A lot of investors are looking for income, and over the last several years it has been hard to come by. While yields are rising, they are still very low by historical standards. With that in mind, Barron’s has run a piece selecting the best income stocks from a sector not considered as much as it should be—biotech. Many biotech companies have strong overseas cash flow, and solid yields. For instance, Pfizer, which rose just over 13% last year, sports a 3.7% yield. Abbvie and Amgen are also good looking stocks, both offering dividends just below 3%. Eli Lilly, Johnson & Johnson, and Bristol-Myers Squibb are also names to look at.
FINSUM: These are definitely some good names to look at, especially as there has not been much focus on biotech for income over the last year.
For the last year there has been increasing public frustration with tech companies. Gone is the general perception of Silicon Valley being inherently good, replaced with an angry skepticism over data leaks, election manipulation, and automation. Now there is tangible change in the air amongst investors too. Jana Partners, along with Calstsrs, have just begged Apple to investigate the iPhone’s impact on kids, and it seems representative of a larger trend against the tech industry. There is also rumbling about regulation on the fringes, and increasing skepticism about the social impact of Amazon, in particular its effect on Main Street, jobs, and inflation (although the general public NEVER misses inflation).
FINSUM: We think there is a big change brewing for the tech industry, and that the next decade will likely be a lot more difficult than the last.
The big bond gurus of Wall Street, Bill Gross and Jeffrey Gundlach, both struck fear in the hearts of bond investors yesterday, saying that the recent Treasury sell-off confirmed that a bond bear market had begun. However, Morgan Stanley is now pushing back against that assertion, saying that Treasuries are still offering value and should be fine. “This isn’t the bear market you’re looking for” says Morgan Stanley. MS says that the Fed is not likely to react sharply to inflation and that the Chinese aren’t going to stop buying Treasuries outright, both factors which will support the market.
FINSUM: While there are some headwinds related to possible tightening, on the whole there are a number of fundamentals which seem likely to continue to support both Treasuries and credit (like demographics—we know we often mention this point).
The big discount brokerages might be poised for an ugly PR nightmare. In an expose type article, the WSJ has highlighted how big discount brokers like TD Ameritrade and Fidelity hide the fact that their account managers have conflicts of interest. Such managers often tell clients they don’t get paid on commission and therefore don’t have conflicts of interest. Yet in reality they do have incentive pay that biases their advice to steer clients into more expensive products. One former manager from Fidelity comments that “You’re omitting certain facts that the client would probably appreciate understanding before you launch into a sales pitch on why you think this product is better”.
FINSUM: This is definitely something that those who use discount brokerages should be aware of. It remains to be seen what the fallout from this expose might be.
Banks are soon to be reporting their fourth quarter earnings, and Barron’s has put out an article advising investors on which stocks to buy ahead of the release. JPMorgan will report first and its numbers will have big implications for the sector. The piece cites analysts and says that Wells Fargo, Zion’s Bank, and Suntrust Bank look likely to do well, while investors should be underweight Goldman Sachs, CIT Group, and US Bancorp.
FINSUM: The tax package is going to be an interesting part of bank earnings both this earnings season and next, as some banks may do unusual tax maneuvers.