A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Desjardins analyst Kyle Stanley’s report Welcome to the pivot party! expressed a lot of optimism towards the REIT sector,
“It’s been a challenging two years, during which investor interest in REITs waned significantly and fund flows poured into short-term money market instruments like GICs. As a result, the REIT sector significantly underperformed the broader TSX — but the tide finally seems to be turning. With the rate cutting cycle in full swing in both Canada and the U.S., the REIT sector has been an outperformer. Since June 1, the REIT index has delivered a total return of +18.1% vs the TSX at +9.5%. However, the recent uptick in bond yields, largely on the back of a stronger-than-expected US jobs report late last week, has driven a pullback in the REITs. We believe the recent surge in Treasury yields is short-term in nature and reflects a repositioning toward a 25bps rate cut by the Fed in November vs the 50bps being priced in previously — both the BoC and Fed will continue to lower their policy rates, in our view. Given the recent pullback in the sector, and the performance of the REITs as bond yields trended lower over the past couple of months, we see further valuation upside as rates resume the move lower in response to future central bank policy decisions”
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RBC Capital Markets analyst Matthew Hedberg outlined the firm’s top ideas in software,
“Our view: As we’ve been marketing, one of the most asked questions is, “What are our favorite software ideas as we look to the end of 2024 and into 2025?” While this will be a larger focus of our 2025 software outlook, we thought we’d get a jump start on the process of identifying some of our favorite North American software ideas by market cap and by analyst to help investors with a shopping list. The key consideration was to identify ideas where we are comfortable that we won’t get a 2025 estimate reduction, as well as having a catalyst path for upward estimate revisions against what is generally a consensus deceleration for CY/25 estimates. As such, top software ideas for Matt Hedberg, Rishi Jaluria, Paul Treiber and Matt Swanson include (in alphabetical order): ADBE, CRWD, CSU (TSX), & VEEV in large cap; DSGX, GTLB, GWRE in mid-cap and CWAN, KXS (TSX) & VRNS in small-cap.”
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Scotiabank analyst Mario Saric thinks investors with short time horizons should avoid apartment REITs,
“Yesterday’s Rentals.ca September Rental data showed an estimated 0.2% 2-BR asking rent erosion (i.e., September vs. August) vs. +0.7% in August vs. July (Exhibit 2); 1BR was +0.2% though. While the validity of the monthly data is strongly debated, a broadening of peak asking rents seems to be surfacing with Ottawa & GTA West joining in September.
“We estimate KMP markets saw avg. 0.7% m/m asking rent growth (due to smaller non-Halifax Atlantic markets), with BEI at +0.4% and IIP, CAR, MI all down 0.6%-0.7%
“Net-net, building on the more cautious take in our August Rentals.ca report, we believe further Apartment REIT outperformance (barring hard landing) will be challenged in the next ~3 months on a possible deepening in breadth of markets with falling asking rents heading into a seasonally slower leasing period (investors seem more interested in asking rents than strong blended rent growth; Exhibit 1) and increased headline risk (Federal immigration policies heading into an Election; Exhibits 8-9). For those with shorter investment horizons convinced of a soft (or no) landing scenario, we think reallocating some multi-family weight into Seniors Housing, Office, and select Retail makes sense.”
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Diversion: “The 85 Best Quentin Tarantino Characters Ever, Ranked” - The Ringer