Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Meny Grauman sees a buying opportunity in Canadian banks,
“Canadian bank stocks have materially underperformed their U.S. peers over the past few months. A move that is not fully explained by fundamentals, creating what we view as an attractive buying opportunity. Over the past three months the gap in relative performance is 948 bps, with 624 bps coming over the past month as U.S. banks rallied strongly on the back of the most recent Fed announcement. From a valuation perspective the Canadian DSIBs are now trading at 10.7x 2022 consensus EPS versus 13.6x times for the large money-center U.S. banks, a discount of 21% ... Canadian banks delivered another strong quarter this summer (on average EPS was 11% better than consensus in Q3), that in many ways was more impressive than what the large US banks reported. Canadian results continue to be underpinned by a still booming mortgage market and a robust recovery in commercial loan growth even as US banks continue to see pressure on loan balances … The Rate Picture is Positive on Both Sides of the Border”
The analyst has “outperform” ratings on Bank of Montreal, Canadian Imperial Bank of Commerce, Canadian Western Bank, Royal Bank of Canada and National Bank of Canada .
“@SBarlow_ROB Scotia sees buying opportunity in Canadian banks” – (research excerpt) Twitter
The research team at Credit Suisse updated their list of top Canadian stock picks. The top four picks are Intact Financial Corp., TransAlta Corp., Suncor Energy Inc. and Newmont Mining Corp. Also included are Royal Bank of Canada, Sun Life Financial Inc., Altagas Ltd., Northland Power Inc., Barrick Gold Corp. and Endeavour Mining Corp.
Teck Resources Ltd. is a top U.S. stock pick.
“@SBarlow_ROB Credit Suisse: Top Cdn stock ideas” – (table) Twitter
Citi global strategist Robert Buckland pays tribute to colleague Tobias Levkovich and forecasts a much more difficult investment environment,
“We mourn the passing of our dear colleague and offer deepest sympathies to his beloved family. In Tobias’ honour, we rename his flagship US Panic/Euphoria indicator as the Levkovich index … The bottom-up consensus expects MSCI AC [All Country] World EPS to grow by 48% in 2021 and 8% in 2022. This is now in line with our top-down projections, suggesting that the supportive wave of net profit upgrades is likely to end. Forecast risks are probably to the downside, with China-related stocks looking most vulnerable… The MSCI AC World currently trades on 18x 12m fwd EPS, compared to the 14x long run median. Of the major markets, the US looks most expensive on 21x and the UK cheapest on 12x. The valuation gap between the MSCI AC World Growth (PE 27x) and Value (PE 13x) indices remains wide… Our key themes are: higher bond yields, China slowdown, and ESG. Amongst regions we now Overweight the UK and Japan. Amongst global sectors we are Overweight Financials, Industrials and Health Care. We recently downgraded the US and global IT to Neutral given these higher-rated equities look vulnerable to rising real yields.”
I spoke with Mr. Levkovich a number of times. A great strategist by all accounts who was also shockingly generous with his time and attention.
“@SBarlow_ROB Citi’s Buckland sees EPS momentum fading” – (research excerpt) Twitter
Diversion: “The Grid Isn’t Ready for the Renewable Revolution” – Wired
Tweet of the Day:
I had missed this, but it looks from the global manufacturing PMI like the worsening of delivery delays might have peaked. pic.twitter.com/kIJ0DL6IfD— Mike Bird (@Birdyword) October 6, 2021
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