Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi research editor Alex Miller detailed the firm’s analysis of the world’s top performing investment themes and also the least effective themes,
“Several themes that have ranked in the top 10 by forward attractiveness over the past few months remain; Agricultural Demand, Belt & Road and Smart Grids feature here but we also include Mining Capex and Supply Chain Solutions which also rank amongst the top 5 … Themes which continue to rank unattractively include Biotech, DNA/Genetics and Global Tourism … Many of our Health Care related themes also rank poorly this month on forward attractiveness. We note as well that Experiential Commerce, Luxury Spend also rank amongst the least attractive possibly due to consumers adapting their spending habits as inflation continues to rise.”
The report helpfully included a list of stocks with exposure to the best performing themes although many are unfamiliar to domestic investors. The stock are AP Moller Maersk, Hapag Lloyd, DSV, Kuehne und Nagel, Bollore, Federal Express, Atlas, Taiwan Semiconductor Manufacturing, United Parcel Service and Deutsche Post.
“Citi: Stocks with exposure to world’s most successful investment themes in March” – (table) Twitter
Scotia Capital strategist Hugo Ste-Marie emphasized the “end of the earnings party” for the S&P 500 and volatility ahead,
" S&P 500 Q1/22 EPS should dip 7.0% sequentially, coming off an all-time high (US$55.03) hit last quarter. The Q1/22 year-over-year (y/y) expansion rate of 4.9% also marks a visible slowdown from an exceptional four consecutive quarters of 30%+ y/y growth. In our view, the expected sequential dip is not overly concerning for now. While we expect positive surprises to carry the final EPS tally higher, we would not expect such a negative contraction to be erased. Tepid corporate guidance and negative revisions in key sectors (Technology) are some headwinds arguing against a strong beat…
“Profit headwinds for most cyclicals. Among sectors not affected by seasonality, Energy (+13%) and Healthcare (+4.5%) are the only ones that should deliver sequential EPS growth in Q1/22… Financials and Discretionary flip to negative y/y growth and Technology slows to a single-digit growth rate.”
“‘End of the earnings party, tougher slog ahead” – Scotia” – (research excerpt) Twitter
CIBC materials analyst Jacob Bout noted that there will be no end to the global potash shortage as long as sanctions against Russia remain,
“With Brazil potash spot prices at a record $1,170/t, we revisit the impact of Western sanctions to the Russia/Belarus potash supply. Latest industry forecasts indicate that Russia and Belarus potash exports will be down by ~13Mt in 2022 (~54% Y/Y decline to just 10.9Mt) and down by ~10Mt-11Mt in 2023 vs. 2021 levels. Without the lifting of restrictions and access to EU ports, supply from this region is unlikely to return to pre-2022 levels before 2026 … We estimate only around 4.0 Mt/year of remaining idled or unused capacity in Canada (in addition to NTR’s ~1Mt increase announced this year), i.e., insufficient to fully cover the shortfall in output from Russia and Belarus. The rest of the world (Israel, Germany and Jordan) has a very limited ability to bring on new production… if sanctions remain in place, the potash market will be incrementally short for the next few years. Historically, potash demand grows ~2%-3%/year; there should eventually be a heightened need to replenish the soil for this nutrient as supply becomes available "
“CIBC: ‘if sanctions remain in place, the potash market will be incrementally short for the next few years.”” – (research excerpt) Twitter
Diversion: “The 50 Best Rom-Coms” – The Ringer
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