An excellent column on the U.S.-based Visual Capitalist site points out five investment-worthy trends that have been accelerated by the pandemic. I want to talk about how investors can verify whether these are sustainable trends, generating solid long-term portfolio returns, or if they’ll disappear once everyone’s vaccinated.
The five trends are “Screen Life Takes Hold,” “The Big Consumer Shake-Up (eCommerce and touchless shopping),” “Peak Globalization,” “The Wealth Chasm (inequality)” and “The Flexible Workplace.”
Let’s focus on the last, work from home-oriented investment theme.
The author Nick Routley writes, “The impact is already being felt, with global commercial property investment volume falling by 48% in Q3 2020,” and adds, “Thousands of [Americans] are moving out of pricy urban areas, presumably because they are able to work remotely from a cheaper location.”
The biggest downside of dense urban centres, like Toronto, Montreal and Vancouver, is cost of living, but there are also benefits. Professional sports, the arts, high-quality restaurants, effective public transit (sometimes) are only a few. The risk for an investor in the ‘work from home forever’ theme is that people rush back into the big cities once the pandemic is contained.
The persistence of the flexible workplace trend and all the asset prices it benefits – technology stocks involving secure corporate network access, suburban home prices and the like – should be evident in the unit prices for office REITs.
A permanent switch towards working from home would clearly threaten large-scale owners of urban office space for rent. Changes in their unit prices are an effective gauge of the extent of the broader trend because, unlike suburban home prices, the office REIT prices reflect sentiment and information regarding future profit expectations – they are forward looking.
The S&P/TSX Office REIT index, after falling almost 50 per cent from February 20 to March 23 this year, has recently been showing signs of life. The index has climbed 27 per cent since the end of October in a potential sign that the worst-case scenario for the sector will not be realized.
Investors in companies benefitting from the move towards workplace flexibility should keep an eye on office REIT prices. Strength in the latter may provide a sign that the trend has been over-estimated while unit price weakness would support their investment thesis.
In general, investors looking to benefit from investment trends should find a real-time indicator to measure whether they remain on the right track to portfolio gains.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Loblaw Companies Ltd. (L-T) This is a great company, an industry leader, but hasn’t been a great stock lately, says Jennifer Dowty. A recovery in the share price may be a few quarters away, yet analysts see potential, with the average one-year target price suggesting returns of 25 per cent. Read Jennifer’s full profile of the stock here and why she thinks the risk/reward profile is looking attractive for long-term investors. (for subscribers)
Etsy Inc. (ETSY-Q) Along with a cluster of “stay at home” stocks like Zoom Video, Peloton and Shopify — so called because their businesses took off during the pandemic as people’s shopping and work habits changed — Etsy has seen its share price soar. More than 90% of Wall Street analysts rate the stock a buy. Individual investors, mutual fund managers and hedge fund traders alike have been scooping up its shares, which have risen more than 250% this year. That makes Etsy by far the best-performing stock in the S&P 500 stock index, to which it was added in September — a sign that it was now in the corporate big leagues. It all represents quite a turnaround for a company that had been producing ugly losses and once was a crusader for socially conscious capitalism. Matt Phillips and Gillian Friedman of The New York Times report. (for subscribers)
The ‘absurdly wide’ valuation spread between value and growth stocks holds lots of opportunity
Smart investors should start betting against a bubble in growth stocks, according to a widely followed money management group. And that’s partly because value stocks now look extraordinarily cheap on any metric. Ian McGugan reports. (for subscribers)
A new option for safely parking U.S. dollars and a 2.3% TFSA savings account
There’s new competition to offer a U.S.-dollar option to Canadians who want to safely park money and earn a modest return. And this same company is offering an unusually high interest rate on a high interest savings account that can be held in a TFSA. Rob Carrick reports. (for subscribers)
Getting mighty crowded - searching for market elbow room
After a tumultuous collapse and rebound through 2020′s pandemic shock, few major investment houses doubt that the broad sweep of fundamental drivers argues for outsize allocations to equity for the next 12 months. Vaccine-aided rebounds in economic activity, persistently low borrowing costs, still plentiful cash, strong fiscal supports and reduced political uncertainty all point that way. Now the worry is that everyone is leaning the same way - always a red flag about over-exhuberance or excessive pessimism. Mike Dolan of Reuters reports. (for subscribers)
Others (for subscribers)
Wednesday’s Insider Report: Director unloads over $12-million from this dividend stock
Tuesday’s Insider Report: Company leaders complete million dollar trades in these three stocks
The Contra Guys: Why the outlook for investors in SSR Mining looks bright
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Ask Globe Investor
Question: When is the last day I can sell a stock to claim a capital loss for 2020?
Answer: You must sell a stock no later than Dec. 29 in order to claim a capital loss for the current tax year. That’s because a sale on Dec. 29 will settle on Dec. 31 – the last day of 2020. Capital losses must first be used to offset capital gains in the current year. Any remaining capital losses can be carried back up to three years, or forward indefinitely, to offset gains in those years.
What’s up in the days ahead
Tim Shufelt takes a look at some TSX names that could be ripe for tax-loss selling this month.
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Compiled by Globe Investor Staff