Barron’s: China is a couple of months ahead in deal-

ing with this pandemic. The Chinese market had its
biggest drop in early February, before the global
market tanked on Feb. 20, and is still holding up.
What has helped its resilience?
Tiffany Hsiao: Confidence. There are a couple layers:
Within China, there’s confidence the disease is control-
lable. They have so much in resources—they can make
five million masks per city when they ask people to

Illustration by KEVIN McGIVERN

April 20, 2020 BARRON’S 37

A fund manager’s focus on small

companies gives her a perspective on
“The self-sufficiency theme is alive and well [in China].”
how China is faring after Covid-19. Tiffany Hsiao

work together—so they are confident U.S. How are they doing in China? How will a recession in the U.S. or Health care makes up 20% of your
they have the medical supplies and [China’s] stimulus has been very mea- Europe affect China’s recovery? portfolio. What is the draw?
people working together. And because sured, such as a deferred social secu- We need to see a more effective re- Part of it is my constant paranoia that
of how swift and effective the [con- rity tax and local tax rebates. On top sponse globally to provide a stronger something is going to go wrong, so
tainment] was, people are not worried of that, a lot of the more wealthy parts backdrop for China to recover. This half [of the allocation] pertains to basic
about job security. We can’t say that of the economy—the landowners—vol- was supposed to be a great growth stuff like vaccines—including
about the U.S. or Europe. Everyone at untarily offered two months of free year: A lot of businesses were holding CanSino Biologics (6185.Hong Kong),
the companies we own is back at rent and no collections on debt. Here back their checkbooks for three years, which is doing clinical trials in Seattle
work. in San Francisco, a lot of restaurants [waiting] for a resolution to the trade for a coronavirus vaccine— medical
And if you look at demographics, are going out of business because war to deploy the capital. waste, and companies trying to de-
the largest cohort [of investors] is mil- landlords refuse to do that. The [Chinese unemployment] situ- velop strong health-care infrastruc-
lennials. When they see a correction, ation is fluid, since many workers are ture to keep 1.4 billion people healthy,
they are going to participate because How has consumer or corporate still in the process of returning to so it doesn’t turn into a social problem.
that is not their nest egg. They are still behavior changed? their normal jobs. However, if coun-
building it and have the ability to cap- We are a heavy investor in software, tries outside of China continue to suf- And the other half?
ture the falling knife, whereas in the including China Youzan (8083.Hong fer, then those jobs may not be waiting It’s focused on human DNA; 99.9% is
U.S. and Europe investors are depend- Kong), which is the equivalent of for workers as they return. similar, but that small difference re-
ing on that money in the next 10 years. Shopify, and helps mom-and-pops sell sults in Caucasian and Asians having
anything. As soon as everyone shut How do you invest around that? very different critical-illness disease
What about China’s lack of trans- down, their users went through the We stress-test every company through types, especially with cancer. In Asia,
parency and attempts to muffle roof, as companies tried to go from all types of scenarios. When you are the more prevalent cancer types are of
early warnings, like from Dr. Li bricks-and-mortar to online. China is investing in a country as big as China, the liver and stomach, whereas those
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Wenliang, who eventually died? very dynamic. Small- to medium-size- something will always go wrong. I call are designated by U.S. Food and Drug
When this virus first broke out, the business owners are very nimble. And them black ducks [instead of swans] Administration as orphan diseases,
Chinese government’s response was there’s still demand: People still need because they are not as rare as you with fewer than 200,000 new diagno-
not transparent. But in the past, you to eat and have kids entertained with think. If it’s not this virus, it’s going to ses in the U.S., compared with 1.2 mil-
would see very draconian measures to educational programming. Their basic be a natural disaster or something else. lion new diagnoses of liver and gastric
suppress freedom of speech. This needs haven’t changed; they just need We want the highest return on cap- cancers in China.
time, they let people vent their frustra- a different way to get it. ital possible. To do that, we tilt toward In the past, China relied on the
tions. People were creating art pieces People are also embracing the digi- asset-light companies that don’t have Western world for medical advances
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out of that doctor’s picture and post- tal economy even more. The e-com- much balance-sheet risk. Our compa- and newer therapies. But as the drugs
ing on WeChat and mourning his merce adoption rate is already much nies never depended on [debt], and become more DNA-based, you need
death. The Chinese government pub- higher than in the U.S., with about their products are intellectual- drugs that fit the Asian DNA better, so
licly apologized [for its treatment of 25% of retail sales done online com- property driven and can be used digi- we focus on scientists who earned
Li]—that in itself instilled confidence. pared with 11% in the U.S. In the past, tally and remotely. So we’ve been very their stripes at Western companies
people just ordered clothes or elec- insulated, especially year to date. and start their own businesses—like
Are you worried about a second tronics and now are ordering grocer- Innovent Biologics (IVBXF), whose
wave of infections? ies. During the crisis, they are also China was trying to become more management is top-notch talent from
People on the ground are not fearful. having kids educated online. We own self-sufficient as tensions with the global drugmakers. It’s a top oncology
The government has put in place very Koolearn Technology Holding U.S. escalated. Has that been biopharma company that focuses on
cautious, but reasonable, polices (1797.Hong Kong), an online education derailed by the latest crisis? drugs for Asia’s prevalent cancer indi-
around public health. Any person company that was ready with content The self-sufficiency theme is alive and cations and has a very strong pipeline
who returns from overseas has to self- and had teachers trained. well. When the government was of innovative, novel therapies in addi-
quarantine for 14 days. They give you
“We need to thinking about how to stimulate the tion to blockbuster drugs.
electronic bracelets as you enter, and see a more Have any trends been derailed? economy, that was the first area it
track you. That type of policy broad- effective Travel is a very large part of consumer looked at—investing more in semi- Have you encountered any prob-
cast to the people gives them confi- discretionary spending. The Chinese conductors, biotech, and software. lems with liquidity?
dence that the government is doing its response love to go overseas—and now they The chairman of our largest position, Chinese small-caps comprise the
job, so they can safely go do theirs. globally to can’t. And as we emerge from this Silergy (6415.Taiwan), the largest world’s largest small-cap asset class. It
In terms of valuation, the Chinese crisis, there is a fear of racism, so analog semiconductor company in surpassed the U.S. two years ago in
onshore equity markets have not cor- provide a [travel] will [continue to] be impacted. China, told me the company will grow terms of liquidity, number of stocks
rected much since the Covid-19 out- stronger There’s also some time shifting: revenue 20% to 30% unhindered, listed, and total market cap listed. If
break. There is risk that if a second Real estate transactions were down a because the areas they invest in are you are worried about liquidity, Chi-
infection shuts down the economy for backdrop lot in the first quarter, but they’re the areas the government wants to nese small-caps are much more liquid
longer, valuations could become even for China starting to bounce back in cities like speed up—5G infrastructure, health- than the U.S.—and have done much
more stretched in the near term. Nanjing. The line to go see [a new list- care equipment, and data centers—as better year to date.
to recover.” ing] was wrapped around the build- more people work from home and
Small businesses are hurting in the Tiffany Hsiao ing. There’s pent-up demand. embrace the digital economy. Thanks, Tiffany. B
38 BARRON’S April 20, 2020

The $349 billion “paycheck protection program” has
run out of funding even as processing backlogs have
prevented businesses from getting what they need.

