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Today’s Top 5 Stock Picks: Cash Gushers

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A company’s balance sheet can predict its future, argues Bryant VanCronkhite, lead manager of the $5 billion Wells Fargo Special Mid Cap Value fund. A significant amount of cash on a balance sheet, for example, can unlock a company’s dormant potential, whether it’s through a smart acquisition or reinvestment.

VanCronkhite, 36, aims to get an edge by buying companies with strong balance sheets, but only when Wall Street is mispricing their stock. “Of course, the market won’t give credit until after it sees something happening,” he explains.

4 Chinese Stocks Taking on the World

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Beijing’s policy of encouraging Chinese companies to go global is gathering momentum as the Middle Kingdom’s slowing economy prods many to seek out foreign markets in pursuit of growth.

ChemChina’s blockbuster $43 billion acquisition of Swiss agricultural chemicals giantSyngenta is the flag-bearer of the growing global ambitions of Chinese companies keen to expand their markets, acquire cutting edge technologies and burnish their bona fides as players on a global stage. Going global makes sense: China’s economy is expanding at half the pace it enjoyed during the halcyon days of double digit growth, the currency is weakening and the world’s most populous nation is getting older.

Investors should follow that cue and keep a close eye on those companies taking the bold leap beyond China’s shores to take on some of West’s biggest companies that have long dominated many industries. Alan Wang, investment director at Hong Kong-based fund manager Value Partners, is one stock picker watching those stocks looking globally for growth. “Investors are worried about China’s slowdown. If you buy a company with a pure China demand focus, they won’t do well if the Chinese economy continues to deteriorate.” Wang sees opportunities in sectors like high-end manufacturing, or Chinese firms that have big, “tier one” customers like Ford, Apple andNike.

Barron’s Asia has run the rule over Chinese companies eyeing fame and fortune away from their home turf. We’ve identified four stocks that look attractive based on earnings prospects, yield and valuations.

AT&T Stock Yields 4.9%; Can Ring Up More Gains

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AT&T investors are getting the best of both worlds today. The stock’s 4.85% dividend yield is almost twice that of the 10-year Treasury and well above the 2% paid by the S&P 500. And with AT&T’s (ticker: T) stock trading at 13 times forward earnings, its valuation looks attractive.

AT&T also offers growth potential. Under a President Trump, the telecom giant should benefit from a kinder regulatory environment and lower taxes. The company should also profit from its continuing move into media, particularly its proposed $106 billion purchase of Time Warner (TWX), now awaiting regulatory approval.

Earlier today, Baird Equity Research analyst William Power upgraded AT&T stock to Outperform. This upgrade was especially notable given that Baird’s opinion of AT&T had been stuck at Neutral since 2012.

The upgrade lifted AT&T’s share price more than 2% to a recent $41.19. The stock, up 11% since the presidential election, could generate a double-digit total return in the next 12 months.

“After many years of avoiding the telcos due to competitive concerns, we are upgrading AT&T following a confluence of events that we believe significantly improve the company’s prospects over the coming years,” says Power.

In short, Ma Bell is becoming what Power calls “Ma Media,” meaning it’s no longer your parent’s telephone company.

Earlier this year, AT&T, like other telecom stocks, attracted income-hungry investors fleeing global market turmoil. Shares hit a multi-year high in July at $43.89 then fell as investors dumped pricey dividend stocks and Trump savaged the Time Warner acquisition after it was unveiled in October.

The post-election environment has been far kinder. The FCC is expected to be much more accommodative under Trump, especially regarding Net Neutrality rules. And with lower taxes, Baird’s Power anticipates “a business investment tailwind not seen in years.”

Finding Tomorrow’s Star Growth Stocks Today

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Small-company investors typically limit their investible stock universe by market value. Brown Capital Management takes a different approach. The Baltimore-based small-company specialist defines “small” as businesses with revenues of $250 million or less. “It just makes more sense,” says Keith Lee, co-manager of the $3.1 billion Brown Capital Management Small Company fund (ticker: BCSIX).

Amazon’s 49,000% Gain: The Most ‘Super’ of ‘Superstocks’ Since 1926

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Finding the next Amazon.com, which first sold shares to the public 20 years ago this week, is hard. In fact, finding the last Amazon was hard, too. From 1926 through 2015, only 30 stocks accounted for one-third of the cumulative wealth generated by the entire U.S. stock market; Amazon was one.

