Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Jean-Michel Gauthier sees domestic markets at a bit of a cyclical tipping point while updating the firm’s top 30 stock picks (my emphasis) ,
“Cyclicals hit their lowest average rankings since the financial crisis on broad weakness across Discretionary, Financials, and Technology. Still, Tech rankings seem to be bottoming out and Momentum metrics are essentially as bad as it gets. If Growth rankings are not revised lower soon, we could see a broad rebound. Defensives continue to rise across the board on strong Momentum, although Real Estate plays are the odd man out. Energy and Chemicals make new ranking highs, while Gold miners rebound and Base Metal/Lumber go through a soft patch. Overall, the Defensives bias deepens, but could quickly reverse if macro/Growth doesn’t deteriorate. Sectorwise, Energy, Staples, and Financials are the highest-ranked sectors.”
There is one change in Scotia’s quantitatively-driven SQoRE Canada Top 30 portfolio – Oceangold Corp. replaces ATS Automation. The remainder of the picks are MEG Energy, Birchcliff Energy, Tourmaline Oil, Enerplus, Whitecap Resources, Crescent Point Energy, Parex Resources, Nutrien, Methanex, Stelco Holdings, Teck Resources, First Quantum Minerals, Capstone Copper, West Fraser Timber, Interfor, Canfor, Russell Metals, Richelieu Hardware, Gildan Activewear, Loblaw Co.s, Bank of Montreal, Canadian Imperial Bank of Commerce, Home Capital Group, Cannacord Genuity Group, Fairfax Financial Holdings, Great-West Lifeco, Power Corp., Altagas and Boardwalk REIT.
“Scotia’s quant-driven top 30 Canadian stock portfolio” – (table) Twitter
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RBC Capital Markets list of top global energy picks has dramatically outperformed their benchmarks,
“Our view: In April, the RBC Global Energy Best Ideas List was up 1.2% compared to the iShares S&P Global Energy Sector ETF (IXC) down 1.9% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) down 2.5%. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 117.6% compared to the S&P Global Energy Sector ETF up 13.3%.”
The list is Shell Oil, BP, Cenovus Energy, ConocoPhillips, Canadian Natural Resources, Santos Ltd., Tourmaline Oil, ARC Resources, Range Resources, California Resources Corp., Tamarack Valley Energy, Schlumberger Ltd., Secure Energy Services, Cheniere Energy Inc., Altagas Ltd., Energy Transfer LP, rattler Midstream LP, Targa Resources Corp., The AES Corp., Algonquin Power & Utilities and Drax Group.
" RBC’s top picks in global energy” – (table) Twitter
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BofA Securities U.S. quantitative strategist Savita Subramanian published an update on earnings seasons with the blunt title End of Euphoria,
“76 S&P 500 companies (71% of earnings) have reported so far. Consensus 1Q EPS has risen 4% since April 1 to $53.54 (+9% YoY), in-line with our forecast. All 11 sectors are beating consensus, and 56% beat on both sales and EPS vs. a typical 44% Week 3 rate … While consensus 2022 EPS rose 1% since April 1, it was entirely driven by Energy (-0.2% ex-Energy). Both our guidance ratio (0.7x) and our earnings revision ratio (0.8x) plummeted to the lowest since 2Q20. We see downside risks to consensus EPS … Our corporate sentiment reading based on our predictive analytics team’s natural language processing (NLP) analysis plummeted to the lowest level since 2Q20. On a YoY basis, this marks the biggest drop other than GFC and COVID recessions (Exhibit 13). The YoY change in sentiment score has been highly predictive of the following quarter’s earnings growth YoY (54% r-sq), and points to an EPS decline in 2Q - not our base case… Reactions to earnings remain muted - beats outperformed by 97bps the next day vs. +150bps historically. Similar to last quarter, positioning remains a consistent alpha strategy: crowded stocks lagged by 59bps (regardless of results), while neglected stocks outperformed by 41bps (a 100bp spread). The spread was twice as wide for Growth stocks: -156bps for crowded and +56bps for neglected (+213bp spread)”
“BofA’s earnings recap for week 3 was entitled ‘End of Euphoria’” – (research excerpt) Twitter
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Diversion: “Tom Cruise Said in 1990 Making a Sequel to Top Gun Would Be ‘Irresponsible’” – Gizmodo
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Scott Barlow