Here’s How America

and businesses. Even the most com- vaccine is developed. Economist Paul
mercially minded governments will Romer has been pushing for 20 mil-
have a hard time convincing people lion to 30 million U.S. tests a day,
that it’s safe to go out if the bodies keep which would be about 250 times the

Needs to ‘Reopen’
piling up, which is what will happen if current daily rate. Given a lack of sup-
we don’t stop the spread of the virus. plies and labor, expanding testing ca-
The Swedish government consciously pacity by any measure will be chal-
chose to avoid prioritizing public lenging, let alone by a factor of 250,

health, yet the country is still enduring but it’s necessary under any normal-
an economic downturn even as its ization scenario.
death rate spikes. Matthew Harrison, the top biotech
None of this is to say the current analyst at Morgan Stanley, estimates
situation is tolerable. Responsible pre- that the U.S. as a whole won’t be able
cautions are depriving swaths of the to start reopening until midsummer.

U.S. economy of income and jobs. The But if we aren’t careful now, and an
he U.S. economy that seems like it will be enough, won’t Organization for Economic Coopera- anticipated second wave happens be-
has likely shrunk be. The $349 billion “paycheck protec- tion and Development argues that to- fore the health-care system has had a
more in the past six tion program,” for example, has al- day’s viral “containment measures” chance to recover from the current
weeks than it did in ready run out even as processing back- will directly reduce U.S. output by a crisis, the lack of spare capacity would
the entire Great logs have prevented businesses from little more than 25% for as long as they turn it into a disaster. Moreover, peo-
Depression. The getting what they need. last, and the total cost is being ampli- ple would have no reason to trust offi-
good news is that if Trying to reopen businesses with- fied by everything from businesses cials in the future about whether it’s
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we do things right, we can limit the out customers will just lead to a bigger slashing ad spending to consumers safe to go out, which would ultimately
damage from the coronavirus down- economic hit from additional failures tightening their budgets. One conse- depress both consumption and pro-
turn and restore much of what has By Matthew C. and layoffs. The Chinese government, quence is that roughly 15 million duction even more than otherwise.
been lost. If we do things wrong, how- Klein for example, claims to have stopped Americans were receiving unemploy- Suppose, however, that the second
ever, we’ll only end up with more new infections and has lifted many of ment benefits as of April 11—more wave is avoided and that reopening
deaths and an even bigger hit to the the restrictions it imposed earlier in than double the previous record in the can proceed smoothly. Even then,
economy. the year, but Chinese retail spending summer of 2009. progress will be slow. Some sectors—
“Reopening”—which everyone from in March was nevertheless 18% below So what can be done? particularly manufacturing and con-
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

Xi Jinping to Angela Merkel to Donald its level a year earlier after subtracting In theory, regularly testing every struction—should be able to get back
Trump is eager to do—sounds tempt- inflation, barely up from February. man, woman, and child—and quickly to work relatively quickly with the aid
ing, but it isn’t the answer. For the Prematurely ending controls also quarantining anyone who tests posi- of additional protective gear. But most
most part, government restrictions risks overwhelming health systems tive—would allow most people to live analysts recommend maintaining so-
aren’t preventing commerce that without doing anything for workers more or less as they did before until a cial distancing and limits on public
would otherwise be happening—after gatherings during any reopening until
all, essential businesses are still oper- a vaccine has banished the threat of
ating while many other workers are the virus for good. That will be a major
able to do their jobs from home. drag on the economy.
Rather, people have been responding Scott Gottlieb, who helped write the
rationally to the threat of a deadly con- right-leaning American Enterprise
tagious disease, and indeed were curb- Institute’s “road map” for reopening
ing their consumption even before U.S. the U.S. economy, expects about 80%
cities and states began imposing lock- of activity to get back to normal before
downs. Unless people feel safe, lifting a vaccine becomes available. That
restrictions won’t do much for affected would be a substantial improvement
sectors like restaurants and airlines, over current conditions, but it would
where demand has fallen off a cliff and still be a disaster for tens of millions of
could stay far below normal until a Americans. As a result, Goldman
Covid-19 treatment or vaccine is found. Sachs now says the U.S. job market at

Photograph by Benjamin Lowy

The answer, then, is that govern- the end of 2021 will be almost as bad
ments should focus on providing fi- Just a few people as it was during the previous trough in
nancial support to businesses and walking recently 2010.
through the
workers to tide them over until the World Trade Center
In the end, there is no trick to re-
health crisis passes. The $2.3 trillion Oculus, a usually storing normalcy without eradicating
Cares Act was a start, but far too small packed shopping, the virus. The choice isn’t between
tourist, and transit
and poorly targeted. A good rule of hub in lower reopening and not—it’s between the
thumb is that any amount of money Manhattan. one decent option and disaster. B
April 20, 2020 BARRON’S 39

Send letters to To be considered for The Readback, a podcast taking you
publication, correspondence must bear the writer’s name, inside the latest stories, is available
address, and phone number. Letters are subject to editing. wherever you listen to podcasts.

there must now be some enlightened certain activities, e.g., wandering on a more, equity prices, an asset class
economic and social program that will lonely path in the woods: risk of infec- directly outside the Fed’s remit, have
encompass reality. This is a presiden- tion 1:10,000,000; seeing friends with risen significantly. The conclusion:
tial election year. Hopefully, a thought- social-distancing measures: 1:2,500; With such a meaningful Fed put, risk
ful and temperate leader will step for- riding on the overcrowded subway in will rally.
ward with proposals for genuine New York City: 1:54. Gary Schweitzer
improvement for the commonweal. With such an app, everyone could Brooklyn, N.Y.
Channing Wagg see their personal risk. You could im-
Boxborough, Mass. prove the app by including your per- COVID-19: IN MEMORIAM
sonal risk factors: 32 years old, no ante-
To the Editor: cedent health issues, etc., or 75, with José María Loizaga, one of the
The coronavirus pandemic is not a diabetes and on immunosuppressive founding fathers of private equity in
black swan. The possibility of such a drugs. The model could be updated Spain, died at age 84 in Madrid this
pandemic, together with its conse- with the latest data on local herd im- past Sunday of Covid-19, according to
quences, was widely expected and pre- munity, etc. Now, that’s an effort that his son, Moira Capital Partners Chair-
dicted years ago by several visionaries Google could do! man Javier Loizaga. He was born in
and experts. Ari Giagounidis Bilbao in 1939, built a successful ca-
For example, Bill Gates was remark- On reer in banking and industrial devel-
ably accurate in describing such a pan- opment, and headed up southern Eu-
demic and its impact in his 2015 TED To the Editor: rope for Otis Elevator in the 1980s. In
Talk “The Next Outbreak? We’re Not Most experts think it will take 18 1985, he founded Mercapital, one of
Ready.” months for a vaccine, so my best guess the early private-equity firms in
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

RAND’s 2012 report, “Threats is the world will look very different for Spain, which he ran until 2008. He
Without Threateners?” said that a “fu- the next 1½ years (unless we can get later served as vice president and di-

TheRoadto ture pandemic may be virtually cer-

tain,” and that “its timing and severity
are not.” It added, “Pandemics are a
real possibility in the here and now;
the vaccine sooner). At that point, we’ll
have a big hole to get out of.
Mark Weidmann
rector of ACS Group, a global infra-
structure company based in Madrid.
Loizaga is survived by his wife and
three children. His son Javier, who

TheMonetary there is nothing future about them.”