That’s 30 out of a grand total of 25,782 companies that were publicly traded over that period.​

The search might not be completely futile, but many investors are going about it the wrong way. That’s because the average return of the stock market, and the return of the average stock in the market, are nothing alike. Even though the stock market generates positive average returns over time, more than half of all stocks lose money over their lives as public companies, and the number of stocks that make big money is astonishingly small.

Blue Hills Bancorp Can Rise by at Least 20%

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In my column in this week’s Barron’s, I recommended three small bank stocks. Another one to add to the list is Norwood, Mass.-based Blue Hills Bancorp (ticker: BHBK).

Blue Hills, with $2.3 billion in assets, operates 11 branches in the Boston area, including in Brookline, Dedham, Westwood, and on Nantucket. In July 2014, Blue Hills converted from a mutual structure to full stock ownership in a $280 million offering.

At a recent $15.55, its shares have climbed 50% since the bank’s 2014 offering. Yet they still look cheap. They trade for just 1.1 times the bank’s $14.05 a share tangible book value.

In a client report published last week, Compass Point analyst Laurie Havener Hunsicker pointed out that same-sized New England peers trade for 1.6 times tangible book. Hunsicker puts Blue Hills’ fair value at $19 a share, or more than 20% above its recent price.

Netflix and Comcast Are Together At Last

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It’s not quite world peace, but Comcast and Netflix, long rivals in the battle over TV’s future, are finding common ground.

On Friday, the companies announced that Netflix’s streaming TV service would be available on Comcast’s X1 cable boxes across the country — starting next week. It’s a big moment for TV, given that Netflix has spent much of its life fighting the cable establishment.

Amazon’s CEO Will Sell $1 Billion in Stock Annually to Fund His Space Travel Company

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A Billion Dollar Commitment

On Wednesday, April 5, Jeff Bezos, founder and CEO of Amazon, revealed that he is financing Blue Origin, his space company, by selling approximately $1 billion in Amazon stock annually. He made the announcement as he stood before the full-scale mock capsule of his New Shepard rocket, emphasizing his vision for a future that includes millions of humans playing, working, and living in space.

The reusable New Shepard rocket will take six people up into space for stunning panoramic views of our home world, and possibly some tumbling around to enjoy weightlessness. On the return to the ground and reality, the travelers will endure 5 Gs of pressure and eventually slow to a comfortable 5 km per hour (3 miles per hour) before touching down.

Bezos said he wasn’t yet sure how much passengers would pay, but said that as spaceflight becomes more common, ticket prices will decline.

The capsule and the rocket booster are both reusable to make New Shepard’s trips more economical. “Reusability is the key to getting millions of people living and working in space,” said Bezos at the press conference.

More Reasons to Worry About the Stock Market

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Whether it‘s election jitters, the Federal Reserve, or just weak earnings, several key areas of the stock market — small stocks, railroads and home building — now show technical breakdowns. And not to be outdone, both ultrasafe Treasury bonds and ultrarisky junk bonds have also cracked.

It is hard to think that the broad stock market can move much more to the upside, barring a sudden Fed move or an election surprise, when these engines are shut down. I don’t think even Facebook (ticker: FB) can help, even if its earnings after the bell Wednesday continue to shine.

The Russell 2000 index of small-capitalization stocks broke down below a key short-term support level last week. The chart shows some sort of undefined topping pattern beginning in July. We could argue about what to call it, but it really doesn’t matter.

Active Stockpickers Are Outpacing Passive Funds

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Passive investing had been declared the winner in the race for returns, beating stockpickers. But the race is still on, and suddenly, the stockpickers are surging ahead. After a slow start to the year, 60% of actively managed funds are beating the Standard & Poor’s 500 index since July 1, the highest level in nearly two decades. This at a time when money has been pouring into index funds at record rates.

Granted, passive investing has outpaced active in 22 of the past 26 years, in large part because of fees—1.14% for the average actively managed large-cap fund, compared with less than half that for passively managed funds, going as low as 0.03% for some broad-market exchange-traded funds. Then there are years like 2015, when the S&P returned 1.4%, entirely on the backs of a handful of super-performing stocks. Managers who didn’t own Facebook (ticker: FB), Amazon.com (AMZN), Netflix (NFLX), andAlphabet (GOOGL) found themselves lagging—just 39% of all active large-company funds beat the market that year. But that anomaly has passed, and active management is back.

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