Morgan Stanley technology analyst Katy Huberty is unambiguously bullish on stocks involved in the next generation of broadband technology, opening a recent research report with the blunt statement: ”We are buyers of stocks exposed to stronger than expected consumer 5G demand.”
Morgan Stanley’s confidence arises from a survey of U.S. and Chinese consumers that uncovered the highest levels of demand for new smartphones in years. Apple Inc. has already released 5G compatible iPhones and has begun revising sales expectations higher.
U.S. telecommunication providers are also indicating strong early demand for the new iPhones. Ms. Huberty points to aggressive subsidies from telecom providers – offering new iPhones to consumers at lower prices – as another reason to expect 5G phone sales to exceed current expectations.
Ms. Huberty’s 65-page report is long but includes a surprisingly concise list of 10 stock picks. Apple is among the three U.S. companies expected to benefit from the trend, along with T-Mobile U.S. Inc. and Qualcomm Inc.
Other names include Taiwan-based Delta Electronics and Taiwan Semiconductor Manufacturing Co. Ltd, and Samsung Electronics Co. Ltd. of Seoul, South Korea. Morgan Stanley’s picks from the Hong Kong market are Sunny Optical Technology Group Co. Ltd. and China Mobile. Japan’s Murata Manufacturing Co. Ltd and Sweden’s Ericsson round out the list.
The novelty of lugging a smartphone around everywhere wore off a long time ago for me so I wasn’t expecting the sector to become a hotbed of investor interest and capital. Ms. Huberty’s argument is nonetheless compelling – I was reminded of the move to high definition televisions - and the new upgrade cycle could very well prove to be a lucrative one for investors.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Ayr Strategies Inc. (AYR-A-CN) Ayr Strategies is a vertically-integrated cannabis multi-state operator with established operations in Massachusetts and Nevada and expansion plans in three other U.S. states. The share price this week closed at a record high on high volume. And the average one-year target price implies a potential 41 per cent return - on top of its 121 per cent year-to-date gain. Jennifer Dowty has this profile of the stock. (for subscribers)
Converge Technology Solutions Corp. (CTS-X) Shares hit a record high Wednesday amid a hot technology takeover market and as the company amasses its own acquisition war chest. Converge, which provides cloud, cybersecurity and other tech services, has seen its shares double in the past three months and surge 220 per cent over the past year. The company, which is readying to graduate to the Toronto Stock Exchange, recently closed an upsized $46.2-million financing, which it said would be used for largely for acquisitions. Brenda Bouw tells us more about the stock. (for subscribers)
Seeking underperforming TSX stocks that may be due for a reversal
Bargain hunters enjoyed some big gains as their once bedraggled stocks shot higher. While the price surge is great for shareholders, it’s bad for buyers because it makes bottom fishing more difficult this tax-loss selling season. But serious bargain hunters take a longer view of things. They tend to seek out firms that might be due for a reversal after having disappointed investors for many years. Norman Rothery looks at some potential long-term reversal bargains. (for subscribers)
Commodity prices are moving up. Is this the start of a supercycle?
Copper, soybeans, wheat and gold have enjoyed spectacular run-ups this year, reigniting interest in commodities as the global economy recovers from the pandemic. More than a snapback, the gains are raising the question of whether a commodities supercycle is now in the works. David Berman tells us more. (for subscribers)
Does it make sense to use preferred shares as a bond substitute?
Intolerably low interest rates are causing a major rethink of diversification at the individual investor level. And that includes subbing preferred shares for bonds. But is it really a wise investment strategy? Rob Carrick shares his thoughts - and so did a lot of readers in our comments. (for subscribers)
A balanced fund ETF that’s proven its worth
The ETF industry has suddenly fallen in love with balanced funds. For years there were only a few available. Now it seems like there is a new one announced every week. Some of the newbies look good on paper. But there is no history to tell us how they will perform against their peers over time. There are a few exceptions, however. This is one that Gordon Pape recommends. (for subscribers)
In a period of historically low rates, these two dividend-paying energy stocks are worth the risk
In these days of historically low interest rates, how does a stock that yields 7.4 per cent sound to you? Or how about one with a yield of 8.2 per cent? You can buy either or both right now. Both have investment-grade ratings from two bond rating agencies. Both insist the dividend is secure and will not be cut. What’s the catch? The two companies are in the beaten-down energy sector. Are they worth a shot, in light of their attractive yields? Gordon Pape thinks they are, if you are willing to accept the risk that comes with them. Here are Gordon’s two picks. (for subscribers)
Strong earnings recovery bodes well for stocks next year
The third quarter may go down as the most triumphant earnings decline in corporate history. With earnings season basically wrapped up – but for the notable exception of Canada’s big banks – total profits are on track for a dip of less than 10 per cent in both Canada and the United States, compared with the same quarter last year. And all else being equal, a substantial upward revision of earnings from existing forecasts is exceptionally bullish for stock prices. Tim Shufelt reports. (for subscribers)
These are the two sectors to watch the most as value stocks make a comeback
The past three months have seen value stocks outperforming growth stocks by the biggest margin in 10 years, a strong indicator that big changes in market leadership are already under way. A closer look at the U.S. stocks driving the Russell 1000 Value Index higher uncovers two sector-based investment trends, one likely more sustainable than the other. Scott Barlow tells us more. (for subscribers)
Cloud computing ETFs are surging, but should investors bet on the niche play long term?
Cloud computing ETFs have benefitted from the historic shift to working-from-home and distance learning brought about by the COVID-19 pandemic, though some providers expect the surge to continue long after the global health crisis ends. For those feeling bullish on the sector, Canada will soon have its first ETF dedicated to the sector. Jameson Berkow reports. (for everyone)
Others (for subscribers)
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More investing ideas from the pros (for subscribers)
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Ask Globe Investor
Question: I opened a RRIF this year, but I have not put any money in it. I will be 69 next year. I do not need the money. Because I opened the account, do I have to move all of my RRSP, some, or none into it? – Mike M.
Answer: Why would you bother to open a RRIF if you did not intend to contribute to it? You are not required to do so until the end of the year in which you turn 71. In your case, that would be 2023.
However, now that you have the RRIF you should do something constructive with it. If you are not drawing income from a pension plan and you are at least age 65, you can claim the 15 per cent pension income tax credit for the first $2,000 you withdraw from the RRIF each year. That’s $300 a year off your tax bill. Your provincial tax credit will add to that.
That means you have to transfer enough money from your RRSP to the RRIF to generate a withdrawal of $2,000 a year. You will be 68 on Jan. 1, 2021. The minimum withdrawal at that age is 4.55 per cent. If you want to stick with the minimum, you’ll need to move about $44,300 into the RRIF. Of course, you could move less than that and take more than the minimum withdrawal to reach $2,000.
If you take action before Jan. 1, you’ll be able to claim the credit on this year’s tax return.
Note that this does not mean the $2,000 is tax free. That would only apply if you are in the lowest tax bracket. But the tax you pay will be much lower.
And yes, it is ok to have both an RRSP and a RRIF at the same time.
What’s up in the days ahead
Stocks related to green power are surging. LIT, the Global X ETF that tracks battery & lithium stocks, was up nearly 20 per cent in November, while TAN, the Invesco solar energy ETF, shot up a similar amount. Can the rally last? Ian McGugan will share his thoughts.
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Compiled by Globe Investor Staff