And finally, “In current circumstances,
Risk Will Rally
worked with him for 25 years, noted
his father’s ability to balance family
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

only pandemics seem to be an existen- and business, his intense work ethic,

tial threat, capable of destroying Amer- and, until the end, his robust health.
ica’s way of life.” To the Editor: “The need or the desire to make money
The warnings from U.S. Intelligence Barron’s coverage of the Federal Re- was never what motivated his behav-
in the beginning of the year were ig- serve’s intervention in the high-yield ior,” he wrote.
nored by the White House. The root bond market would benefit from a
To the Editor: cause of this pandemic is failure of the broader perspective (”Thursday’s
In last week’s edition, among the numerous perceptive government and corporations to heed Junk-Bond Rally May Have Been a Share Your Market Predictions
comments about the Covid-19-driven crisis was one by the warnings and take timely action. Fed-Fueled Mirage,” The Trader, Barron’s Big Money Poll surveys institutional
Rock Creek Group founder Afsaneh Mashayekhi Bes- Nassim Nicholas Taleb, the author April 10). Beyond technical support investors twice a year on their outlook for
chloss that “our economy was very strong, but our social of Black Swan, has called this pan- for single-name issues, what matters the economy and the markets. In addition to
polling professional money managers, we’re
fabric and labor wasn’t” (“Get Ready for a Postcoronavi- demic a “white swan” and said it was are supply dynamics (less credit mi-
interested in our readers’ opinions on these
rus World. The Economy Will Never Be the Same,” Cover preventable. gration of investment to speculative topics and how coronavirus is affecting
Story, April 10). I take exception to this. Sandip Lahiri grade) and relative value (investment- your retirement. Go to
The economy never recovered from the securitized- Tampa, Fla. grade spreads, broadly Fed back- readerpoll to have your say. Poll closes at
mortgage-induced financial crisis and, in fact, was only stopped, have tightened). Further- midnight on April 20.
weakened by the Federal Reserve’s subsequent increase in
debt levels and suppression of interest rates. As proof, An App for That
witness the abrupt loss of 17 million jobs, mostly service

“The author of Black Swan has

related, the froth on the supposed economic recovery. To the Editor:
Now, on top of precarious debt levels, the Fed must resort Many people are tired of being locked
again to the same bromide of debt stimulus in an attempt in, and many would be happy to take a
to stabilize the economy. Necessary, because seemingly
there is no alternative at hand, but the debt cycle begins
again, another jaunt on the yellow brick road that leads to
sensible risk if that could help to re-
open the economy (“The Terrible Costs
of Keeping—or Ending—the Corona-
called this pandemic a ‘white swan’
the monetary Land of Oz.
Given the degree of weakness in the economy and im-
virus Lockdowns,” April 10). Why
don’t we have an app that tells you and said it was preventable.”
pact of this on our society as revealed by the pandemic, what your risk is when you undertake Sandip Lahiri
40 BARRON’S April 20, 2020
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At MFS, we actively invest throughout the credit cycle,
helping advisors deliver income, diversification and risk
management for their clients. It’s a traditional approach
we call Essential Fixed Income.

Learn more at

©2020 MFS Investment Management 44850.1 Fixed Income®
April 13 through April 17, 2020

Euro Trader P. M4 Power Play P.M7

Emerging Markets P. M4 Charting the Market P. M8
Striking Price P. M5 Winners & Losers P. M9
Commodities P. M6 Research Reports P. M10
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13D Filings P. M7 Statistics P. M13


Dow Jones Industrials S&P 500 Nasdaq Composite Russell 2000

52-wk: -8.72% YTD: -15.05% Wkly: +2.21%
52-wk: -1.05% YTD: -11.03% Wkly: +3.04%
52-wk: +8.15% YTD: -3.59% Wkly: +6.09%
52-wk: -21.50% YTD: -26.33% Wkly: -1.41%

Wednesday 7.5%
Monday A slew of terrible economic data, including
With markets closed in Europe, U.S. stocks plunging retail sales and industrial production,
battled their way back from early losses to caused markets to slide Wednesday. 5
finish well off their lows. Small-caps took the brunt of the selloff.

To reprint or license content, please contact Barron's reprints department at 800-843-0008 or


Tuesday -5
Stocks surged amid positive news about
the coronavirus. hit an all-time
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

All the major indexes soared to end the week -7.5

high, helping the Nasdaq gain nearly 4%.
after an encouraging report on Gilead Sciences’
remdesivir as a coronavirus treatment.
Monday Tuesday Wednesday Thursday Friday Close
Source: Barron’s Statistics

o much for the little gap between the two indexes has been Sciences’ (GILD) antiviral drug rem-


America may love
stories about scrappy
that large since March 13, but one has
to go back to 2002 to find a similar
desivir appeared to be working in a
small Covid-19 trial at the University
of Chicago.
underdogs that some- Considering the economic news of Still, the two indexes responded in
times overcome the the week, one would almost have to such dramatically different fashions
odds and win. But we assume small-caps have it right. Retail that it’s almost as if they live in two

The Stock also love favorites, and these days they

come in pretty much one size only—the
sales plummeted the most on record.
The Empire State index of manufactur-
different worlds—and in some ways,
they do.

Market’s bigger the better, at least when it comes

to the stocks we buy.
By Ben Levisohn ers in the New York region fell to its
lowest level ever. Industrial production
Because of their small size, the
companies in the Russell 2000 are

Just consider this past week’s mar- suffered its largest decline since 1946. much more sensitive to economic
ket returns. A quick look at the S&P Banks like JPMorgan Chase (ticker: growth rates than the much bigger

Await Their
500 index’s 3% gain suggests that ev- JPM) and Bank of America (BAC) ones in the S&P 500, explains RBC
erything is going to be all right despite reported massive loan-loss reserves for Capital Markets strategist Lori Calva-
the economic slowdown caused by the good debt gone bad. sina. She notes that the small-caps
Comeback coronavirus. The small-company Rus-
sell 2000, however, dropped 1.4% to
The only real good news on the
week came on the health front, in-
generally underperform large-caps
ahead of drops in the Institute for
1229.1, implying that everything isn’t cluding tentative steps to reopen the Supply Management’s manufacturing
A-OK. It’s the third time the weekly economy and a report that Gilead survey. “We’ve been confronted by the
M2 BARRON’S April 20, 2020

grim reality of how severe the economic recognize that these trends were largely in
damage has already been this week,” Calva- place before the current crisis began. Ama-
sina says. Small-cap underperformance zon’s rise had put other retailers down years
suggests it’s going to get worse. ago; the energy sector was under pressure
This isn’t a one-week trend, and it even long before Covid-19 destroyed demand for
shows up within the S&P 500 itself. Since crude; big tech stocks were the go-to invest-
the index peaked on Feb. 19, its 100 largest ments long before the novel coronavirus
stocks by market cap on that day have became part of everyone’s vocabulary. That’s
dropped an average of 16%, six percentage a reflection of a world where growth is slow,
points less than the next quintile of stocks. and where stocks of large companies that
The 100 smallest stocks in the S&P 500 can make their own growth will outperform.
have dropped 35%, nearly twice as much as For small companies to finally outperform,
the largest. The world is really divided be- the stimulus is needed not only to bridge the
tween the haves and the have-nots, and that gap until the crisis is over but to get the
may continue as the economy deteriorates. economy moving once again.
“I don’t know why there would be any “The government programs are a safety
rule against the strong getting stronger in a net, and small-cap companies need a safety
difficult environment,” says Larry Pit- net,” says Jefferies strategist Steven De-
kowsky of GoodHaven Capital Management. Sanctis. “They also need the government to
“That may be how it plays out.” kick-start the economy.”
You don’t have to dig into index perfor- When that happens, the underdog might
mance to see that the big and the strong are finally have a fighting chance.
just getting bigger and stronger as the small
and weak get crushed. This Small-Cap Is Ready to Pounce
(AMZN) and Netflix (NFLX), two compa- This market hasn’t been friendly lately to
nies that have benefited from the crisis in small-cap stocks, as we just noted, or to
two different ways, hit new all-time highs companies that use debt as part of their
as investors flocked to the same giant tech business models. But Compass Diversi-

IB SmartRoutingSM
stocks they always did. Procter & Gamble fied Holdings—which is guilty on both
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

(PG), Johnson & Johnson (JNJ), and counts—is in a position to emerge from the
Costco Wholesale (COST) all raised their coronavirus recession stronger than it en-
1 dividends—and each finished the week up tered it.
provides an average net benefit of more than 5%. Meanwhile, smaller S&P
500 companies such as oil-services com-
Compass (CODI) essentially operates
like a middle-market private-equity firm:
pany Helmerich & Payne (HP) and re- acquiring, operating, and divesting busi-

USD 4.42 per trade tailer L Brands (LB) suspended theirs.

