10 BARRON’S October 21,
26,770.
Dow Industrials:-46.
Dow Global Index:+3.
1.75%
10-year treasury note:0.
BERNSTEIN’S QUANT+FUNDAMENTAL LIST
Nice Flight, Hard Landing
Markets took a wait-and-see attitude
toward the China trade deal, while new
U.S. tariffs on the European Union
threatened to open a second front.
Stocks rose on decent earnings, then hit
a Friday downdraft on more Boeing 737
MAX bad news. For the week, the Dow
industrials slipped 0.2%, to 26,770.20;
the S&P 500 gained 0.5%, to 2986.20;
and the Nasdaq Composite rose 0.4%,
to 8089.54.
Syria’s Shifting Sands
With the Turkish military moving
across northern Syria, the Kurds
struck a deal with the Russian-backed
Syrian government of President
Bashar al-Assad. President Trump
then ordered a withdrawal of U.S.
troops, and fears mounted that the
Kurds would release detained Islamic
State fighters. Trump authorized sanc-
tions on Turkey and sent the vice
president and secretary of state to
seek a cease fire. Turkish President
Recep Erdogan, who had declared,
“We will finish what we started,”
agreed to trade a five-day pause for
sanctions relief. Fighting continued.
A Wall Breached
Resistance to the impeachment in-
quiry crumbled. Former National Se-
curity Council Russian expert Fiona
Hill testified that her then-boss John
Bolton told her to report what she
knew of Trump lawyer Rudy Giu-
liani’s activities in Ukraine to the
NSC’s top lawyer. She was followed by
other State Department officials, in-
cluding the ambassador to the Euro-
pean Union, Gordon Sondland, who
said he was following Trump’s orders.
Meanwhile, federal prosecutors are
reportedly investigating Giuliani.
GM Strike Winds Down
After a monthlong strike, the United
Auto Workers said that it had a deal
with General Motors, contingent on
worker approval, that covers 46,
workers and includes $7.7 billion in
GM investment in the U.S.
Brexit on the Brink
United Kingdom Prime Minister Boris
Johnson negotiated a plan to retain an
open border between Northern Ireland,
a part of the U.K., and Ireland, an EU
member. In Brussels, 27 EU leaders
approved the plan, but Parliament faces
a vote on Saturday, with a Northern
Irish party, a key Johnson ally, opposed.
WeWork Fixer-Upper
WeWork has assigned board members
to decide between two financing
options: major investor SoftBank
pumping in several billion dollars in
exchange for a larger stake, or JP-
Morgan Chase selling billions in
debt. Without a deal, parent We Co.
could run out of cash inNovember.
More Opioid Talks
The Wall Street Journal reported that
three drug distributors— McKesson ,
Cardinal Health , and Amerisource-
Bergen —may pay some $18 billion to
settle state and local opioid claims.
Johnson & Johnson has reportedly
offered a $4 billion settlement.
When Quant
Meets Value
Bernstein Research has beaten the market in recent
years by combining two disciplines: fundamental research
and quantitative analysis. Quant investing can be more
objective, consistent, and testable than fundamental analy-
sis, says Bernstein’s Ann Larson. But analysts are better at
predicting business change. Since 2004, U.S. stocks that
Bernstein rated as Outperform have beaten the S&P 500
index by almost 2% annually. A back-test of stocks fa-
vored by its quant model would have beaten the S&P by
4%. And stocks making both lists would have outper-
formed by almost 6% a year, she says.
Bernstein began publishing its 10-stock Quant+Fun-
damental portfolio in 2016, updating every six months.
This past Wednesday, it released its new list.
Philip Morris International has struggled lately, but
Bernstein likes its yield, cash flows, and heated-tobacco
product, IQOS. And CVS Health has high-quality earn-
ings and a strong outlook for recently acquired Aetna.
Bernstein also likes health insurers Cigna and Centene.
Southwest Airlines was hurt by the grounding of its
Boeing 737 MAX jets, but Bernstein foresees a tailwind
when the planes return, and likesits stock buybacks and
low leverage. The grounding also hurt Boeing supplier
Spirit AeroSystems Holdings , which should earn high
margins when MAX is back. Hilton Worldwide Hold-
ings will grow by adding new units, Aramark hasanew
CEO, and Ross Stores’ off-price apparel can withstand
online rivals. And for desert? Chipotle Mexican Grill ,
with improving sales and margins, a new management,
and new digital-ordering technologies—Bill Alpert
69%
Increase in pork prices in the
past year in China after an
outbreak in African swine flu
6%
China’s third-quarter gross-
domestic-product growth,
lowest in three decades
3%
New IMF estimate for 2019
global growth, down from 3.2%
in July and 3.8% in 2017
$
Median weekly earnings in the
third quarter for U.S. workers—
up 1.7% from a year earlier
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THE NUMBERS
HE SAID
“I believe when it’s not
absolutely clear what
to do, we should err
on the side of greater
expression.”
Facebook’s Mark Zuckerberg in a
speech at Georgetown University
Illustration: CVS (source photo); Zuckerberg: photograph by Andrew Caballero-Reynolds/AFP/Getty ImagesREVIEW