Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Credit Suisse analysts published a list of the top 20 value creating companies in the health care sector. The methodology uses the research firm’s proprietary cash flow return on investment (CFROI) estimates – to calculate economic profit (EP) growth.
The list of stocks, ranked by five year growth in economic profits, is led by Johnson & Johnson, Unitedhealth Group, Abbvie Inc., Pfizer Inc., Gilead Sciences Inc., Merck & Co., CVS Health Co., Bristol-Myers Squibb Co (disclosure: I own BMY in my personal account), Amgen Inc., Thermo Fisher Scientific Inc., Medtronic PLC and Biogen Inc.
“@SBarlow_ROB CS: Top value creators in health care sector (EP= economic profit)” – (full table) Twitter
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Vancouver-based Teck Resources Ltd. is among Morgan Stanley’s top picks in the global mining sector.
Analyst Carlos De Alba wrote,
“While mining equities’ recent volatility may continue a bit longer, we expect the sector to resume its outperformance, similar to what happened in late 2004, supported by strong balance sheets and attractive valuations, combined with a strong global capex recovery leading to robust global growth … Teck offers growing exposure to copper, and a substantial long-term expansion in volumes and EBITDA. Near term, market uncertainty related to the Covid- 19 outbreak, political outlook in Chile and Peru, and rising leverage may weigh on the stock, but Teck has good liquidity and we see long-term value in its asset base.”
Mr. De Alba’s price target indicates 34-per-cent upside for the stock.
“@SBarlow_ROB TECK among Morgan Stanley’s top picks in global mining” – (chart) Twitter
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CIBC economists Benjamin Tal and Katherine Judge argued that Canadian inflation will be more muted domestically than south of the border,
“There are reasons to believe that inflationary pressures in Canada will be more muted than in the US. Admittedly, the 7% appreciation in the value of the Canadian dollar since the start of the pandemic is a cushion on inflation that could be lost next year… Roughly one quarter of Canada’s CPI basket is made up of directly imported content. Import prices in Canada are roughly flat to pre-pandemic levels, and down from year-ago levels. In contrast, the US is experiencing a sharp double-digit climb in import prices … sensitivity of households to rising rates is much more pronounced in Canada than it is in the US, a direct result of the post-financial crisis divergence in the pace of debt accumulation … the share of interest rate sensitive sectors in Canada, namely housing, is double what is seen south of the border, suggesting a more aggressive response to higher rates in Canada from that key drive.”
In short, rate hikes will have a much larger slowing effect on the Canadian economy because of high debt levels.
“US-Canada inflation: Mind the gap” – CIBC Economics
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Diversion: “America’s Alcohol Industry Needs a Drink” - The Atlantic
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Scott Barlow