It wasn’t supposed to be this way. The
nesses in several niche consumer and in-
dustrial end markets. Since its initial public
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

performance disparity comes even as the offering in 2006, Compass has made 20
Federal Reserve and the U.S. government acquisitions and 11 divestitures.
pump trillions of dollars into the U.S. econ- Its current holdings are a diverse group.
omy as companies try to bridge the gap The largest is Sterno Group, a maker of
between the shutdown and the reopening. candles and other warming tools for the
Part of that goal has been to protect jobs, food-service industry, followed by 5.11 Tac-
but also to help smaller companies weather tical, a provider of equipment and uniforms
the storm. If the market is any indication, used by police, firefighters, and other emer-
those plans have failed. gency responders, which has expanded into
Or maybe not. Observant investors will consumer apparel and products under

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Vital Signs
Friday's Week's Week's
Close Change % Chg. Last Week Week Earlier

Interactive Brokers Rated #1 DJ Industrials

DJ Transportation
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Best Online Broker 2020 by Barron’s* DJ Utilities 823.98 -3.85 -0.47 Unchanged 26 11
DJ 65 Stocks 7896.55 +91.82 +1.18 New Highs 40 21
DJ US Market 704.58 +19.73 +2.88 New Lows 49 42
NYSE Comp. 11208.29 +71.68 +0.64 Av Daily Vol (mil) 5,436.3 6,864.2
Member - NYSE, FINRA, SIPC – Supporting documentation for any claims and statistical information will be NYSE Amer Comp. 1739.79 +4.28 +0.25 Dollar (Finex spot index) 99.71 99.52
provided upon request. *Interactive Brokers rated #1, Best Online Broker according to Barron’s Best Online S&P 500 2874.56 +84.74 +3.04 T-Bond (CBT nearby futures) 179-280 178-270
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S&P MidCap 1561.43 -24.94 -1.57 Crude Oil (NYM light sweet crude) 18.27 22.76
trademark of Dow Jones & Co. Inc. [1] IHS Markit reported that IBKR clients received $0.43 per 100 share net
S&P SmallCap 722.58 -20.65 -2.78 Inflation KR-CRB (Futures Price Index) 123.80 127.82
price improvement versus the industry as a whole during the second half of 2019. The average monthly stock
order size during that period was 1,557 shares and the average commission per cleared commissionable Nasdaq 8650.14 +496.57 +6.09 Gold (CMX nearby futures) 1689.20 1736.20
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April 20, 2020 BARRON’S M3

Industry Action
Performance of the Dow Jones U.S. Industrials, ranked by weekly percent change.*
Consumer Services 7.04%
Health Care 6.40
Technology 5.81
Consumer Goods 4.01
Telecommunications 1.99
Oil & Gas 0.32
0.00 Industrials
–0.75 Utilities
–2.57 Basic Materials
–3.91 Financials

* For breakdown see page M36. Source: S&P Dow Jones Indices

Compass’ ownership. Other subsidiaries Compass a market capitalization of just un-

sell goods from printed circuit boards to der $1 billion.
custom molded foam products, baby carri- The discount is far overdone. The corona- or call 1-866-SECTOR-ETF
ers, and gun safes. virus-induced correction has come at a time
That diversification doesn’t insulate when Compass is sitting on the strongest An investor should consider investment objectives, risks, charges and expenses carefully before investing. To
Compass’ portfolio from physical-distanc- balance sheet it has had in years, with plenty obtain a prospectus, which contains this and other information, call 1-866-SECTOR-ETF or visit www.sectorspdrs.
ing disruptions or lost demand during a of available liquidity to weather the current com. Read the prospectus carefully before investing.
pandemic or a recession, but it helps. downturn, maintain its payout, and emerge All ETFs are subject to risk, including possible loss of principal. Sector ETF products are also subject to sector risks and non-diversification risks,
Meanwhile, the company is cutting discre- an opportunistic buyer on the other side. which generally results in greater price fluctuations than the overall stock market. Ordinary brokerage commissions apply.
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

tionary spending and capital expenditures, Compass’ management was busy in 2019, ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is distributor for the Select Sector SPDR Trust.
and its payout commitments to bond- and disposing of assets during a period of ele-
shareholders are comfortably manageable. vated valuations and fortifying its balance
Last month, Compass agreed to pur- sheet. The holding company sold two sub-
chase Marucci Sports, a manufacturer of sidiaries in 2019—hemp producer Manitoba
baseball bats and other gear, for $200 mil- Harvest and recycling and waste-disposal
lion in cash. Sold under the Marucci and firm Clean Earth—for a combined $770 mil-
Victus brands, the wooden bats are popular lion, notching a gain of $311 million.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

with professional players. Compass CEO It also raised $111 million from a sale of
Elias Sabo told Barron’s that management preferred shares in November, which it used
plans to use that aspirational brand posi- to pay off debt and reduce its leverage to
tioning to gain market share with amateur about 1.4 times net debt to Ebitda. Credit-
players, school leagues, and other consum- rating firms Moody’s and S&P each up-

Don’t settle
ers. It’s a strategy Compass has employed graded Compass’ remaining debt, lowering
at 5.11 and motor-sports parts maker Fox its cost of capital.
Factory Holding (FOXF), which it began “Nobody knew this was coming, obvi-
to spin off in 2013. ously,” says Sabo, referring to the pandemic.

for average.
Compass’ total 2019 revenue and ad- “But what we did know is we were over a
justed earnings before interest, taxes, de- decade into an expansion, that asset prices
preciation, and amortization, or Ebitda, were at record highs, and that eventually
reached $1.5 billion and $241 million, re- something would create a market disloca-
spectively. For the past nine years, Compass tion. So we just started to become defensive.”
has paid a quarterly distribution of 36 cents Management estimates that Compass
per share out of its operating cash flow— currently has over $650 million of liquidity
giving the stock a hefty 9.24% dividend available. Its potential firepower for acqui- Upgrade your financial advisor at
yield at its recent $15.84. sitions is greater: In the past Compass has
Compass was one of Barron’s best-per- been comfortable with taking leverage to
forming stock picks in 2019, returning 66% close to four times net debt to Ebitda. Man-
through year end after we wrote about it in agement will be busy hunting for newly
May, helped by a string of better-than-ex- discounted bargains on the way out of the
pected earnings and its generous payout. coronavirus crisis and ensuing recession.
The first few months of 2020 have been Investors who missed Compass stock’s
another story entirely. From their high of spectacular rise in 2019 have a rare second
more than $26 in late December, shares tum- swing at it. They can be paid generously to
bled to about $11 each at the market’s March wait for new acquisition opportunities to
©201 9 Dow Jones & Company. All Rights Reserved. 2E200
lows, before rebounding partially to give emerge. — Nicholas Jasinski
M4 BARRON’S April 20, 2020

