Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO strategist Brian Belski expects volatility in the near term but remains more bullish than most on late 2022,
“We certainly remain bullish heading into year-end, we do believe the issues facing the market are unlikely to dissipate in the near term, and as such we expect this higher volatility backdrop to persist over the coming months. However, we believe this does NOT mean investors should position portfolios more defensively, but rather focus on areas of stability, value and income—three core characteristics of Canadian equities within global markets, according to our work. Overall, we believe Canadian investors should remain broadly more cyclical while focusing on areas with strong relative value and income growth potential … Yes, Dividend Growth and Value Can Diffuse Volatility. Our work shows, these characteristics can consistently outperform the market during periods of elevated and rising market volatility.”
Mr. Belski presented his dividend growth screen as the best volatility-combatting strategy which consists of “Dividend paying S&P/TSX stocks; free cash flow yield greater than the dividend yield; and NTM [next 12-month] P/E lower than the S&P/TSX”
The list is extremely long. “Outperform” rated stocks likely of most interest to Canadian investors include Allied Properties REIT, ARC Resources, Birchcliff Energy, CI Financial Corp., Canadian Imperial Bank of Commerce, Canadian Natural Resources Ltd., CT REIT, Cenovus Energy Inc., Enerplus Corp., Gildan Activewear Inc., Lundin Mining Corp., Mullen Group Ltd., Open Text Corp., Paramount Resources Ltd., Quebecor Inc., Stelco Holdings Inc., Suncor Energy Inc., Teck Resources Ltd. and West Fraser Timber Co. Ltd.
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Morgan Stanley strategist Edward Stanley went in search of investment “moonshots,” the new companies that will dominate the next few decades. These potential big wins fall within 12 categories,
“Since 2000, 1% of companies generated ~40% of shareholder returns. Spending time considering the potential Moonshots of the next decade should be a focus for all investors … Our 12 Moonshots: (1) The Augmented Self, (2) The Extended Self, (3) Generative Adversarial Networks & Deepfakes, (4) Domestic Robotics, (5) Nano- & Xenobots, (6) Prefab Construction, (7) Small Modular Reactors, (8) Bio-Printing, (9) Floating & Vertical Farms, (10) Data Centres in Space, (11) Transparent Solar Cells, (12) . Tunnelling & Hyper Travel”
I will have to read up on what these themes entail – look for further discussion in this week’s Globe Investor newsletter. The research report includes a list of 80 companies, many of them private and unfamiliar. Some of the most notable names include Samsung, Thermo Fisher, Rolls Royce, Aerofarms, and Canadian high speed transportation start-up TransPod.
“MS looks for ‘moonshots’ for coming decade” – (research excerpt) Twitter
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Scotiabank strategist Simone Arel reiterated the firm’s view that defensive market strategies are suitable in the wake of strong inflation data out of the U.S. on Tuesday,
“From a year-over-year perspective, inflation decelerated less than forecasted at 8.3% (cons. +8.1% YOY), while core inflation accelerated more than expected at 6.3% (cons. +6.1% and 5.9% last month). Admittedly, that was the worst-case scenario for investors hoping for a rapid deceleration in inflation. U.S. 10-yr (3.41%) and 2-yr yields (3.76%) closed 5 and 18bp higher, respectively … In the equity space, the S&P 500 tumbled 4.3%, with long duration assets hit the hardest (Nasdaq -5.2%), and defensive sectors outperformed cyclical ones… %. With more tightening and no Fed pivot in sight, the rest of 2022 will remain quite volatile. See our recent report titled Capital Preservation Still Top of Mind "
“Scotiabank reiterates call for capital preservation strategies” – (research excerpt ) Twitter
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Diversion: “Want to write an ‘iconic’ song? A computer may have figured out how” – A Journal of Musical Things
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Scott Barlow