A daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities U.S. quantitative strategist Savita Subramanian released Health Care deep dive: 9 reasons it’s our favourite overweight on Wednesday,
“1. Best for Late Cycle (now) and Downturns (2023?): Our US Regime Model is in Late Cycle, during which HC [health care stocks] has enjoyed the strongest alpha of all sectors … 2, 3 and 4. GARP, DARP and YARP: Health Care is statistically cheap, trading at a near-record discount to the S&P 500. It offers Growth at a reasonable price (GARP): HC is the second fastest growing sector based on annualized EPS growth since 1986 - Tech is #1 but trades at a significant premium … 5. Most upbeat outlook during earnings … 6. Demand: longevity/aging demographics, plus the aftermath of a global pandemic, are likely to drive an acceleration in consumer and corporate spend - co’s with strong health care policies re-rated during COVID and have largely maintained those premia… 7. M&A and activism could catalyze outperformance. ... 8. Regulatory overhang likely overblown: ahead of mid-term elections where betting markets assign a 70%+ probability of Republicans taking both the House and Senate, the regulatory risks are likely more than adequately priced in. 9. Alpha without the beta: HC is an idiosyncratic, story-specific sector with low intra-stock correlations … "
The analyst recommendations that accompany the report are Human Inc., Thermo Fisher Scientific, Boston Scientific, Stryker Corp. [disclosure: I own this one] and CVS Health Corp.
I have to stop myself from buying more health care on a monthly basis – I am already very overweight.
“BofA: “9 reasons [health care is ] our favorite overweight”” – (research excerpt) Twitter
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Is the Toronto housing market finally cracking? The April numbers were terrible as National Bank analyst Darren King reported,
“The Toronto Regional Real Estate Board (TRREB) data for the resale market in April showed seasonally adjusted home sales plunged by 26.2% compared to March, following a strong decline of 18.1% the prior month. This data for Toronto echoes the Vancouver numbers released yesterday, indicating that the real estate market is slowing down rapidly across the country following the recent increase in mortgage rates. As a result, the level of activity in Toronto’s real estate market is now 16.3% below its long-term average (since 1991). This downturn in demand has allowed supply to build up over the month. Indeed, end-of-month listings were up 16.0% in April compared to March despite a 6.6% decrease in new listings. As a result, market conditions are now back in balanced territory after being favourable to sellers since the second half of 2020. With such market conditions combined to the backdrop of a sharp deterioration in affordability since the beginning of the pandemic, we believe home price inflation is largely a thing of the past.”
“GTA: Housing demand plunged as rates rose in April – National Bank Economics
See also: “Housing Data Show What We Already Know: Weakening” – (BMO research excerpt) Twitter
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RBC Capital Markets analyst Bish Koziol made a number of changes to the firm’s quantitative-driven top 40 list of Canadian stocks.
Canacol Energy Ltd., Enghouse Systems Ltd., Waste Connections Inc., Canadian Imperial Bank of Commerce and Telus Corp. were removed.
North West Co., Enerplus Corp., B2Gold Corp., Toronto-Dominion Bank and Quebecor Inc. were added.
The new list includes, in addition to the additions mentioned, Canadian natural Resources Ltd., Pason Systems Inc., Parex Resources, TC Energy Corp., CCL Industries, Stella-Jones Inc., Labrador Iron Ore Royalty Corp., Toromont Industries Ltd., Richelieu Hardware Ltd., CN Railway Co., Stantec Inc., WSP Global Inc., Metro Inc., Empire Co. Ltd., Loblaw Co. Ltd., BMO, National Bank of Canada, IA Financial Corp. Inc., CI Financial Corp., Equitable Group Inc., Great-West Lifeco., Sun Life Financial Corp., Canadian Western Bank, Bank of Nova Scotia, TMX Group Ltd., CGI Inc., Celestica Inc., Open Text Corp., Cogeco Communications inc., BCE Inc., Shaw Communications Inc., Rogers Communications Inc., Fortis Inc. and Colliers International Group Inc.
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Newsletter: “Slowing growth and rising yields are handcuffing investors” – Globe Investor
Diversion: “‘Austin Powers: International Man of Mystery’” – The Rewatchables (podcast)
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Scott Barlow