More Companies Are Slumping Currencies
Ditching Dividends Will Weigh on Stocks
By Pierre Briançon easing program largely designed to help By Craig Mellow dimensions of U.S. government stimulus
banks keep financing troubled corpo- should also prop up dollar assets for the

alk about a reversal of fortune. rates, also allowed European lenders to isk assets of all sorts have ral- rest of this year, adds Andrew Keirle, a
Companies paying dividends use their capital buffers—think of them lied over the past month as portfolio manager in emerging market
are being frowned upon in as rainy-day funds—during the crisis. panic over the Covid-19 pan- local-currency bonds at T. Rowe Price.
Europe after years of being The ECB asked those same banks to demic peaked and subsided. “Markets closer to the opening of the
celebrated as the avant-garde of the long, abstain from their planned disbursement Emerging market currencies are a nota- spigot will come back first,” he says.
post-financial-crisis recovery. of some 30 billion euro’s worth of divi- ble exception. Emerging market currencies have a lot
The coronavirus outbreak has dends this year. Yet for Europe’s largest The Wisdom Tree Emerging Cur- of room to catch up at some point. Cur-
changed rules and perceptions. Divi- bank, BNP Paribas (ticker: BNP.France), rency Strategy exchange-traded fund rencies outside of Asia are at their “low-
dends are now being canceled, or at least it took a precise warning by its top bank- (ticker: CEW) has slumped 2% since est, real effective exchange rates in almost
“postponed,” to borrow from the finan- ing supervisor, threatening legal mea- March 16 and 11% year to date, plunging a decade,” Czerwonko calculates. An
cially correct vocabulary of the day. The sures, to finally comply. A similar warning to a four-year low. They should rebound, early rebounder might be the Russian
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

question is how long the dividend disap- was issued for United Kingdom banks by but not anytime soon, investors predict. ruble, whose 17% decline this year ig-
pearance will last, and what investors the country’s Prudential Regulation Au- Emerging market currencies “remain nores the Kremlin’s underlying fiscal
should do about it. thority. For now, all European banks have susceptible to renewed weakness over the strength, he thinks.
There are many reasons for this. bowed to their regulators’ veiled orders next three to six months,” says Alejo Cz- Lewis Jones, an emerging markets
Regulators are asking banks to retain and scrapped their dividends. erwonko, the emerging markets strategist debt portfolio manager at William Blair,
dividends to shore up their capital base. Elsewhere, governments are making at UBS Global Wealth Management. sees “reasons to be positive” on Mexico,
Governments, while they are massively the massive aid they are deploying to the “They should recover some losses going whose peso has plunged 23% against the
coming to the rescue of the private sector, private sector conditional on the reten- into 2021.” dollar in the past two months. President
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

want to make sure that taxpayer money tion of dividends. There is a political Depressed currencies will drag on Andres Manuel Lopez Obrador’s irreso-
isn’t used, whether directly or indirectly, element there. emerging market stocks for international lute Covid response could be outweighed
to reward shareholders of stressed-out When millions of workers are losing investors. The correlation is far from ex- by longer-term advantages. “It’s not a
companies—in many cases, distant invest- their jobs and companies are queuing up act. Emerging market equity indexes are great story, but it will benefit a lot from
ment funds in faraway countries. at the state’s windows to ask for tax dominated these days by China, South the U.S. recovery, and the central bank
But the main reason by far is the mas- breaks, grants, or cheap loans, it doesn’t Korea, and Taiwan, three countries that can slash rates aggressively,” Jones says.
sive shock that lockdowns across Europe hurt for a government to show that its seem to be leading the way out of the State Street’s Hurd is eyeing Indone-
are forcing on the economy. To pay out money won’t be used to help “rich” Covid-19 scourge. sia, where the rupiah is off 12% since
dividends, companies would need to sur- investors get the returns they expected. The currency index gives nearly equal Covid hit. “They’re somewhat more insu-
vive (many won’t) and eke out a profit In any case, the companies operating weights to 15 countries, including the two lated from global shocks and have the
(many won’t, either). in the sectors that have been hardest hit shakiest at the moment, Turkey and funding base for a fairly aggressive fiscal
So, what about the survivors that man- by the crisis wouldn’t be able to pay divi- South Africa. Stocks are concentrated in response,” he says.
age to break even? Banks and non- dends anyway. This is the situation for oil-importing nations that benefit from One thing investors aren’t expecting is
financial companies are caught in the Airbus, (AIR.France), the European air- the recent collapse in crude prices. Cur- abrupt currency collapses with global
ongoing tornado that sees governments plane maker, and Accor (AC.France), the rencies factor in Russia, Colombia, and ripple effects, like Mexico’s Tequila Crisis
everywhere move in to manage their international hotel group. other exporters. of the mid-1990s, or the East Asian deba-
economies. This big state takeover may The scrapping of dividends also makes Still, it’s hard to see a broad-based cles a few years later. That’s because
be temporary, but in the meantime, pri- economic sense. However eager manage- resurgence for emerging markets while struggling economies like Turkey and
vate companies, markets, and investors ments may be to keep luring investors in investors are clinging to the dollar and South Africa have moved to flexible ex-
have to make do with the new paradigm. spite of the crisis, no one today has any other haven currencies for dear life. That change rates that decline gradually in-
Governments and regulators first idea of the direction that the economy risk-off reflex may be locked in for longer stead of the “pegs” their predecessors
chose to send friendly advice and “recom- will take when the recovery begins, and as “the pandemic rotates back to EM,” tried vainly to defend.
mendations” to banks and others regard- when this may happen. In this context, says Aaron Hurd, senior currency portfo- But they and other emerging markets
ing dividends. Then, as a few CEOs and being cash-cautious is the safest bet. And lio manager at State Street Global Advi- can keep declining a while longer under
boards pretended to look elsewhere, the governments forcing private companies sors. the current stressed circumstances.
calls became more pressing. to scrap dividends may, indeed, in spite of Covid-19 is just gathering strength in “EM currencies are cheap across the
The European Central Bank, which appearances, be acting in the interest of populous developing countries like India, board,” T. Rowe’s Keirle says. “But the
has launched a massive quantitative- shareholders. B Turkey, and Brazil. The sheer mammoth market is focused on risk aversion.” B
April 20, 2020 BARRON’S M5

Options trading suggests that stocks may
advance, but more slowly, as companies release
earnings reports and the information is digested.

Fear Is Down, but We’re Equity Options

Not Out of the Woods Yet CBOE VOLATILITY INDEX

VIX Close VIX Futures

Put-Call Ratio S&P 500 Index

80 270
60 195
By Steven M. Sears Overwriting pays investors for owning
50 170
stock and for agreeing to sell at the higher

40 145
t’s the start of the most important earn- price should the stock price exceed the
ings season in a decade. strike price at expiration. Many investors, 30
The stock market just posted its however, don’t want to sell their stock, so 20 70
greatest weekly rally in 46 years. But they perpetually “roll” the calls to higher M J J A S O N D J F M A 10 M J J A S O N D J F M A 45
that fact—and even official government strike prices to hold the shares and keep Daily Values Source: CBOE Source: McMillan Analysis Corp.
reports—will be less valued by investors generating more income.
than first-quarter earnings reports, which This will annoy some investors who feel SPX SKEW NDX SKEW
will provide reasonably solid data to evalu- cheated if they are not offered complicated Implied volatility % Implied volatility %

ate what has happened to the economy strategies that allow them to intellectually 17% 16%
since the coronavirus threw it for a loop. strut their stuff. But it’s a message worth 16 15
Everywhere one turns, someone is confi- heeding when top strategists and major 15
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

dently asserting what we will want to hear: investors are keeping it simple. 14
13 13
that the worst is truly over. Often, the Susquehanna Financial Group’s Chris
soothsayers cite the lowered level of the Jacobson cited the sale of 20,000 Target 12 12
11 11
Cboe Volatility Index, or VIX, as if that (TGT) June 120 calls, 10,000 Citigroup (C)
alone will magically heal the global econ- June $60 calls, 10,000 Morgan Stanley 10
omy and even repel the Covid-19 virus. Yet (MS) June $50 calls, 10,000 Duke Energy 8 9
recent earnings reports from Bank of (DUK) June $100 calls, and 10,000 Honey- 7 8
America (ticker: BAC), JPMorgan Chase well International (HON) June $165 calls. Source: Credit Suisse Equity Derivatives Strategy Source: Credit Suisse Equity Derivatives Strategy
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

