Investing Insights: Barron's Roundtable Experts Share Top Stock Picks

Barron's Roundtable, a convergence of market experts and stock-picking maestros, unfolded a captivating tapestry of insights during the 2024 edition. 

Despite a lukewarm consensus on the equity outlook for the year, the seasoned panelists showcased their acumen by recommending a compelling total of 56 stocks and select bond funds. This third and final report encapsulates the investment perspectives of luminaries such as Henry Ellenbogen, Rajiv Jain, Abby Joseph Cohen, and Mario Gabelli. Let's take a look.

Henry Ellenbogen's Discerning Choices

• Chemed (CHM): Positioned as a holding company with resilient franchises in healthcare and home services, Chemed garnered Henry Ellenbogen's endorsement. Despite relative obscurity on Wall Street due to its intricacies, Chemed's normalized growth is poised for a resurgence. Vitas Healthcare, a hospice care provider funded primarily by Medicare, and Roto-Rooter, the largest emergency plumbing service in the U.S., constitute Chemed's robust portfolio. Ellenbogen anticipates mid-teens growth in adjusted earnings per share and envisions Chemed as an under-the-radar gem with earnings potentially reaching $28 per share in 2025.
  
  
• Bright Horizons Family Solutions (BFAM): Ellenbogen's keen eye extends to Bright Horizons, a company experiencing accelerated growth following pandemic-induced disruptions. With a focus on structured childcare and backup care, Bright Horizons caters to employers seeking to enhance productivity and employee retention. Ellenbogen predicts earnings of about $4.50 per share in 2025, anticipating sustained mid-teens growth beyond that.
  
  
• J.B. Hunt Transport Services (JBHT): Recognizing the cyclical nature of growth companies, Ellenbogen advocates for J.B. Hunt, a company that weathered the challenges of weak freight markets. J.B. Hunt's dominance in intermodal transport, coupled with its Dedicated Contract Services segment, positions it for substantial growth. Ellenbogen anticipates earnings close to $10 per share in 2025, underlining the company's resilience and improved business quality.
  
  
• HubSpot (HUBS): As the leading provider of customer-relationship-management software for small and midsize businesses, HubSpot, according to Ellenbogen, is poised for continued growth. With a focus on organic development and AI integration, HubSpot aims for an operating-margin profile exceeding 30%. Ellenbogen foresees $1 billion of Ebitda in 2026, with a valuation ranging from 25 to 30 times enterprise value to Ebitda.
  
  
• Birkenstock Holding: In a nod to the endurance of Birkenstock, the German footwear company, Ellenbogen emphasizes its unique market strategy. Restraining supply growth, limited advertising spending, and reliance on perennial silhouettes contribute to Birkenstock's durability. CEO Oliver Reichert's strategic moves have propelled the company's revenue growth by 20% annually, with a projected stock valuation between 20 to 25 times earnings.
  
  
• Toast (TOST): Ellenbogen revisits Toast, a company heralded for revolutionizing restaurant software. Despite missing revenue guidance in 2023, Toast remains a standout in the industry, endorsed for its pivotal role in standardizing restaurant software. Ellenbogen predicts a 25% revenue growth trajectory, with margins potentially expanding to 20%. Toast's stock, currently at $17, could ascend to $30, according to Ellenbogen.

Rajiv Jain's Visionary Selections

Jain's investment philosophy, anchored in a macro backdrop awareness, gravitates towards the semiconductor space amid rising inflation and interest rates. While acknowledging challenges faced by high-multiple stocks, Jain sees potential in the semiconductor industry's growth trajectory.

• Nvidia (NVDA): Flagging Nvidia as his largest position, Jain notes the company's robust performance as it addresses capacity constraints at Taiwan Semiconductor Manufacturing. Despite a decline in the P/E multiple, Nvidia's earnings estimates have surged, underpinned by a 100% increase in chip prices. Jain envisions continued growth at a 20% compound annual rate, emphasizing the company's dominance in servers and potential challenges related to supplier capacity.
  
  
• Arm Holdings (ARM): Jain evaluates Arm Holdings, a dominant player in mobile chip architecture, which went public in September. With a market cap dominated by SoftBank, Arm's potential growth is underscored by its central processing units market share expansion. Jain anticipates a sustained growth rate of 20% or more annually.
  
  
• Synopsys (SNPS): Jain's repertoire extends to Synopsys, which he deems a remarkable company. Although focusing on technology companies with substantial market caps, Synopsys stands out as an exception. Positioned as a "cousin" to Arm, Synopsys is recognized for its excellence in chip design, earning Jain's endorsement.

Jain diversifies his portfolio beyond technology with strategic investments in energy and finance:

• Petrobras (PBR): With Petrobras, Jain navigates the complexities of the energy sector, spotlighting the company's resurgence after governance reforms. Trading at four times earnings and boasting a nearly 20% dividend yield, Petrobras stands as an attractive investment opportunity. Jain emphasizes the company's profitability compared to Chevron, presenting it as an undervalued gem.
  
  
• Banco BTG Pactual (BPAC): Positioned as "Better Than Goldman," Banco BTG Pactual earns Jain's favor in the financial sector. Controlled by André Esteves, the bank has exhibited consistent growth, achieving a 20%-plus annual rate over the past decade. Jain foresees a high-teen annual compounding potential for the bank.
  
