Daily roundup of research and analysis from what The Globe and Mail’s market strategist Scott Barlow
BofA Securities published the results of their popular monthly survey of portfolio managers and it included a sharp about face on risk tolerance,
“Russia/Ukraine drives FMS [fund manager survey] cash levels to highest since Apr’20 (COVID), global growth optimism to lowest since Jul’08 (Lehman); but investors still expect Fed hikes, FMS equity allocations down but not at capitulation levels, BofA Bull & Bear Indicator at 2.8, i.e. not yet ‘‘extreme” bearish; Positioning + Policy = too early for contrarian buy call = we remain tactically & cyclically bearish … Growth expectations at 14-year low but CPI expectations up & majority now expect inflation to be “permanent” … No surprise 6/10 now forecast stagflation … Cash levels surge to 5.9%; allocation to commodities at record high 33% (#1 crowded trade = long oil/commodities); allocation to global equities slumps to lowest since May’20; but investors very underweight bonds (-56%) not stocks (+4%) … Major Mar’22 rotation from banks & consumer to tech, staples & utilities, from small to large cap (10-year high), from European to US stocks.”
“From BofA’s fund manager survey” – (research excerpt) Twitter
“Investors dump stocks, flee to cash as growth outlook hits weakest since 2008: BofA” - Reuters
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Morgan Stanley’s large-scale TMT (technology media and telecom) conference in San Francisco has concluded and the analysts detail dominant themes and top stock picks that arose,
“Low Overall Revenue Impact from Russia/Ukraine: The overall impacts to revenue were largely cited as de minis with a number of companies including Disney, Microsoft, Zoom, Match, and more quoting <1-2% revenue exposure in the region … The Tech sector was a significant beneficiary of the rapid shift to remote work that occurred during lockdowns, and companies are now citing the rise of a hybrid workforce as another driver of demand … Supply chain bottlenecks remain the primary issue for semiconductor companies … The best approach to streaming was up for debate among media companies. Disney, Comcast (Peacock), and Paramount have all chosen to embrace an ad supported tier while Netflix wants to focus on their primary model .. We also highlight the best OW ideas from our TMT analysts. Stock picks include Accenture ($475 PT), Amazon.com ($4,200), Apple ($210 PT), F5 Inc. ($280 PT), Lam Research Corp ($730 PT), Match ($175 PT), Salesforce.com ($360 PT), TMobile US, Inc. ($150 PT), and Warner Music Group ($50 PT). "
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Citi U.S. equity strategist Scott Chronert attempted to uncover the biggest stock opportunities from recent market volatility,
“With the input of our Citi US Quantitative Strategy colleagues, we conduct a cross-sectional analysis of revenue exposure, market sensitivity, and macro influences on recent stock returns. The output from our regression aligns well with recent single stock performance (~80% of observation within 1 standard deviation of trend) since the market’s interim peak on February 25… Investors will find our two outlier screens helpful in identifying overbought, oversold, and pair trade opportunities. We view the near-term dislocations from expected returns as potential entry points for more intermediate-, or longer-term positioning angles.”
The list of stocks that stand out as oversold after accounting for both geopolitical, macroeconomic and fundamental factors is too long to fully recount but there are a number of stocks likely to be of interest to domestic investors. These include Walt Disney Co. Ralph Lauren Corp., Abercrombie and Fitch Co., Clorox Co., CME Group Inc., Baxter International Inc., Terex Corp., Corning Inc., Freeport McMoran Inc. and Alcoa Corp.
“Citi’s Chronert implements cross-discipline analysis to uncover unjustly oversold U.S. stocks” – (full table) Twitter
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Diversion: “Top Five Best Picture Winners” – The Ringer (podcast)
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