(JPM), Wells Fargo (WFC), and others Favorite J.P. Morgan call-selling candi- Skew indicates whether the options market expects a stock-market advance or decline. It measures the difference
suggest much suffering ahead, even if the dates include Starbucks (SBUX), General between the implied volatility of puts and calls that are 10% out of the money and expire in three months. Higher
readings are bearish.
fear gauge is falling. Electric (GE), Lowe’s (LOW), and Darden
The options market, where sophisticated Restaurants (DRI). Other S&P 500 index Week's Most Active
investors position for the future, is display- overwriting candidates include Boeing Company Symbol Tot Vol Calls Puts Avg Tot Vol IV %ile Ratio
ing a cautiousness that contradicts some of (BA), Chipotle Mexican Grill (CMG), Arcus Biosciences RCUS 2746 173 2573 16 25 171.6
the recent stock-market strength. Indeed, Nordstrom (JWN), Twitter (TWTR), Liberty Tripadvisor LTRPA 35549 29251 6298 268 99 132.6
strategists at Goldman Sachs, J.P. Morgan, Deere (DE), Ulta Beauty (ULTA), Dow Homology Medicines FIXX 3410 1758 1652 36 100 94.7
MEI Pharms MEIP 18151 16553 1598 280 86 64.8
and Oppenheimer & Co. are advising cli- (DOW), Schlumberger (SLB), and Exxon NN Inc. NNBR 3511 1335 2176 92 100 38.2
ents to focus on conservative strategies. Mobil (XOM). Quigg told clients to focus SM Energy SM 17508 16949 559 1072 99 16.3
“We are in the middle of a golden age for on call options that expire within two Invitation Homes INVH 8313 343 7970 548 97 15.2

options-selling strategies. Premiums are months with strike prices 5% higher than Switch SWCH 16268 14994 1274 1448 81 11.2
JB Hunt JBHT 6398 2368 4030 688 95 9.3
widely inflated with fear, and this is creating the underlying stock prices. Raytheon Technologies RTX 63699 45461 18238 7332 96 8.7
intense interest among investors to sell puts Even though officials are contemplating Dick's Sporting Goods DKS 26510 7058 19452 3172 96 8.4
and calls,” Michael Schwartz, Oppenheimer reopening the economy, and the Federal AECOM ACM 13540 7525 6015 1948 97 7.0
Kandi Technologies KNDI 4824 4323 501 728 88 6.6
& Co.’s chief options strategist, told Barron’s. Reserve is battling to rescue the economy
Limelight Networks LLNW 8203 7749 454 1252 98 6.6
J.P. Morgan’s Shawn Quigg recently told for the second time in a decade, many op- Compugen CGEN 4239 2209 2030 680 68 6.2
clients that investors seem reluctant to do tions investors are cynical. Trading sug- Abbott Labs ABT 304070 229052 75018 51004 98 6.0
anything too risky, though they are inter- gests that stocks may advance, but more Domo I DOMO 5640 4329 1311 1060 89 5.3
Lakeland Industries LAKE 17266 14349 2917 3408 67 5.1
ested in “monetizing rich implied volatility slowly, as companies release earnings re- Consumer Staples SPDR ETF XLP 84977 22842 62135 17224 97 4.9
levels by overwriting long stock positions.” ports and the information is digested. Some Akoustis Technologies AKTS 2805 2532 273 592 98 4.7
Earlier this week, trades that attracted investors are hedging against declines, too. This table of the most active options this week, as compared to average weekly activity – not just raw volume. The idea is that the
attention involved major investors “over- In some ways, option trading patterns unusually heavy trading in these options might be a predictor of corporate activity – takeovers, earnings surprises, earnings pre-
announcements, biotech FDA hearings or drug trial result announcements, and so forth. Dividend arbitrage has been eliminated. In
writing” large stock positions. The strategy are playing a dirge for a damaged economy. short, this list attempts to identify where heavy speculation is taking place. These options are likely to be expensive in comparison to
their usual pricing levels. Furthermore, many of these situations may be rumor-driven. Most rumors do not prove to be true, so one
entails selling calls—usually at 5% to 10% When will we know the worst is over? should be aware of these increased risks if trading in these names
above a stock’s price and that expire in When Warren Buffett invests his massive Ratio is the Tot Vol divided by Avg Tot Vol. IV %ile is how expensive the options are on a scale from 0 to 100.
under three months—against stock that an cash pile and it’s easy to buy name-brand Source: McMillan Analysis

investor owns. toilet paper on Amazon. B

M6 BARRON’S April 20, 2020
Milk Prices Drop as
Consumer Demand Falls
By Myra P. Saefong commodity prices did not initially fall,
Gould says.
ilk prices this year have more But when refrigerators were restocked,
than erased the gains they consumers stopped ordering in and gro-
scored for all of 2019, as the cery store sales weren’t enough to offset
closure of restaurants and the losses from restaurant sales, he ex-
schools to prevent the spread of Covid-19 plains.
forced changes in the dairy market and in Gould estimates domestic cheese de-
consumer buying behavior. mand loss from the food-service industry
“The dairy industry remains stuck in a at 214 million pounds each month, which
challenging and unfortunate position” be- equals 2.1 billion less pounds of milk, or
cause the processing pipeline is becoming about 11% of all the milk produced during
backed up due to the abrupt loss in de- the month.
mand, says Rick Kment, market analyst at Gould forecasts a drop in Class III milk
commodity analysis provider DTN. prices to a low of $8.95 per hundredweight
Milk is a perishable product and the in June, which he says would be a record
“ability to store it unprocessed for more based on data going back to 1998.
than a couple of days is nearly impossible,” Still, the dairy industry has made moves
he says, adding that with processing plants that will lessen the blow of lost demand
at full capacity, farmers have had to dump and the drop in prices.
excess milk. Those include the dumping of excess
Futures prices for Class III milk, which milk at levels that are likely “substantially”
is used to make most types of cheese, set- larger than normally seen in the spring,
tled at $12.11 per hundredweight on April when production seasonally peaks, says
16—the lowest since September 2009. At David Maloni, executive vice president of
$12.33 on April 15, Class III milk has lost food-service supply-chain technology firm
around 37% year to date, erasing last ArrowStream.
Manage Your Barron’s year’s 35% climb.
Meanwhile, the April 16 finish for cash-
Cow herd “liquidation” is also antici-
pated in the coming months and this
Account Online settled cheese futures at $1.184 a pound
was a record low based on data going back
should “lead to much tighter milk and
dairy product supplies and higher prices
to 2010. later this year,” Maloni says.
Update your account details any time. The impact of the coronavirus hit the He also says, “U.S. dairy markets have
It’s quick and easy. dairy industry in waves, says Matt Gould, fallen substantially below other major ex-
editor at newsletter The Dairy Market An- porting countries’ prices,” and that should
• Place delivery holds alyst. The first wave was at the end of Jan- result in “better export demand in the not-
• Change an address uary, when the disease was rapidly so-distant future.”
spreading in China. The impact of the An early sign of a turnaround may
• Report an issue
shutdowns there was immediately felt in come from China.
• Update your payment information the nonfat dry-milk market, says Gould. “The single most important factor for
• Reset your password and more The next wave came as states in the U.S. dairy prices to rebound is improved buy-
began to shut down, which led to a boost ing patterns in China,” says Arun Sun-
in purchases of pizza, he says. Pizza ac- daram, equity analyst at CFRA Research.
Take action at
counts for much of the country’s demand “Agricultural commodity prices should
and avoid call wait times. for cheese, which is made from milk. improve once we start to see greater, more
Then there was a run to grocery stores, consistent agricultural product purchases
which strained the supply chain for fluid from China.” After its bout with the virus,
© 2020 Dow Jones & Co., Inc. All rights reserved. 2E7837 milk and saw a period of record sales for the Chinese economy is beginning to open
milk, butter, cheese, and yogurt. Dairy up again. B
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
April 20, 2020 BARRON’S M7


