Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Canadian Imperial Bank of Commerce is among the global stocks moving into the top decile in terms of attractiveness, according to Citi strategist Chris Montagu.
His screening technique is as follows,
“We measure relative Value using one of two metrics. The primary metric is the ratio of the stock’s P/E to its theoretical fair value, which we estimate using a cross sectional model. If we cannot calculate such a value due to missing data then we use the ratio of the stock’s P/B to its theoretical value instead. Our composite Momentum score consists of three distinct elements: price momentum, abnormal trading volume (stocks which are currently more heavily traded than normal have a more sustainable source of momentum that is still building) and earnings/cashflow revisions (the change in the outlook for earnings and cashflow). Each of these three Momentum measures is equally weighted to determine the composite Momentum score.”
There are nine stocks outside of CIBC moving into the top decile – Nestle, Bristol Myers Squibb (disclose: a long-term holding for me personally), Novo Nordisk, Nintendo, Lafargeholcim, Fresenius, RWE, Osaka Gas and Hapoalim B M Ltd.
“@SBarlow_ROB C's methodology for gauging attractiveness” – (research excerpt) Twitter
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Raymond James real estate analyst Johann Rodrigues is concerned about tenants skipping rent in the coming months but believes price weakness in the sector could set up a “once-in-a-decade opportunity” for investors (my emphasis),
“We have grown increasingly concerned that come April 1, a high percentage of multi-family and retail tenants will request a deferral or simply not pay rent … we believe the Street is underestimating how many tenants will not pay their April rent … the government is rolling out assistance programs (though at this point, nothing specific with respect to rent payments), we believe there will be many who fall through the cracks. With the government banning evictions, landlords have lost the stick to convince tenants to pay … To be clear, long-term, we are still extremely bullish on the multi-family REITs and selectively bullish on the retail REITs - we simply believe this situation will provide a better entry point and urge investors to accumulate REIT units should they drift lower … We believe this is a once-in-a-decade opportunity… The chance to buy [Ontario multi-family REITs] at doubledigit NAV discounts should not be missed, in our view.”
“@SBarlow_ROB Rayjay on Cdn REITs: "Is Paying Rent About to Become an April Fool's Joke?" – (research excerpt) Twitter
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BofA Securities’ quantitiative strategist Savita Subramanian sees a growing structural aversion to equities with positive implications for dividend-paying stocks,
“While sentiment is currently between the “Buy” and “Sell” thresholds, both thresholds have been falling in recent years after a 10-year period of sub-60% allocations to stocks. We believe this downshift in appetite for equities has been driven by a panoply of issues, including demographics, low growth/scarcity of yield, retirement funds having been decimated (first by the Tech Bubble then by GFC) and generally a “hot stove” mentality about stocks among all age cohorts post-GFC. In our view, this behavioral bias against equities presents an opportunity where US dividend growth stocks could be superior to fixed income. The massive economic disruption brought on by COVID-19 questions the sustainability of dividends, but even in a draconian scenario in which every troubled industry cuts dividends to zero, this would only shave ~9bps off the S&P 500 div yield.’
“@SBarlow_ROB Subramanian: "behavioral bias against equities presents an opportunity where US dividend growth stocks could be superior to fixed income" – (research excerpt) Twitter
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Column: “This index provides investor guidance where earnings forecasts have failed” – Barlow, Inside the Market
Diversion: “Why Time Has Slowed” – Housel, Collaborative Fund
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