Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital markets analyst Bish Koziol made a large number of changes – six – in the firm’s quantitatively driven list of top 40 Canadian stocks,
“Our Canada Overall Top 40 List rose 0.6% last month, versus the S&P/TSX Composite loss of 2.4%. Industrials and Information Technology led the advance for the portfolio. Five of the six deletions from the model portfolio this month realized worsening Growth scores. All of the sells had lower overall [proprietary] ranks vs. a month ago …Momentum led all strategies last month, gaining 0.9%”
Out are FirstService Corp., WSP Global Inc., Descartes Systems Group Inc., Dollarama Inc., Toronto-Dominion Bank and Restaurant Brands International Inc.. These were replaced by Equitable Group Inc., Canadian Natural Resources Ltd., Enghouse Systems Ltd., Cogeco Communications Inc., Linamar Corp and Magna International Inc.
The remaining companies in the list are Pason Systems, Imperial Oil, CES Energy Solutions, Prairiesky Royalty, Keyera Corp., Stella Jones Inc., Labrador Iron Ore Royalty, CCL Industries, Richelieu Hardware, Thomson Reuters, TFI International, Ritchie Brothers Auctioneers, Toromont Industries, CN Railway Co., Stantec inc., Waste Connections Inc., Metro Inc., North West Company, Empire Co. Ltd., Loblaw Co.s, National Bank, Great-West Lifeco, Bank of Montreal, TMX Group, Intact Financial Corp., CI Financial., Bank of Nova Scotia, Open Text Corp., Celestica Inc., CGI Inc., Rogers Communications, Quebecor Inc. and Northland Power.
“RBC’s QuaDS Score - Canada Overall Top 40″ – (table) Twitter
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Scotiabank REIT analyst Mario Saric discussed the chilling effects of Nordstrom store closures on the sector,
“Nordstrom announced it is exiting Canada, which includes six full-sized stores, seven off-price Nordstrom Racks, and online operations (Nordstrom.ca). ... Five of the six Nordstroms are in Cadillac Fairview malls and one is an Oxford Properties’ Yorkdale mall (all in Canada’s major urban markets), while only one Nordstrom Rack is owned by a REIT in our universe of coverage (Nordstrom Rack occupies ~40,000sf of First Capital’s 85,000sf of commercial GLA at One Bloor East in Toronto) … We note Retail REITs had a relatively strong 2022 with the more “triple-net-lease” Retail REITs viewed as safety during the pandemic, with occupancy for many sitting at or near all-time high. We believe CRR [Crombie Real Estate Investment Trust] provides an attractive mix of offence and defence, while we think RioCan’s (REI.UN-T) portfolio quality improvement over time is under-appreciated … We are leaving our estimates intact at this stage. Not great for broader retail market sentiment. The immediate financial implications for our universe are negligible, as noted. Broadly speaking though, the announcement comes quickly on the back of the possible Canadian Bed, Bath, and Beyond departure and may have some thinking back to other U.S. retailer departures (i.e., Target) following a surprisingly muted departure list during the pandemic. The announcement is likely to spur investor questions re: “other watchlist tenants”” .
“Nordstrom departure not great for mall REIT sentiment but negligible financial damage (Scotiabank)” – (research excerpt) Twitter
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Morgan Stanley global strategist Andrew Sheets described why the next two weeks are important for the U.S. economy’s effects on markets,
“Recent data have been hot, driving yields higher and leading our economists to raise expectations for near-term Fed rate hikes and reduce expected rate cuts. But this isn’t a stronger growth story. We forecast US GDP growth in 2023 at just 0.4 per cent (4Q/4Q), up from 0.3 per cent previously. Reflexivity matters, as tighter expected policy means that expected growth comes up short of where it would be otherwise. The US narrative is about to face a significant test: Recent data are a standoff between weakness in traditional leading indicators like PMI new orders, the yield curve or the Conference Board LEI, and strength in other series (payrolls, retail sales). It’s possible that these leading indicators are too downbeat. But January data could also have been flattered by large seasonal adjustments and not be as strong as advertised. We may know soon. The next two weeks bring US employment and retail sales numbers, where seasonal adjustments reverse. Good readings could confirm a strong data narrative, but disappointments would mean the weaker readings on those leading indicators suddenly loom large”.
Good summary from MS’s Sheets – (research excerpt) Twitter
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Diversion: “Do masks work? It’s a question of physics, biology, and behavior” – ArsTechnica
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