In Holdings
Infinera (INFN)
Oaktree Capital boosted its stake
Cast Eye on
Union Pacific Sees Biggest
in the photonics technology com-
pany to 25,175,384 shares. The
higher position resulted from the
purchase of 1,000,000 shares on
March 19, at prices ranging from
Insider Stock Buy in Years $4.60 to $5.25. No reason was cited
for the fresh investment that now
gives Oaktree a 13.8% interest in

the tech firm. Oaktree did reveal n a muted proxy season, indus-
that it had entered an agreement trial companies are suddenly
By ED LIN request to make DeLaney, a former with Infinera that allowed the ap- catching the attention of activ-

CEO of food-service distributor Sysco pointment of an Oaktree represen- ist investors.
nion Pacific, like many of (SYY), available for comment on his tative to Infinera’s board on April Recent campaigns have been
its railroad peers, has suf- stock purchase. 13. The agreement also called for launched at GCP Applied Tech-
fered in the coronavirus- DeLaney’s latest purchase is the Union Pacific, like Infinera to work with Oaktree to nologies (ticker: GCP) and at
induced economic slump. largest by any Union Pacific insider many of its rail appoint another independent direc- smaller companies, such as HC2
The Association of since December 2015, when director peers, has seen its tor, with a term lasting until the Holdings (HCHC) and Synalloy
American Railroads said Michael R. McCarthy paid $3.9 million shares slump, but 2022 shareholders meeting. (SYNL), by activists such as Star-
this month that total U.S. for 50,000 shares. director William J. board Value, MG Capital, and
rail carloads reached their lowest non- Credit Suisse analyst Allison M. DeLaney recently Privet Fund, respectively.
holiday levels since the group began
collecting data in 1988.
Landry last week slashed earnings
estimates across the rail sector, noting
bought more than
$2 million of the Decreases The campaigns come as some
activists have moved to the side-
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But one Union Pacific (ticker:

UNP) director may be seeing a light
at the end of the tunnel. William J.
that “it is nearly impossible to forecast
how bad volumes will be in the next
quarter (or longer)—given the uncer-
embattled stock.
In Holdings lines amid the coronavirus pan-
demic, worried about running their
own operations.
DeLaney paid $2.1 million on March tainty of shutdowns.” Overseas Shipholding Others have dipped their toes
31 for 15,000 Union Pacific shares, Union Pacific is Landry’s top pick Group (OSG) into activism, preferring behind-
an average price of $138.20 each. in the group, however, and she rates Paulson & Co. cut its stake in the the-scenes engagement with com-
DeLaney made the purchase through its stock at Outperform with a $168 maritime crude oil and petroleum panies they’re invested in, instead
a trading plan that executes automat- target price, down from $216. “[O]ur transporter to 6,300,000 shares. of costly public proxy battles.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

ically when preset conditions are industry channel checks tell us that Without providing specifics, Paul- There was a 38% drop in cam-
met. He now owns 20,000 Union the company has been undertaking son slashed nearly a quarter of its paigns launched in February and
Pacific shares. even greater cost reductions than the holding through a March 5 block March—and March was the slowest
Union Pacific didn’t respond to a market may appreciate,” she wrote. B sale of 2,000,000 shares at $2.50 month for campaign initiations
apiece. Paulson now hold a 7.3% since 2013, according to data pro-
interest in Overseas Shipholding vided by Lazard.
Group. Looking broadly, there might be
a reason why U.S.-based industrial

Activist Holdings Brands’ board on matters that might

come up for a vote.
Meet Group (MEET)
Magnetar Capital reduced its
interest in the social-media com-
companies have become of particu-
lar interest to investors—both pas-
sive and activist. The pandemic has
Bloomin’ Brands (BLMN) Commvault Systems (CVLT) pany to just under 5%. On April 9 forced companies to rethink their
Jana Partners reported owning Starboard Capital revealed that it and April 13, Magnetar sold supply chains and move more pro-
7,985,439 shares of the Outback holds 4,616,000 shares of the enter- These disclosures are
235,000 and 234,539 shares, re- duction to domestic sites.
Steakhouse chain’s parent com- prise information-technology firm, from 13Ds filed with spectively, at prices ranging from Also, companies that apply for
pany, equal to 9.2% of the outstand- equal to 9.9% of the tradable stock. the Securities and $5.96 to $6.10, leaving it with loans under the Paycheck Protec-
Exchange Commission.
ing stock. On April 8, Jana and The position accounts for the addition 13Ds are filed within 3,535,151 shares. On March 5, Meet tion Program are urged to buy U.S.-
Bloomin’ Brands entered into a of 286,744 shares on March 30 at a 10 days of an entity’s said that it had entered into a de- made equipment and products to
cooperation agreement stipulating price of $38.91 each. On April 9, Star- attaining more than finitive agreement to be acquired the “extent feasible.”
5% in any class of a
that the dining firm will expand its board delivered a letter to Commvault company’s securities. by NuCom Group, a company “There’s probably more of a ‘Buy
board by two to permit the appoint- listing six director nominees for elec- Subsequent changes owned by ProSiebenSat.1 and Gen- America’ tailwind post-crisis,” Ben
in holdings or inten-
ment of two Jana nominees, effec- tion at the coming 2020 annual meet- tions must be re-
eral Atlantic, for $6.30 per share Rosenzweig explains.
tive July 1 of this year. In return, ing. Commvault said it will review ported in amended in cash. The deal is expected to Rosenzweig is a partner at Privet
Jana will abide by customary stand- Starboard’s proposed director nomi- filings. This material is close in the second half of this Fund Management, which, with
from April 9 through
still arrangements and vote its nees and present its recommendation April 15, 2020. Source: year, subject to regulatory and UPG Enterprises, has named five
shares in agreement with Bloomin’ in its proxy materials. shareholder approval. nominees to the board of Synalloy,
a Virginia-based metals and chemi-
cals company. B
M8 BARRON’S April 20, 2020

Charting the Market

A graphic look at selected stock activity for the week ended April 17, 2020 n Edited by Bill Alpert
BA (NYSE) • 154.00 • 2.16 158 GILD (NASD) • 83.99 • 10.48 88 TSLA (NASD) • 753.89 • 180.89 794 AMC (NYSE) • 3.20 • 0.60 5
 After halting production in 151  University of Chicago doc- 84  Goldman Sachs launched 738  The movie-theater chain 4
March, the aircraft maker on 144 tors believe their Covid-19 80 coverage of the electric car 682 emptied by Covid lock- 3
Thursday said it will slowly 137 patients were helped by an 76 company with a Buy, while 626 downs said that it plans to 2
restart work in its Seattle- 130 experimental Gilead drug, 72 Credit Suisse raised its rat- 570 raise $500 million of debt, in 1
area plants. Its suppliers’ M T W T F STAT news reported. Gilead M T W T F ing from a Sell to a Hold. M T W T F a private offering of notes M T W T F

shares flew on the news. said it awaits more data. Short sellers got squeezed. due in 2025.
Stock Price $ Stock Price $ Stock Price $ Stock Price $
393 87.5 975 18.5
332 82.0 812 15.0
271 76.5 649 11.5
210 71.0 486 8.0
149 65.5 323 4.5
88 60.0 160 1.0

Volume in Millions Volume in Millions Volume in Millions Volume in Millions

280 204 214 76
140 102 107 38
0 0 0 0


PTON (NASD) • 33.49 • 5.04 41.0 GME (NYSE) • 4.88 • 0.99 8 ROKU (NASD) • 126.80 • 34.35 135 HTZ (NYSE) • 5.01 • -1.25 6.5

