Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi strategists are recommending a selected “AI-at-a-reasonable price strategy”,
“We believe it is time to buy into the next leg of the Artificial Intelligence trade which includes broadening beyond the U.S. and across the value chain. Aggressive price action in certain pockets suggests implicit growth expectations have run well ahead of fundamental expectations. This means investors should be discerning within the theme, especially for core holdings. For Growth investors, we suggest an Artificial Intelligence-at-a-reasonable-price approach. For Value managers, consider lower-multiple names where margins should expand. The end results provide broader regional and value chain exposure, lower beta relative to tech-heavy indices, and more attainable implicit fundamental expectations.”
The most recognizable names among the reasonable price stock picks include Meta Platforms, Alphabet, Salesforce, Okta, Intel, Marvell Technology, Amazon, Qualcomm, Mastercard, Visa, Airbus, Bouygues, ABB and Panasonic Holdings.
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RBC Capital Markets head of U.S. equity strategy Lori Calvasina is raising her target for the S&P 500,
“We refresh our year-end S&P 500 forecasts for 2024. The three big things you need to know: First, we lift our year-end 2024 S&P 500 price target to 5,300 (from 5,150). The most constructive model in our tool kit indicates upside to 5,400, which represents our bull case if our base case is too conservative. Second, we continue to see some conflicting cross currents for stocks. Among the five models that we use, our economic, valuation, and cross-asset work are sending the most constructive signals, while our sentiment and politics work are less enthusiastic. Third, we lift our 2024 S&P 500 EPS forecast to $237 (from $234), which remains slightly below the bottom-up consensus … Our sentiment work has been making us uneasy. Our model based on AAII net bullishness is now producing the weakest forecast among our five target price models, though its signal is unchanged from our January update”
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BMO chief strategist Brian Belski is looking for a bounce in domestic small caps,
“As we reiterated last week, we believe Canada remains the predominant contrarian call in terms of developed equity markets in 2024. Granted, the TSX composite has recently eclipsed all-time price highs, but overall index performance pales in comparison to its neighbour to the south. From our lens, Canadian small cap stocks are an even deeper contrarian call within an already contrarian context with respect to overall Canadian equities – an asset class that we believe is primed for a catch-up trade that could even eclipse the large cap stocks. In fact, while the S&P/TSX small cap index has managed to keep pace with its large cap peers so far this year, the index remains well off its 2022 historical high. Furthermore, our work suggests the fundamental underpinnings are improving faster than its large cap peers, with earnings growth set to rebound to double digits over the next twelve months, well ahead of the single-digit growth expectations for the overall S&P/TSX composite. As such, we believe investors should be looking within the Canadian small cap universe for both value and growth opportunities with a tilt toward traditional cyclical areas of the market”
Stocks in the BMO Research Small Cap Canadian Equity Portfolio include Air Canada, AltaGas Ltd., Algonquin Power 8 Utilities Corp., Aritzia Inc., Brookfield Business Partners LP, Celestica Inc., Crescent Point Energy Corp., Capstone Copper Corp., Canadian Western Bank, Dream Industrial REIT, Element Fleet Management Corporation, EQB Inc., Guardian Capital Group, Hudbay Minerals Inc., Headwater Exploration Inc., Interfor Corporation, InterRent REIT, Jamieson Wellness Inc., Linamar Corporation, Lightspeed Commerce Inc., Maple leaf Foods Inc., Topaz Energy Corp., Whitecap Resources Inc. and Sleep Country Canada Holdinqs Inc.
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Diversion: “10 Things AI Chatbots Can Do Besides Yap” – Gizmodo
Scott Barlow