Barron's Recap (5/19/12): Dalio's World and the Einhorn Effect
This weekend in Barron's online: Hedge-fund manager Ray Dalio's thoughts on the troubles in Europe, the effect of comments made by David Einhorn, and the consequences of the Facebook IPO flop.
"Ray Dalio's World" by Sandra Ward. Ray Dalio, fabled hedge-fund manager, is the head of money-management firm Bridgewater Associates, the world's largest hedge-fund firm and one of just a few to place more than one fund on Barron's annual Top 100 Hedge Funds ranking. He has described the deleveraging experience of the United States as "beautiful" for its balance of austerity, debt restructuring and quantitative easing. But, he says in the article, the situation in Europe is very different, more like the U.S. under the Articles of Confederation. And he sees a 30% chance in the next six months to two years for a really bad shock from Europe due to a lack of a centralized authority. See the article for how he thinks this will affect the U.S. and the global economy.
In "The Einhorn Effect" Andrew Bary points out that when David Einhorn, the head of Greenlight Capital, made a bearish comment about Martin Marietta Materials (NYSE: MLM) at the annual Ira Sohn Investment Conference, shares of the company fell more than 10% in minutes. This effect is a consequence of presciently bearish calls Einhorn has made on such companies as Lehman Brothers, St. Joe (NYSE: JOE) and Green Mountain Coffee Roasters (NASDAQ: GMCR). See the article for what top-performing hedge-fund managers at the conference liked and did not like.
See also: Martin Marietta Fights Back at Einhorn
"Changing Their Stripes" by Michael Santoli suggests that, with investors willing to pay for stocks that generate income, more companies are considering becoming real-estate investment trusts. Because they are unable to match the stock-market performance of REITs, companies in such industries as digital-transmission towers, data warehouses, private prisons and health care facilities are seeking to convert to REIT status.
Andrew Bary's "Facebook Flops: Look Out Below!" suggests that If underwriters do not support Facebook (NASDAQ: FB), the stock could fall below its offering price. After all the hype and anticipation, the most anticipated tech IPO of all time fell flat on Friday, finishing just 0.6% higher. This prompted a sell-off Friday in social-networking stocks like Zynga (NASDAQ: ZNGA), Groupon (NASDAQ: GRPN), and LinkedIn (NYSE: LNKD) and contributed to an afternoon decline in the major averages.
See also: Could Facebook Reach $200 in 12 Months?
Capmark Financial Group (CPMK) looks like a decent liquidation play, claims Jack Willoughby in "The Intriguing Real-Estate Sale at Capmark." The former major commercial-real-estate lender started out as a former GMAC unit. Its failure at the height of the financial crisis wiped out the holdings of KKR (NYSE: KKR) and Goldman Sachs (NYSE: GS). Barron's bottom line: Capmark shares could reach $29 if the company continues to unload its commercial real estate at better-than-expected prices.
"Mining the Gold Miners" by Robin Goldwyn Blumenthal asks, is it time for investors to start consider gold miners? Gold-mining stocks are trading at record lows, relative to the price of gold. Newmont Mining (NYSE: NEM), the world's second largest gold miner could be a big beneficiary if gold prices move back up as many believe they will because of global economic conditions. Newmont shares might rise 50%.
Other featured stories:
- "Waiting for the Turn" by Amy Feldman is a profile of Brian Barish, manager of the Cambiar Opportunity Fund.
- "The Accidental Fashionista" by Miriam Gottfried spotlights Coach's (NYSE: COH) CEO Lew Frankfort.
- "Champion of Accounting and Accountability" by Gary Weiss offers the thoughts of accountant Abraham J. Briloff.
- "The Sources of Wealth" is by Jack Falvey, an adjunct faculty member at Boston College and the University of Massachusetts campus in Boston.
- And "Don't Save the Whales" is an editorial commentary by Thomas G. Donlan.
Columns in this weekend's Barron's discuss:
- Facebook's IPO fizzles -- what comes next?
- A new website for technicians who don't want to be overwhelmed with charts
- Nelson Peltz and Legg Mason's (NYSE: LM) share-buyback program
- JP Morgan (NYSE: JPM) and the risks of credit-default swaps
- Clorox (NYSE: CLX) and others boost dividends
- The return of the debt ceiling debate
- And more ...
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Tags: Barron's, Bridgewater Associates, Capmark Financial Group, clorox, Coach, David Einhorn, Facebook, green mountain coffee roasters, Groupon, JP Morgan, Legg Mason, Lehman Brothers, LinkedIn, Martin Marietta Materials, Nelson Peltz, newmont mining, Ray Dalio, St. Joe, Zynga