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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BofA Securities U.S. quantitative strategist Savita Subramanian – one of the sell-side pundits I follow most closely – has released her year-ahead 2021 investor guide (my emphasis),

“Our 2021 year-end target for the S&P 500 is 3800 (+6% upside). The recovery is intact and the world likely re-opens in the 2H, but a lot of optimism is priced in already on vaccine/recovery. Vaccine execution risk, delayed fiscal stimulus and longer lockdowns are risks. …a few themes support stocks: the S&P 500 dividend yield is 3x the 10-year yield, and S&P 500 dividends are set to increase in 2021… Our top two sectors are unapologetically cyclical and value-focused: Financials and Energy (which we double-upgrade from underweight). Technology and Health Care offer neglect and growth at a reasonable price. We are underweight Staples, Real Estate and Comm.”

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Ms. Subramanian explained her double-upgrade of U.S. energy stocks in point form thusly,

“Deep value / cyclical inflation beneficiary. ESG energy purge behind us; EPA [Environmental Protection Agency] policies matter less than supply/demand. FCF [free cash flow] focus over production focus. Highest dividend yield of all 11 sectors, but may be at risk if oil prices remain weak. "

“@SBarlow_ROB BoA 2021 U.S. investment guide: “Our top two sectors are unapologetically cyclical and value-focused: Financials and Energy” – (research excerpt) Twitter

***

I wrote about the financial danger inflation presents to retirement on Monday, but Citi published a report arguing there’s no price pressure on the horizon,

“#1: Base effects [do not equal] long-term reflation. Base effects [low prices this year because of the pandemic] will be present in core price inflation due to the distortionary effects on measures of inflation from the lockdowns and the persistent economic weakness … Our global growth forecast implies that the level of GDP will only be back at where it was pre-COVID-19 in mid-2021. The output gap is reflected in persistent labor market weakness, which is a headwind to inflation, but our estimations show that it is more important for slack sensitive inflation that businesses are lacking pricing power … Five factors suggest inflationary pressure could return, but we believe these drivers relate to longer-term inflation prospects than those of 2021.”

“@SBarlow_ROB Citi says don’t worry about inflation any time soon,” – (research excerpt) Twitter

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***

There’s been a lot of bullish reports on auto equipment providers over the last week for reasons I don’t fully understand. CIBC contributed to the trend with a bullish report on Linamar Corp. this morning,

“We are upgrading Linamar from Neutral to Outperformer and raising our price target from $56 to $71. We believe Linamar has traded at a discount, reflecting concerns around the impact of electric vehicle adoption on its earnings. Based on our analysis using Bloomberg New Energy Finance’s (BNEF’s) 20- year EV forecast, we see Linamar’s earnings CAGR [compound annual growth rate] over the next 10-20 years to be in line with its historical trend rate. As such, we raise our target multiples to 6x EV/EBITDA and 11x P/E (up from 5x and 9x, respectively) … we argue if a proven management team is given proper time and resources, it significantly increases the probability that team can pivot its company’s business and adjust to changes in industry trends. That is what we have seen Linamar do over the past several years as it prepares for the global adoption of electric vehicles”

“@SBarlow_ROB CIBC bullish on Linamar” – (research excerpt) Twitter

“@SBarlow_ROB BoA: EVs require more robots - 20% CAGR ahead for robotics providers” - (research excerpt, November 23) Twitter

“Wednesday’s analyst upgrades and downgrades” - Globe Investor

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***

Diversion: “900 years ago today a tragedy took place which would dramatically alter the course of British history” – Medieval Manuscript blog

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