Halister News

(Bloomberg) -- “Bond King” Bill Gross says the Federal Reserve must raise interest rates because savers would be “destroyed” if rates turn negative, according to an interview with the Janus Capital Management fund manager in the cover story of the April 11 issue. Without savers, who Gross says are the “bedrock of capitalism,” there isn’t investment or growth. Key takeaways:

• Fed will raise interest rates this year, either once or twice to 1% fed-funds rate by year-end

• Fed must move gradually in normalizing interest rates over a period of two to four years, with normalization targets for 2% fed-funds rate, 3.5% 10-year Treasury yield, 4.5% mortgage rate

• U.S. economy is growing very slowly but isn’t facing a recession

• Suggests asset managers can profit more from trading Treasury calls and puts than investing directly in central- bank notes

• Cites Nuveen Preferred Income Opportunities (JPC), Duff & Phelps Global Utility Income (DPG), Annaly Capital Management (NLY) and American Capital Agency (AGNC) as investment picks

Other highlights from this week’s magazine (subscription required):

• Walt Disney (DIS) at $96 “holds even more appeal” after the abrupt exit of Tom Staggs as chief operating officer this week since problems created by the departure “seem manageable,” Barron’s reported. Disney’s operating challenges are the envy of other companies: While subscribers could slip away from its cable networks such as ESPN, operating profit in Disney’s cable business is expected to grow by mid-single digits through 2019. Barron’s recommended the stock at $110 in a May 2015 cover story.

• Apple (AAPL) shares could be $150 in a year, creating a return of 40% including dividends, Barron’s said. Reports from Credit Suisse analyst Kulbinder Garcha and Needham’s Laura Martin show that Apple stock should rise either because of its ability to increase profits from services or by applying the high valuations given to cable companies.

• Toll Brothers (TOL) could gain about 40% if investors realize it’s not as exposed to the weakness of the Manhattan real-estate market as some market participants think, Barron’s said. Deutsche Bank analyst Nishu Sood wrote earlier this year that “fears are overstated” about its exposure, while CEO Douglas Yearley said New York is “still a very good market.”

• Seagate Technology (STX) shares offer an enticing dividend yield of 7.6% even though the outlook for the company’s product line of hard disk drives and other data storage is lukewarm, Barron’s said. John Petrides, a portfolio manager at Point View Management, which holds Seagate shares, is confident that the company will continue paying its dividend and could rise 15% in a year.

• Owens-Illinois (OI) could rise at least 25% in the next 18 months if it’s able to execute on operational improvements and revive growth in its business of making glass containers for food and beverages, Barron’s reported. The company plans to slash costs at facilities, streamline its supply chain and rebuild aging furnaces. Barron’s says its call in April 2015 for a 25% rally didn’t materialize, and the stock fell about 30% since then.

• Carrefour (CA FP) could rise 20% if the French retailer can win over critics of its growth prospects, Barron’s said. Its challenges arise from consumers purchasing lower-margin food products rather than more profitable non-food items, as well as declining profit margins in Asia. But its new strategy of serving customers through convenience stores along with its hypermarkets and its past decisions to enter emerging markets early offer upside.