Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Dominion Securities energy analyst Greg Pardy made a large number of changes to his Global Energy best Ideas list.
He removed Algonquin Power and Utilities Corp., BP PLC, ConocoPhillips Co, Ranger Oil Corp. and Suncor Energy Inc. in favour of Diamondback Energy Inc., Marathon Petroleum Corp., Permian Resources Corp., Repsol, and Superior Plus Corp.
The longer-term performance of the list has been strong,
“In November the RBC Global Energy Best Ideas List was up 1.4% compared to the iShares S&P Global Energy Sector ETF (IXC) up 3.3% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) up 4.6%. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 150.1% compared to the S&P Global Energy Sector ETF up 29.6% "
The exploration and production names on the list, outside of the ones already mentioned, are Tamarack Valley Energy Ltd., Topaz Energy Corp., California Resources Corp., Range Resources Corp., Arc Resources Ltd., Tourmaline Oil Corp., Canadian Natural Resources Ltd., Enerplus Corp and Santos Ltd.
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Morgan Stanley commodity strategist Amy Sergeant is bullish on iron ore and aluminum but remains cautious on copper miners,
“Iron ore sits top of our order of preference, with a temporary 1H rally driven by a seasonal pick-up in steel production against weaker supply. Aluminium remains our other top pick, with another deficit year as rebounding energy prices drive supply struggles while China demand recovers. Zinc also sees support as smelter disruptions continue. Gold and silver could still see downside initially as the last of the rate hikes come through, but we see more upside into 2H if the Fed moves towards rate cuts, per our economists’ projections; gold outperforms silver. PGMs sit towards the middle of our order of preference, with growing risks to auto production. We maintain a preference for platinum over palladium. We remain cautious copper, calling for prices to trough in mid-2023 as mine and refined supply grows, tipping the market into surplus. We are cautiously optimistic on met-coal as ex-China demand improves from a low base; we expect thermal coal to trend lower gradually, but remain elevated vs history.”
“MS 2023 outlook for metals prices” – (research excerpt) Twitter
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BMO senior economist Robert Kavcic continues his great work on mortgage finance and real estate markets,
“The Bank of Canada’s 50 bp rate hike will push variable rates further above stresstested rates for many mortgage holders. Recall that through the 2021 boom, borrowers taking out variable-rate mortgages around 1.5% were stress tested in the 4.79%/5.25% range. Now, 400 bps of tightening has pushed current rates above those stress-test levels. Of course, the majority of variable-rate mortgages have fixed-payment features, so they are not being hit with the full force of payment hikes immediately (renewals will be another story). The key now will be how long rates stay at these levels. The longer we stay in 5.25%-plus mortgage rate territory, the more the pressure will build.”
“Mortgage rates rise above previous stress test levels” – (research excerpt) Twitter
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Diversion: “The Best Movies of 2022″ – The Ringer
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