  
• Banco Bilbao Vizcaya Argentaria (BBVA): Jain turns his attention to BBVA, a banking giant with a $58.2 billion market cap, trading at 6.5 times earnings. BBVA's robust presence in Mexico's banking system, coupled with an almost 7% dividend yield, positions it as an appealing investment with an expected high-teen annual compounding potential.
  
  
• International Holding Company (IHC): In the Middle East, Jain finds promise in IHC, a brokerage firm headquartered in the United Arab Emirates. With a market cap of $270 billion and 75% ownership by the royal family of the U.A.E., IHC is poised for double-digit compounding. Jain emphasizes the U.A.E.'s economic growth, oil wealth, and per capita income as factors contributing to IHC's potential along with the company's significant profits from real estate, healthcare, and global venture-capital deals, including early investments in SpaceX. With stable free-cash-flow generation, organic growth, and a well-managed country backing it, IHC is considered a strategic play on the royal family and the U.A.E.
  
  
• Adani Group (India): Jain recommends investing in companies tied to the Adani Group, particularly highlighting Adani Enterprises. This flagship company has outperformed with a 32% compound annual growth rate over 25 years. With significant control over air-passenger traffic and air cargo volume in India, Adani Enterprises presents a compelling investment opportunity in the country's infrastructure boom.
  
  
• Bank Central Asia (Indonesia): Positioned as a reputable bank with low deposit costs, Bank Central Asia is endorsed by Jain as a solid investment in the Indonesian market. With consistent growth, a strong reputation, and a focus on prudent lending practices, the bank stands out as a reliable player in the financial sector.
  
  
• TotalEnergies (European Energy): Jain recommends TotalEnergies, a European energy company led by CEO Patrick Pouyanné. With a strategic focus on cost management, strong asset presence in North and West Africa, and a low valuation, TotalEnergies offers an attractive opportunity in the energy sector, which Jain deems crucial for portfolio diversification.

Abby Joseph Cohen's Insights

Cohen provides an overview of the current market scenario, expressing confidence in the U.S. economy's resilience. She anticipates a steady performance with potential declines in interest rates and a depreciating dollar. Cohen acknowledges the exceptional performance of the U.S. stock market in recent years.

• Chevron (CVX): Despite a 14% decline in 2023, Cohen recommends Chevron, emphasizing its attractive valuation, high dividend yield, and potential for increased cash returns to shareholders. The acquisition of Hess and positive developments in major projects contribute to the company's appeal.
  
  
• Pfizer (PFE): Cohen highlights Pfizer as a compelling choice in the healthcare sector. Despite a recent downturn, she underscores Pfizer's history of successful acquisitions, particularly the recent addition of Seagen, and its potential for a turnaround with a diverse product portfolio.
  
  
• Estée Lauder (EL): Cohen sees potential in Estée Lauder, acknowledging the challenges faced due to the pandemic and business issues in China. However, she believes that strategic improvements, a focus on e-commerce, and a renewed product lineup position the company for recovery.
  
  
• Lynas Rare Earths (Australia): Cohen suggests Lynas Rare Earths as an investment in the mining and processing of rare-earth minerals. With essential applications in electronics and glass production, Lynas offers growth potential, especially with U.S. Department of Defense support for its U.S. refinery.
  
  
• Japanese REITs: Cohen recommends two Japanese real estate investment trusts (REITs), Nippon Prologis REIT and Japan Hotel REIT Investment. She sees these REITs benefiting from foreign capital inflows, a favorable economic environment in Japan, and higher returns compared to REITs globally.

Mario Gabelli's Unloved Picks

• Sphere Entertainment: Gabelli identifies Sphere Entertainment as an undervalued asset with significant potential. The company, with intellectual property leverage and strategic deals, could benefit from its broadcasting rights, including New York Knicks and Rangers games.
  
  
• CNH Industrial: Formerly Case New Holland, CNH Industrial is Gabelli's pick in the agriculture sector. He commends CEO Scott Wine's efforts to enhance the company's positioning and investment in precision agriculture, despite concerns about the extended farm cycle.
  
  
• Tegna (Broadcast and Digital Media): Gabelli sees Tegna as a promising investment in the media sector. With a strong presence in U.S. television households and potential buyout interest, Tegna's current stock price provides an attractive entry point for investors.
  
  
• Grupo Televisa (Mexico): Gabelli recommends Grupo Televisa, emphasizing its undervaluation, nearshoring benefits in Mexico, and ownership stake in Univision. Despite concerns about streaming business impact, Gabelli sees potential for a rebound.
  
  
• Henry Schein (Dental and Medical Equipment): Gabelli highlights Henry Schein's growth potential in the dental implant business. Despite a recent cyberattack affecting revenue, he anticipates a rebound with the company's acquisition strategy and estimated earnings growth.
  
  
• Paramount Global (PARA): Gabelli discusses Paramount Global as a potential acquisition target. With strategic advantages, including content ownership and cash flow, Paramount Global could attract interest from larger entities seeking consolidation in the media industry.

Conclusion

As Ellenbogen, Jain and the other analysts share their expert insights, the Barron's Roundtable reveals a diverse landscape of investment opportunities across healthcare, technology, finance, and energy sectors. These seasoned investors provide a roadmap for navigating the complexities of the market, showcasing their prowess in identifying potential winners in the evolving economic landscape.

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