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The U.S. quantitative strategy team at BofA Securities has a new report out called Five themes and how to play them, providing investors looking for bargains with a host of stock ideas to watch amid ongoing market volatility. The five themes are de-globalization, changing market leadership, inflation, cost of capital shock and productivity.

The pandemic highlighted the fragility of global supply chains and this, combined with U.S./China geopolitical tensions, leads BofA to expect a re-shoring of production capacity into the U.S. and developed world. The stocks where revenues are most likely to benefit from rising investment in non-residential fixed investment in the U.S. are Kinder Morgan Inc., Quanta Services inc., U.S Bancorp., Ventas Inc., and CenterPoint Energy Inc.

The strategists expect market leadership to evolve towards ‘under earners’ - companies whose recent earnings growth is below longer-term trends. The most notable examples are Illumina Inc., Etsy Inc., International Flavors and Fragrances Inc., Take-Two Interactive Software Inc., eBay Inc. and Warner Bros. Discovery Inc. BofA also believes we’re in the early stage of a new market cycle that will benefit value stocks. The companies at the top of the related screens for low valuation stocks include American Airlines Group, EQT Corp., Comerica Inc., Paramount Global, Citigroup Inc. and Viatris Inc.

The team listed companies that most benefit, as well as those that will get hurt the most, from inflation pressure. Stocks that climb most with inflation include Freeport McMoRan Inc., Mosaic Co., Devon Energy Corp. and Applied Materials. Companies where stock prices rise most as inflation falls (in case this is the trend in 2024) are, Best Buy co. Inc., O’Reilly Automotive Inc., Clorox Co. and Jack Henry & Associates Inc.

The cost of capital shock attempts to identify companies where profitability in terms of return on capital is most resilient to higher borrowing costs in the corporate bond market. The financially healthiest companies using this criteria are Verisign Inc., Fortinet Inc., McKesson Corp., Apple Inc., Otis Worldwide Inc. and Automatic Data Processing Inc.

BofA strategists also believe that the re-shoring trend, combined with surging wage costs, will result in higher profits for stocks involved with process automation - technology that will automate complex business functions. Related stock picks on this productivity theme include Texas Instruments, Honeywell, Analog Devices and Emerson Electric Co.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Brookfield Infrastructure Partners LP (BIP-UN-T) Analysts are upbeat about the company, but their optimism is at odds with a unit price that slipped toward five-year lows, turning a former star into the biggest laggard within the S&P/TSX 60 Index this year. David Berman takes a closer look at whether this is one to buy on the dip - or avoid all together.

The Rundown

This one sector is looking like a buy in an overall shaky stock market

Beyond having traditional hedges such as gold, there is a strong bull case to be made for having Aerospace & Defense exposure in portfolios at this time of heightened geopolitical risks throughout the world, say economists David Rosenberg and Marius Jongstra. Fundamentals are solid, with market-beating earnings growth penciled in, which makes valuations more attractive than they may appear at first glance, they argue in this column.

Back from purgatory, the 60-40 balanced portfolio looks right for the times

A new report from CIBC Capital Markets suggests it’s time to reconsider the 60-40 mix because it’s right for the times, reports Rob Carrick.

Brookfield is a great company, but it has a big flaw for investors

Brookfield Corp. is a great business success story. Too bad that it seems to go out of its way to confuse its investors, says Gordon Pape. Case in point: Brookfield has introduced a new tender offer that has shareholders wondering what to do. Here’s his advice.

Searching for bargains amid the stock stumble - and hints from past bear markets

The market has served up tricks to investors this fall. The S&P/TSX Composite Index fell by 15 per cent from its high in the spring of 2022. The stock market’s stumble prompted Norman Rothery to look for bargains and compare them to the ghosts of bear markets past. This revealed quite a basket of treats for investors to consider this year. (For an update on all his portfolios for dividend and value investors, click here.)

Why isn’t the busted bond market making headlines?

