Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank analyst Himanshu Gupta sees another strong year ahead for industrial REITs,
“As of 1st January 2020, Industrial REITs were trading at 2x AFFO [adjusted funds from operations] multiple premium to CDN REITs sector. In 2020, Industrial REITs posted total return of 14.2% (best performing sub-sector) vs -11.4% for CDN REIT sector in 2020. Despite all the outperformance, as of today, Industrial REITs are again trading at the same 2x premium to REITs sector (i.e., 19.2x 2021 AFFO vs REITs sector at 17.2x). We estimate Industrial REITs are likely to generate the highest y/y AFFOPU [AFFO per unit] growth across real estate sectors in 2020 and 2021 (i.e., 2020 growth of +5.8% y/y vs REIT sector average of -3.4% & 2021 growth of +11.3% vs REIT sector +7.4%). We see the current set-up in 2021 to be similar to 2020 for Industrial REITs to outperform the index”
Mr. Gupta has sector outperform rating on Dream Industrial REIT (12-month target $14), Granite REIT ($87), and Summit Industrial REIT ($14.25)
“@SBarlow_ROB Scotia sees another strong year ahead for industrial REITs” – (research excerpt) Twitter
Goldman Sachs’ prominent U.S. equity strategist David Kostin highlights stocks where he believes current price understate future earnings growth,
“As 4Q earnings season begins, consensus expects S&P 500 firms will report a year/yea rEPS decline of 11%.Forecasts vary widely acrosssectors, with cyclicals expected to post the largest declines. Risks to 4Q EPS seem tilted to the upside, as our economists expect GDP growth improved relative to3Q, when S&P 500 EPS fell by 8%... We recently raised our top-down S&P 500 EPS forecasts following unified Democratic control of DC …We identify 22 stock laggards where consensus expects 2021 EPS to surpass pre-pandemic 2019 levels but where the share price has yet to surpass its pre-pandemic level on Feb.19, 2020”
The companies on the list that are most likely of interest for Canadian investors include DISH Network Corp., Leidos Holdings Inc., Vertex Pharmaceuticals Inc., Kimberley-Clark Corp., Hershey Co., Gilead Sciences Inc. Moody’s Corp., Campbell Soup Co. and NortonLifeLock Inc.
“SBarlow_ROB GS: “Stocks with prices below Feb. 19th2020 level, 2021 EPS estimates above pre-pandemic 2019 EPS, and positive EPS revisions since Feb. 19th2020”' – (full table) Twitter
Citi analyst Ephrem Ravi sees more upside for commodity prices,
“[We] look at the commodity prices in inflation adjusted terms. Broadly speaking, most commodities are trading well below their previous peaks, while many of them are higher than their long term averages. Copper price is around 30% lower than the previous peak (inflation-adjusted) though has surpassed long-term averages. In contrast, iron ore price is closer to its previous peak which indicates a higher risk of a pullback relative to other commodities. Likewise, gold is trading around its peak and witnessed a pullback from $2,000+ levels late last year… commodities tend to perform well in an inflationary environment … Now the question is whether commodity prices beat inflation and have increased in real terms. Among key commodities, iron ore has given 5.3% annualized returns followed by silver returns of 2.9%, gold at 2.6% and copper at 1.5%, over the last 30 years… Welcome to 2021, a year in which we are bullish on growth cyclically, and a year that should precede a structural, decarbonization-led, demand-driven bull market in copper and a supply-driven bull market in aluminium. We are most bullish on palladium (+25% to $3,000/oz) "
“@SBarlow_ROB Citi: “Copper price is around 30% lower than the previous peak (inflation-adjusted)”' – (research excerpt) Twitter
Diversion: “Bumble Reactivates Political Filter That Women Used to Catfish and Report Capitol Rioters” – Gizmodo
Tweet of the Day:
🌎 Global #copper stockpiles tracked by leading exchanges have collapsed to the lowest level since 2008, adding to signs of increased market tightness - Bloomberg— Christophe Barraud🛢 (@C_Barraud) January 18, 2021
*Worldwide inventories of the key base metal have contracted by more than 60% since March. pic.twitter.com/1OMgVakU7N
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