 Analysts at Canaccord 37.5  Investor Michael Burry, 7  Although it withdrew 2020 123  A report in the New York 6.0
Genuity and Roth Capital 34.0 famous from The Big Short, 6 guidance amid uncertainty 111 Post said that the car-rental 5.5
added their voices to the 30.5 reported a boost in his hold- 5 among advertisers, the 99 company faces a “looming 5.0
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or

crowd that thinks the home 27.0 ings of the videogame re- 4 streaming service added 3 87 cash crunch.” Hertz has 4.5
workout service will benefit, tailer—which he has pressed million accounts in March. made no public comment on
as exercisers avoid gyms. to buy back stock. Earnings will arrive May 7. the matter.
Stock Price $ Stock Price $ Stock Price $ Stock Price $
42.5 16 181 22
34.0 13 155 18
25.5 10 129 14
17.0 7 103 10
8.5 4 77 6
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

0.0 1 51 2

Volume in Millions Volume in Millions Volume in Millions Volume in Millions

68 82 152 76
34 41 76 38
0 0 0 0


MRNA (NASD) • 46.85 • 14.99 51 ZM (NASD) • 150.06 • 25.55 156 NOK (NYSE) • 3.48 • 0.21 4.0 LTRPA (NASD) • 2.35 • 0.14 5
 The developer of some 46  An analyst at Cantor 147  A trade publication said 3.5  The owner of the TripAd- 4
promising vaccines against 41 Fitzgerald joined those who 138 the Finnish telecom supplier 3.0 visor travel website said it 3
the Covid-19 virus will get 36 think homebound workers 129 has hired bankers for advice 2.5 doesn’t know why its shares 2
nearly $500 million from the 31
will be the making of the 120
on takeover defense. Rumors 2.0
soared. There’s been no se- 1
federal government to com- M T W T F video-call service, as well as M T W T F are rife of interest from M T W T F lective disclosure, it said, and M T W T F
plete clinical trials. the work-chat outfit Slack. other 5G-network vendors. no new insider trades.
Stock Price $ Stock Price $ Stock Price $ Stock Price $
52 171 7 17.5
43 137 6 14.0
34 103 5 10.5
25 69 4 7.0
16 35 3 3.5
7 1 2 0.0

Volume in Millions Volume in Millions Volume in Millions Volume in Millions

244 88 408 46
122 44 204 23
0 0 0 0

The charts record the net change in share price, the high, low and closing trades, and share volume for companies with noteworthy stock activity last week. In addition, the graphs depict last week’s daily price activity in detail. The
dotted line on some graphs denotes the stock’s 200-day moving average; lack of a moving average means the shares have traded for less than that time period.
April 20, 2020 BARRON’S M9

Winners and Losers

Winners Volume Percentage Leaders Volume Percentage Leaders Volume Percentage Leaders
Name (Sym) Volume Close Change %Chg. Name (Sym) Volume %Chg. Close Change Name (Sym) Volume %Chg. Close Change Name (Sym) Volume %Chg. Close Change
ArcusBiosci(RCUS) 8686 28.11 +12.18 +76.5 ChurchillCapIII(CCXX) 2426 2935.9 9.77 –0.03 EquinoxGold(EQX) 30486 641.3 7.40 –0.38 CrineticsPharm(CRNX) 2283 521.0 15.35 +1.55
Shopify(SHOP) 19387 590.39+172.65 +41.3 IndependenceContr(ICD) 41220 1748.5 7.88 +1.63 IssuerDirect(ISDR) 109 139.6 9.08 +0.08 LHC Group(LHCG) 8146 409.3 131.53 –7.78
AnteroMidstream(AM) 56836 3.52 +1.00 +39.7 ChesapeakeEner(CHK) 13914 450.5 14.45 –19.55 Electromed(ELMD) 1164 122.2 14.07 +1.82 AstaFunding(ASFI) 246 378.2 11.25 +0.22
AmiraNatureFds(RYCE) 135 9.87 +2.65 +36.7 ArcusBiosci(RCUS) 8686 438.8 28.11 +12.18 BarHarborBkshs(BHB) 383 104.2 16.05 –1.17 SurgeryPartners(SGRY) 14245 356.4 9.60 +2.06
Nautilus(NLS) 15982 5.05 +1.29 +34.3 DRDGOLD(DRD) 5430 299.3 8.21 +0.83 Pfenex(PFNX) 2990 94.3 6.40 –2.70 Merus(MRUS) 1418 318.0 13.09 +0.99
EQM Midstream(EQM) 9516 17.79 +4.53 +34.2 LegacyAcqn(LGC) 2888 268.7 10.40 –0.01 CheniereEnerPtrs(CQP) 3865 61.2 30.89 +2.97 Lovesac(LOVE) 5837 303.8 10.15 +4.39
EquitransMdstm(ETRN) 39174 7.35 +1.78 +32.0 CementosPacasm(CPAC) 83 184.6 6.69 –0.51 DeltaApparel(DLA) 214 57.7 10.82 +0.04 Sabre(SABR) 109803 300.7 6.00 –1.01
PlainsAllAmPipe(PAA) 50747 7.27 +1.57 +27.5 PerformanceFood(PFGC) 24990 182.3 23.34 –5.94 NovaGoldRscs(NG) 23001 49.1 11.27 +1.28 CalitheraBiosci(CALA) 11092 299.6 6.55 +0.29
Dick's(DKS) 30964 172.1 26.49 –1.09 CaledoniaMining(CMCL) 233 48.3 11.92 +2.23 EHang(EH) 483 268.5 12.99 +0.99
Losers DeltaAir(DAL) 335186 166.4 24.27 –0.12 AcmeUnited(ACU) 70 26.9 21.27 +1.27 RedHillBio(RDHL) 4857 252.7 6.33 +0.28
Name (Sym) Volume Close Change %Chg. MagnaChipSem(MX) 5920 137.6 11.14 –0.05 ConTomka(CTO) 202 26.4 39.00 –1.19 SciPlay(SCPL) 3114 246.3 10.45 +1.95
ChesapeakeEner(CHK) 13914 14.45 –19.55 –57.5 MauiLand(MLP) 268 130.6 10.39 +0.06 BattalionOil(BATL) 75 24.5 4.90 –0.60 ArcturusTherap(ARCT) 2638 230.2 17.67 +2.48
Tidewater(TDW) 1199 5.32 –2.36 –30.7 FutureFuel(FF) 1698 128.8 12.50 –0.26 AdamsRes(AE) 45 22.5 22.85 –0.47 UroGenPharma(URGN) 3121 220.0 23.77 +2.47
AmRltyInv(ARL) 17 7.74 –3.22 –29.4 OaktreeAcqn(OAC) 666 127.5 9.85 +0.00 Chase(CCF) 140 17.1 86.51 –5.22 Natera(NTRA) 14277 219.4 33.66 +1.49
Movado(MOV) 2242 9.41 –3.79 –28.7 CrestwoodEquity(CEQP) 13643 127.0 6.70 +1.01 MetallaRoyalty(MTA) 1179 12.2 5.51 +0.13 CoherusBioSci(CHRS) 19110 207.3 15.53 –1.17
SeacorMarine(SMHI) 204 3.17 –1.02 –24.3 ClipperRealty(CLPR) 436 123.5 5.00 –0.55 StdDiversified(SDI) 83 8.1 11.48 –0.37 MalvernBancorp(MLVF) 233 204.9 11.62 –1.91
MetropolitanBk(MCB) 147 22.17 –7.12 –24.3 GSXTechedu(GSX) 37620 122.9 33.59 +0.43 EvansBancorp(EVBN) 76 7.7 24.81 –1.74 A