When the stock market ruptures, everybody knows it. They are noisy, all-consuming ordeals that leave financial and psychological scars for years to come. What is striking about the global rout in bonds, by comparison, is how calm it seems. Three years in and nobody seems to be freaking out. Tim Shufelt explains why.

U.S. ETF debuts set to break 2021 record as active-fund issues jump

Issuance of new exchange-traded funds in the U.S. marketplace is on track to hit a record high in 2023, as asset managers rush to launch actively managed funds in response to rising interest rates and market volatility, reports Reuters.

Others (for subscribers)

The most oversold and overbought stocks on the TSX

Monday’s analyst upgrades and downgrades

Globe Advisor

Six consumer discretionary stocks to consider despite the economic uncertainty

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Ask Globe Investor

Question: In the October issue of ROB Magazine, I read that Royal Bank of Canada’s profit 40 years ago “was an almost quaint $480-million; in 2022, it was $15.8-billion.” I’m curious to know: If a young person had purchased shares back then and reinvested the dividends, what would the total value of the investment be today? Assuming this was their retirement plan, would the investment have kept up with inflation?

Answer: I‘m always pounding the table about the importance of investing for the long-term, so I’m happy to answer this question. I think you’ll find the results quite impressive. Given the turmoil in markets lately, the numbers might even give you some comfort.

The following analysis is based on data from Bloomberg.

Let’s step into our time machine and assume an investor purchased 1,000 shares of Royal Bank RY-T on Dec. 30, 1983. The price at the time was $34.38 a share, so that’s a total investment of $34,380. True, that was a rather large chunk of change – a brand new Hyundai Pony retailed for about $6,000 at the time – but we’ll assume the investor didn’t put another dime into Royal Bank stock apart from reinvesting dividends every quarter.

Before we continue, it’s important to note that Royal Bank’s stock has split on a two-for-one basis three times since then – in 1990, 2000 and 2006. Because each split would have doubled the number of shares, the investor would have 8,000 shares today, even without reinvesting any dividends.

Fast-forward nearly 40 years, to Sept. 29, 2023. Royal Bank’s shares closed that day at $118.70. So, based on capital growth alone, excluding dividends, the initial investment of $34,380 would have grown to $949,600 (8,000 shares times $118.70). That works out to a return of about 2,662 per cent, or 8.7 per cent on a compound annual basis.

Pretty impressive, right? Now, let’s add the secret sauce: dividends.

Assuming all dividends were reinvested in additional Royal Bank shares, the initial investment would have grown at a compound annual rate of slightly more than 13 per cent. Today, it would be worth … wait for it … more than $4.5-million.

A few caveats are in order. First, the results are before income taxes, which would apply to dividends and capital gains in a non-registered account. Second, the numbers aren’t adjusted for inflation, which averaged about 2.48 per cent over the period, according to the Bank of Canada. But that’s a pittance next to the stock’s annualized return. Third, the vast majority of people probably aren’t going to hang on to a stock for 40 years.

Still, the results demonstrate the awesome power of compounding.

Most people don’t have access to a Bloomberg terminal to perform this sort of analysis. But you can do similar calculations for Toronto-Dominion Bank stock TD-T using the dividend reinvestment calculator on TD’s website.

To see how TD’s return stacked up, I entered the same starting date of Dec. 31, 1983, and the same initial amount of $34,380 and asked the calculator to determine the investment’s value as of Sept. 29, 2023. The answer was about $5.6-million – even better than Royal Bank’s performance.

You can do your own calculations for different amounts and holding periods. I think you’ll agree that the results validate the buy-and-hold approach and the wisdom of reinvesting dividends, which is important to remember when markets are in a funk.

--John Heinzl (E-mail your questions to

What’s up in the days ahead

Financial markets are bracing for what could be a momentous week, with a Federal Reserve meeting, U.S. employment data and earnings from technology heavyweight Apple Inc possibly setting the course for stocks and bonds the rest of the year, reports Reuters’ David Randall.

Click here to see the Globe Investor earnings and economic news calendar.

Video: Global bellwether companies to report earnings in this week’s Advisor Lookahead

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Compiled by Globe Investor Staff

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