22 BARRON’S March 16, 2020
has. I can understand why companies with
balance-sheet issues might have big prob-
lems.
Kering[KER.France], the luxury-goods
company, was one of my January picks.
They will have a difficult six to nine months,
but the present price discounts future prog-
ress in a questionable manner.Spotify
Technology[SPOT] is even stranger be-
cause its business this year won’t be particu-
larly affected. If we’re all spending more
time at home, we’ll probably listen to more
music, not less.
My twoChinese picks—Meituan Dian-
ping[3690.Hong Kong] andAlibaba
Group Holding[BABA]—aren’t wholly
immune, but the perception is that the will-
ingness to tolerate this period has been
greater among Chinese companies than in
the West. And,ASML Holding’s [ASML]
long-run dominance in its business and its
level of profitability make it something one
shouldn’t worry about.
Finally, this crisis will reinforce the power
ofTesla’s [TSLA] position because the tra-
ditional car companies, with their low re-
turns, and in many cases vulnerable balance
sheets, could be in trouble if the crisis per-
sists for more than a month or two. I don’t
see, and Tesla doesn’t see, the plunge in oil
prices as a threat to their business. People
buy Teslas because they are great cars.
Do any new names tempt you?
I am intrigued byIllumina[ILMN]. It is
hard to argue that we are going to do less
gene sequencing than before the virus crisis.
The drop in Illumina’s share price [about
30% this year] has put it back on the list of
names I find attractive.
What do you make of the policy re-
sponses put forth to quell the crisis?
I’m not sure cutting interest rates makes
much difference. We need to think about a
much deeper change in fiscal policy. Govern-
ments should borrow more money if they
can borrow with nominal and real rates at
such low levels. It is the ideal time to invest
heavily globally in green renewable energy
programs.—L.R.R.
MARIO GABELLI
Barron’s: Is there any reason for cheer?
Mario Gabelli:We assume there will be a
pretty sharp correction in economic activ-
ity in March, April, and May. If we come
up with a Covid-19 solution that will be
visible in the summer and implemented in
2021, comparisons will be better next year.
I assume governments of the world will
put a substantial amount of money into
the system, and that the Russians and
Saudis will come to an oil agreement in
July or August.
Should investors buy, sell, or wait?
If I’m a taxable client, I can’t buy a 10-year
Treasury bond at current low rates. I have to
rebalance my portfolio from fixed income to
equities. In January, I offered several plays
on alternative renewable energy, including
Avangrid[AGR], controlled byIberdrola
[IBE.Spain], andNextEra Energy Part-
ners[NEP]. We’re buying them now.
I’ve been buyingLiberty Braves[BA-
TRA], which has fallen sharply, though sta-
diums will be shut for several months. Also,
I’m looking at equipment-rental companies
that could benefit from an infrastructure bill.
I recommendedHerc Holdings[HRI] a
couple of times. It went from $28 to the $50s
three times since it was spun out ofHertz
Global Holdings[HTZ]. Now, it’s back to
$26.Crane[CR] is another infrastructure
company I own. It has come down sharply;
I’ve been nibbling every day.—L.R.R.
ABBY JOSEPH COHEN
Barron’s: What lies ahead for the U.S.?
Abby Joseph Cohen:As of a few days ago,
[Goldman Sachs] expected first-quarter real
GDP growth of 0.7%, zero in the second
quarter, 1% in the third, and 1.2% for the full
year. For China, the GDP estimate is 5.5%,
and for global growth, 2.6%. The concern I
have here is consumer and business confi-
dence. That’s why a response from govern-
ment officials is essential.
Are you worried about a financial crisis?
One concern is the oil patch: The energy
majors, according to analysis from our team,
will be fine with oil at $40 a barrel. That
gives them enough cash flow; they can pay
dividends. The real crunch is going to come
for smaller operators and fracking opera-
tors, some of which need $50 to $60 oil.
The leverage in the system is nowhere
near where it was before the financial crisis.
While there could be pockets of credit-
related problems because underlying busi-
nesses aren’t doing well, we don’t see this as
a financial crisis. We see this as a health
crisis. When people feel calmer because the
worst of the health news has passed or they
feel government is doing the right things,
we’ll start to see different behaviors.
What about the stock market?
We could be bouncing along at extremely
attractive valuations for a while because
investors are looking for a catalyst to move
up. The catalyst will be the worst health
news passing. If it takes four to six weeks to
get to the peak of new reported [virus] cases,
we are talking about things maybe looking
better in April for communities afflicted
now. Things could begin to look better in the
third quarter, and, by the fourth quarter,
economic data should look better.—R.K.
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