Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC analyst Sid Mokhtari prefers the TSX to the S&P 500 and offered ten domestic stock ideas to play the theme. His matrix method includes dividend yield, relative strength index, and momentum factors,
“Our TSX matrix-factors were collectively recording better rates of change in their monthly and quarterly prints relative to the SPX factors – often associated with stronger trend characteristics. Our preference for the TSX index has been reinforced with the October prints again being stronger in many of our matrix-factors relative to those for the SPX, with 164 bps of relative outperformance – TSX returned +0.65% versus SPX at -0.99% … In addition to our preference for the better-yielding TSX constituents (two times the SPX members), we find the heavier composition of the technology sector in the SPX to be challenging in the near term … Our top-10 best ideas for the month of October produced +0.69% in absolute, slightly above the TSX by 4 bps. Year to date, our matrix-process has returned 22.75% (749 bps of Alpha against the TSX and 245 bps against the SPX). Comparatively, year to date, the TSX and SPX have returned 15.74% and 20.30%, respectively.”
Here are his top-10 “best ideas” for the month of November:
- Fairfax (FFH-T)
- Onex Corp (ONEX-T)
- Sun Life (SLF-T)
- CargoJet (CJT-T)
- GFL Environmental (GFL-T)
- First Capital (FCR-UN-T)
- Primaris (PMZ-UN-T)
- Quebecor (QBR-B-T)
- Descartes (DSG-T)
- Wheaton Precious (WPM-T)
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RBC Capital Markets head of global energy research Greg Pardy made only one change to his Global Energy Best Ideas list of picks,
“In October, the RBC Global Energy Best Ideas List was down 0.1% compared to the iShares S&P Global Energy Sector ETF (IXC) which was also down 0.1% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) that was down 0.8% on a sequential basis. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 172.7% compared to the S&P Global Energy Sector ETF up 35.6%. We are removing Pason Systems from the RBC Global Energy Best Ideas list this month.”
Pason Systems Inc. (PSI-T) was removed from the list and not replaced.
This leaves Shell, Suncor Energy, California Resources, Chord Energy Corporation, ConocoPhillips, ARC Resources, Topaz Energy, Tourmaline Oil, Canadian Natural Resources, MEG Energy, Woodside Energy, Enerflex Ltd., SLB, Subsea 7, AltaGas Ltd., Pembina Pipeline Corporation, Archrock Inc., Energy Transfer LP, Grenergy, Northland Power, Superior Plus and PG&E Corporation.
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National Bank economists lowered their targets for the loonie,
“While the U.S. economy is operating i] n a state of excess demand, Canada is grappling with excess capacity … This unusual development supports a significant divergence in monetary policy, now reflected in the widest spreads on 2-year Treasury yields between Canada and the U.S. since the 1997-98 Asian crisis—a key driver of the exchange rate. Without a substantial rebound in commodity prices in the coming months, there is little to support an appreciation of the Canadian dollar against the greenback … According to the latest targets, population growth is now projected to decline for two consecutive years—a first in modern history. If this unprecedented shift is implemented swiftly, it will likely dampen GDP growth in the coming quarters. This would allow the Bank of Canada to maintain a more divergent monetary policy from the U.S. for a longer period than previously anticipated, especially if shelter cost inflation begins to ease. As a result, we are raising our USD/CAD target from 1.41 [US$0.7092] to 1.45 [US$0.6897] this month”
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Scotiabank strategist Hugo Ste-Marie recommends clients buy any market dip caused by the U.S. election,
“Although the VIX exceeded the 20 mark in October, don‘t expect volatility to abate in the early days of November. Investors are still facing a deluge of earnings releases this week (87 for the S&P 500 and 100+ for the TSX), the US election is held on Tuesday, which will probably take a few days before the results are revealed, and we have a Fed meeting on Thursday. Regarding the election, it’s worth flagging that momentum has shifted towards a Trump win in the past month or so … Barring the implementation of the most extremes’ election proposals, such as putting massive tariffs on all US imports, which would necessarily come with retaliation, the US economic expansion looks set to continue. In fact, we still believe 2025 growth forecasts are on the low side, and they could be revised upward over time. In the US, the three pillars of growth (consumers spending, capex, and fiscal spending) should provide a strong tailwind to economic activity in 2025, which by extension, is likely to support the uptrend in earnings. Buy the dips. We suggest investors stand ready to seize opportunities that could occur on/after the election. A broad pullback in equity prices due to election uncertainty (delayed results/contested outcome) should be bought”
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Diversion: “Generative AI and the Nature of Work” – Marginal Revolution