Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank’s quantitative strategy team noted that U.S. dividend stocks are outperforming and they provided dividend growth stock options for investors,
“Owning dividend-paying stocks can be a great way to mitigate the negative impacts of elevated inflation. Nevertheless, investors need to be quite discerning of dividend paying stocks … Our work shows that looking for serial DPS growers could be the best way to ride out the storm. These companies tend to be committed to a dividend policy while often being in lower risk/less cyclical industries. These characteristics become an edge given the growing risk of a recession: rosy EPS/DPS growth expectations may not materialize in more cyclical areas of the market … Overall, despite the already steep drop in equities, we believe capital preservation will remain paramount as we do not see yet the winning conditions for the start of a new bull market”
The team included a ling list of companies with proven dividend growth stocks from U.S. markets. Companies most likely of interest to domestic investors include Advance Auto Parts Inc., Morgan Stanley, Broadcom Inc., AbbVie Inc., Best Buy Co., NXP Semiconductors NV, United Parcel Service Inc., NetApp Inc., Juniper Networks Inc. and Lowe’s Companies Inc.
“Scotiabank quant team recommends U.S. dividend growths stocks” – (table) Twitter
Morgan Stanley commodity strategist Marius van Straaten published an interesting report on the metals required for electric vehicle batteries,
“Greater self-sufficiency and diversification in the supply of battery metals is an increasingly hot topic. The US IRA bill has a specific electric vehicle section, while the EU has announced its Critical Raw Materials Act, specifically with the aim of becoming less dependent on China … With U.S. Li-ion battery production capacity already expanding, the sourcing of battery components should become manageable, but battery metal supply independence is a lot trickier, in our view. To qualify, in 2023a minimum of 40% of the critical minerals value in an EV should be sourced from the US or from countries with which the US has a Free Trade Agreement (FTA.”
“Canada set to benefit from U.S. legislation on metals used for EV batteries” – (charts) Twitter
Founded by former Merrill Lynch chief quantitative strategist Richard Bernstein, RB Advisors has joined the chorus predicting a profit recession,
“Investors see a myriad of unknowns right now, but we prefer to structure portfolios for the only two certainties we see for the next 6-12 months: 1) the Fed will be tightening and 2) profits will be decelerating. We’ve pointed out before this combination of events is not typically a good one for equity markets, and we now have our lowest equity beta and highest cash levels in years… The real Fed Funds rate remains historically negative despite the Fed’s repeated rate increases, which suggests the Fed could be raising rates for some time to get inflation under control. Historically, it has been difficult to corral inflation without a positive real Fed Funds rate… Profits are already starting to decelerate after the post-pandemic period of exceptionally strong earnings growth … Performance is typically tied to relative earnings growth, and when profits decelerate stable earnings companies tend to outperform … we currently don’t see such a turn in the profits cycle troughing until 4Q 2023 … "
“Profits Recession Ahead” – RB Advisors
Diversion: “Ground Telescopes Capture Jaw-Dropping Views of DART Asteroid Impact” - Gizmodo
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