Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief investment strategist Brian Belski still sees value in domestic equity markets and provides examples,
“With the recent rally and valuation surpassing long-term historical averages, many investors have voiced concerns that there is no longer value in Canadian markets. We strongly disagree. In fact, our work shows that despite revitalized outperformance, there remains significant breadth of absolute and relative value in Canada. we find that almost all sectors are showing relative value versus the US. Only Canadian Consumer Staples look expensive. Additionally, according to our models, the Communication Services, Energy, Financials, and Real Estate sectors remain at, or below, historical valuation levels. As such, we believe there remains significant value opportunities in Canadian equities and expect further valuation expansion as earnings momentum continues to rebound and ultimately converge with the US”
His list of stocks offering both value and positive earnings momentum are: Advantage Energy Ltd, ATCO Ltd, Boardwalk REIT, Brookfield Corp, B2Gold Corp., Choice Properties REIT, Dream Industrial REIT, Eldorado Gold Corp, Equinox Gold Corp., Fairfax Financial Holdings, Finning International Inc., Fortuna Mining Corp. Galiano Gold, Inc. Granite Real Estate Investment Trust, goeasy Ltd. Headwater Exploration, K92 Mining Inc., Linamar Corp, Mattr Corp, Magna International Inc., MARTINREA International Inc., Mullen Group Ltd., New Gold Inc., North American Construction Group Ltd., NuVista Energy Ltd., OceanaGold Corp, Orla Mining Ltd., Parkland Corp, Paramount Resources Ltd., Stingray Group, Rogers Communications Inc., Surge Energy Inc, Taseko Mines Ltd, Trisura Group Ltd., Tamarack Valley Energy Ltd., Torex Gold Resources Inc. and Wesdome Gold Mines ltd.
***
Scotiabank analyst Mario Saric provided an update on apartment REITs,
“The notable recent change in temperature plus investor questions over possible upside to 2025E operating costs has us revisiting our 2024/2025E Winter utility cost assumptions (Q4/24E & Q1/25E) … We previously forecast an avg. 11% y/y increase in utility cost per suite, which has been revised to 16%, while our avg. 2025E Apartment REIT FFOPU [fund from operations per unit], TP [target price] and NAVPU [net asset value per unit] estimates fall a modest ~0.5%, with 2025E y/y FFOPU now = 7.8% growth (PEG ratio remains at ~2), only the 4th highest amongst CAD REIT asset classes. The FFOPU drops range from KMP (0%) to BEI (0.5%) on higher forecast nat. gas prices, despite our view that the heavy Calgary snowfall experienced in the 2023 Winter (Q4/23 + Q1/24) is unlikely to recur. As discussed in our Apartment REIT report last Thursday on September Rentals.ca data (link), we still believe Apartment REIT outperformance will be challenged in the next ~ 3 months on negative headline risk”
***
Weak guidance by Dutch semiconductor provider ASML caused volatility for tech stocks on Tuesday,
“ASML have released their 3Q24 results half a day early, punctuated by an order miss and reduction to 2025 expectations. They are seeing weakness in both logic and memory, with the former showing a slower ramp in new process nodes and the latter limiting capacity additions. 3Q orders of only EUR2.6bn are well below consensus of EUR5bn, leading to ASML reducing 2025 sales to between EUR30-35bn from 30-40bn previously. Newsflow over the summer has been negative, with Intel’s capex cuts and commodity memory price softness, but as recently as early September, management had reiterated that the low-end of the 2025 range was still “conservative” ... Estimates had been declining for 2025, including our own, but consensus at EUR36bn is now high”
***
Diversion: “A Message From the Past (Thoughts on Nostalgia)” – Housel, Collaborative Fund