Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank REIT analyst Himanshu Gupta sees value in domestic-traded foreign residential REITs,
“Foreign Residential: Getting A Bit More Interesting. OUR TAKE: Slightly Positive. Foreign residential names had a strong 2021 and since then have underperformed in 2022, 2023 and 2024 YTD as interest rates spiked and over-supply issues in U.S. Sunbelt impacted HOM and DRR. We are now searching for a turnaround in these names. Our foreign residential basket (HOM.U, DRR.U, MHC.U and ERE.UN) offers growth similar to CDN REIT sector but trades at almost double the valuation discount. Foreign basket at 32% discount to NAV vs REIT sector at 18%.”
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I am becoming very interested in refrigeration as an investment idea.
The short-term catalyst is cooling requirements for AI-related data centers as BofA Securities analyst Andrew Obin reports,
“The [recent American Society of Heating, Refrigerating and Air-Conditioning Engineers] conference explored challenges related to legislative initiatives, electrification, and AI and its impact on the HVACR industry. Liquid cooling was a primary topic in data center discussions. Participants see liquid cooling quickly gaining share over air cooling in data centers. Liquid cooling has its drawbacks. ... We also heard concerns on energy efficiency for liquid cooling systems. Within our coverage we view Buy-rated VRT and ETN as the chief beneficiaries from data center growth … We heard the most plausible pathway to meet 2050 net-zero emissions goals, calls for the electrification of heating and cooling. Studies suggest a 60% increase in peak demand by 2050 requires major upgrades of the grid … One of the pieces of equipment we heard about during a session on electrification and heat pumps was high efficiency chiller-heaters. High efficiency chiller-heaters are designed to generate cooling or heating as well as both simultaneously. Using this equipment can reduce energy consumption by 40% with a reduction in energy heating”
I will have to do more research to understand the climate-change related opportunities and those arising from the shift of U.S. population to southern states like Texas.
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Barclays analyst Theresa Chen listed a Canadian stock first on her top picks in North America research report,
“as global consumption of natural gas increases, coupled with domestic tailwinds from industrial demand, reshoring, and potential uptick from AI/data center-related power generation over the long term, the structural need for incremental for US onshore natural gas infrastructure as well as and LNG export capacity persists. Within our midstream coverage, we think TRP [TC Energy Corp.] offers good risk/reward from here and upgrade the company to Overweight, from Equal Weight. We also like ET, SUN, as well as OKE into the quarter”
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The RBC global equity team published the 40-page Canadian Equity Chart Book included the following highlights,
“In Canada, RBC Economics views the economy as being stuck in excess supply, with per-capita GDP declining and unemployment trending higher. Inflation is set to moderate further following slower growth in mortgage and rent costs. RBC expects three more cuts from the Bank of Canada this year, to an overnight rate of 4 % by December … Energy & Utilities: We believe energy producers remain well positioned to continue to improve their financial resiliency and boost shareholder returns amid stern capital discipline and balance sheet deleveraging. .. We remain generally constructive on the oilfield services sector, primarily in international jurisdictions. Within Canadian Energy Infrastructure, our theme of favouring Midstream stocks with leverage to growing natural gas and natural gas liquids production has become even more pronounced, and we note recent market interest in Utilities related to datacenter -related load growth and company -specific updates. We still see a constructive setup for Renewables in 2024 … Within Diversified Financials, in this report we highlight trends in share price performance and note that Element Fleet remains our # 1 high -conviction best idea … Real Estate: It was a tough H1/24 for the TSX REIT Index amid persistent macro headwinds. From our lens, fundamentals are in good shape across most subsectors, liquidity ratios remain above trend, floating rate debt exposure is low, debt maturities are well -balanced, earnings growth outlook remains healthy, and valuations look more attractive”
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Diversion: “Two Years of Amazing Images From the James Webb Space Telescope” - The Atlantic