HALISTER: Barron’s Roundup: Wien’s Weak Market; Red Hat, PepsiCo May Rise

Barron’s Roundup: Wien’s Weak Market; Red Hat, PepsiCo May Rise

(Bloomberg) -- The Federal Reserve will raise interest rates once this year, Byron Wien of Blackstone Group (BX) said in the cover story of Barron’s May 23 issue. A soft U.S. economy and weakness in the stock market will also keep the rates on the benchmark 10-year Treasury below 2.5%, he said. Key takeaways:
  • The U.S. economy will be “hard pressed” to expand faster than a 2% rate, Wien said.
  • Stock investors “will be lucky” to earn 5% to 7% annual returns in the coming years, he said.
  • On the possibility of a Donald Trump presidency: “I’m hopeful that the checks and balances in the American political system will restrain Trump from implementing some of his more extreme ideas,” Wien said.
  • Wien predicts the equity market will have a down year as stocks suffer from weak earnings, margin pressure and price- earnings ratio contraction.
  • Wien, 83, loves living in New York and wouldn’t think of moving to a low-tax state like Florida. “I’ve made enough money; the taxes don’t hurt. It’s a privilege to live in New York.”
Other highlights from this week’s magazine (subscription required):
  • Red Hat (RHT) may rise 30% in a year, Barron’s said. Shares of the software company, which closed Friday at $73.17, could hit $95 because of “peppy” revenue and cash-flow growth from its open-source Linux operating system.
  • PepsiCo (PEP) still looks attractive after Nelson Peltz’s Trian Fund Management sold its stake, pushing down the shares 3.9% in the past week, Barron’s reported. Ali Dibadj at Bernstein, who has the equivalent of a buy rating on PepsiCo, says stocks that Trian sells tend to “meaningfully outperform the market” in the following year.
  • Boeing (BA) shares could slide further, Barron’s said. Some analysts think delays in new aircraft orders amid low oil prices could slow earnings. Reports of an SEC investigation into the company’s accounting are adding to investor unease.
  • First Data (FDC) is too cheap to ignore among payment processors, Barron’s reported. CEO Frank Bisignano, formerly COO of JPMorgan Chase, has upgraded technology, paid down some debt and reshaped the business. James Friedman, an analyst at Susquehanna Financial Group, has a $19 price target on the shares, which closed Friday at $11.41.
  • Laszlo Birinyi of Birinyi Associates said in an interview with Barron’s that he expects “new highs” for stocks this year. He didn’t provide a specific target for the S&P 500. He recommends B&G Foods (BGS), Kraft Heinz (KHC), AutoZone (AZO) and homebuilder NVR (NVR). He still holds Apple (AAPL), but is “lightening up,” and has sold some consumer stocks that have moved higher, including Altria Group (MO) and Nike (NKE).
  • If the Dow Jones Industrial Average (INDU) doesn’t surge more than 800 points in next 10 days, it will be the longest run during a bull market without setting a new high since Jan. 28, 1985, the magazine said. The Dow topped out at 18,312.39 on May 19, 2015, and closed Friday at 17,500.94, down 4.4 percent since the peak.
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
PEP US (PepsiCo Inc)
RHT US (Red Hat Inc)
MO US (Altria Group Inc)
AAPL US (Apple Inc)
AZO US (AutoZone Inc)

People
Byron Wien (Blackstone Group LP/The)
Ali Dibadj (Sanford C Bernstein & Co Inc)
Frank Bisignano (First Data Corp)
Laszlo Birinyi (Birinyi Associates Inc)
Nelson Peltz (Trian Fund Management LP)

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