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Scotiabank quantitative strategist Simone Arel highlighted renewed foreign interest in Canadian equities in a research report this week, noting that inflows for the past four months poured in at the fastest annualized pace since 2016.

This can only be viewed as a bullish sign for the domestic market, as global investors look to benefit from Canada’s plethora of cyclical stocks with their links to recovering global growth.

In the chart accompanying the research report (re-posted on social media here), the trailing 12-month net flow of investment into Canada has only just turned positive. Ms. Arel believes foreign investment will continue to climb for a multi-year period, similar to the period between November 2015 and the fourth quarter of 2017. Importantly, 2016 was the last time the TSX outperformed the S&P 500 on a calendar-year basis.

Trailing 12-month foreign investment in Canada bottomed at the end of October 2020. I took a look at the top-performing TSX stocks since that point. There is, of course, no guarantee that the best performing stocks were the ones foreign buyers were acquiring. We can assume a degree of correlation in many cases, however - at least in terms of sectors - because investment funds tend to gravitate towards industries with the most price momentum.

Energy stocks dominate the list of top performers from the end of October until now. Of the top 20 stocks, nine are oil and gas related - 10 if we include uranium producer Denison Mines. Crescent Point Energy Corp., Enerplus Corp., MEG Energy Corp., Vermilion Energy Inc., Whitecap Resources Inc., Turquoise Hill Resources Ltd., Cenovus Energy Inc. and Nexgen Energy Ltd. all more than doubled for the period.

Paper and forest company Interfor Corp was also among the best stocks to own, rising 118 per cent as homebuilding activity exploded on both sides of the border.

Again, I’m not suggesting that foreign buyers were responsible for the rallies in all these cases. But as long as the global economic recovery boosts oil demand and housing markets, and foreign buyers look to Canada for economically-sensitive stocks, there is a very good chance for these market sectors to outperform.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Magna International Inc. (MG-T) For investors leery of the erratic electric-vehicle space, there’s a back door. The Canadian auto-parts giant is emerging as a key supplier in an increasingly electrified world. In addition, Magna’s stock also serves as a cyclical recovery play, as the auto industry storms back from the collapse in sales brought on by the pandemic. As Tim Shufelt reports, some say the company is “in an absolute sweet spot.”

Aegon N.V. (AEG-N) The Contra the Heard newsletter has owned this dividend-paying Dutch-based multinational insurance company, best known for its Transamerica brand, since 2014. During that time, the stock has done little. But the company now has a new CEO who has already begun cutting costs, deleveraging the balance sheet and streamlining operations. Philip MacKellar, a writer for the newsletter, explains why the stock could soon be on the upswing.

The Rundown

Short sales on the TSX: What bearish investors are betting against

Short interest for the TSX remains well below levels of six months ago, but investors have raised their bets against bitcoin ETFs. Larry MacDonald reviews all the latest trends in short positions in Canada.

A surprise risk if you buy an ETF scoring low on the popularity scale

What’s the investment risk involved in owning a well-performing ETF that lacks much in the way of assets under management? Rob Carrick has some answers.

Faux meat growth doubts give market food for thought on Impossible Foods

A cooling of the U.S. stock market’s taste for plant-based meat makers has raised doubts among some investors and analysts about Impossible Foods’ plans to achieve a $10 billion flotation. Impossible is seeking to go public through an initial public offering or via a merger with a blank-check company within the next 12 months. The market value of larger competitor Beyond Meat, however, has sunk from a peak of $14 billion to closer to $8.5 billion and is predicted by several brokerages to fall further.

Dogecoin cryptocurrency slumps after hashtag-fueled surge to record high

Meme-based cryptocurrency Dogecoin fell on Tuesday after hitting an all-time high in a wild session that saw supporters of the token once considered a parody use hashtags to fuel a rally until it lost steam. Dogecoin’s rise came during a surge in online trading of stocks and crypto by retail investors, stuck at home with extra cash because of the COVID-19 pandemic. But the coin has not seen much growth in usage for payments or in commerce.

Supercycle or China cycle? Funds wait for Dr. Copper’s call

Goldman Sachs last week doubled down on its supercycle shout, forecasting copper would average $15,000 per tonne in 2025 in a headline-grabbing April 13 research note titled “Copper is the new oil”. Investors appear to remain highly wary, however, and perhaps for good reason. While a supercycle may be coming, copper is right now still heavily reliant on the Chinese cycle - and on that front, there’s reason for concern. Andy Home of Reuters has this analysis on what may come next for the red metal.

Politics cast a long shadow over Russian stocks

Foreign investors’ relatively high exposure to Russian equities and the sector’s heavy focus on energy could add to pressure on the country’s stocks, which have struggled to weather recent political storms. Karin Strohecker of Reuters reports.

Others (for subscribers)

Number Cruncher: Six under-the-radar companies that could benefit from Biden’s infrastructure plan

Number Cruncher: These 10 U.S. large-cap stocks demonstrate consistent, solid profitability

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: CEO sells nearly $1-million in this consumer stock

Tuesday’s Insider Report: Director invests over $500,000 in this stock on the cusp of a bullish ‘golden cross’

Globe Advisor

Why there’s greater urgency in calls for changes to the RRIF rules

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What’s up in the days ahead

Big U.S. banks surpassed analysts’ expectations in reporting first-quarter results this month. What does that say about the outlook for Canadian financials? David Berman will have some answers.

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

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Compiled by Globe Investor Staff

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