Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities commodity strategist Michael Widmer is raising price forecasts on a host of commodities,
“Having been bullish most mined commodities in 2020, we expect prices to rally further from here on 3 macro themes 1) stimulus, 2) reflation and 3) rebound of the global economy. Hence, we lift price forecasts especially for copper, which we see averaging $9,500/t ($4.31/lb) in 4Q21 [up 15 per cent from previous estimate, current price US$8009/t] , with the market likely flipping into a deficit, as inventories are low. Similarly, we are reinforcing our view that iron ore should stay higher for longer so prices are set to average $135/t this year, compared to our previous expectation of $100/t; that said, 2021 will likely be split into two halves, with a stronger 1H likely followed by a weaker end to the year. Meanwhile, as the economy rebounds and nominal rates have violently pushed higher, gold has struggled. These headwinds are unlikely to abate until 1) inflations moves higher or 2) the Fed ultimately signals a cap to rates. We still see the yellow metal rally back above $2,000/oz.”
“@SBarlow_ROB BoA now even more bullish on copper, iron ore” – (research excerpt) Twitter
U.S. small cap stocks have been on fire lately, outperforming the S&P 500 by 21 per cent and the S&P/TSX Composite’s US$ return by 17 per cent.
Citi analyst Scott Chronert’s reshuffling of his top picks list in the small and mid cap U.S. stock universe sector is thus more relevant,
“We are adding Upwork (UPWK), Rackspace Technology (RXT) and Canadian Solar (CSIQ) to our SMID Focus List. One ongoing stock selection theme of ours has emphasized a focus on companies augmenting/optimizing their business models to a “new normal”. The additions to this list are meant to provide exposure to post pandemic trends that are set to stay for the longer term. To make room for the additions, we remove Chart Industries (GTLS), Change Healthcare (CHNG) and Bottomline Technologies (EPAY) from the Focus List. GTLS and EPAY remain Buy-rated by Citi; CHNG is Neutral-rated.”
There’s a link to the full table of picks below. Some of the better-known names include Oshkosh, Pulte Group, Polaris Inc., Logitech International, Dropbox, Jabil and H.B. Fuller Company
“@SBarlow_ROB New names added to Citi’s top picks for U.S. small and mid-cap” – (table) Twitter
BMO economists detailed the TSX’s “Road to Recovery,”
“The TSX pushed above pre-COVID levels for the first time last week (to record territory) … it took Canadian stocks almost 11 months to reclaim late February 2020 levels, or roughly twice as long as the S&P 500… part of this reflects the fact that Canada doesn’t carry a lot of weight in sectors that were really working early in the pandemic. While the TSX is trailing the S&P 500 by roughly 12 ppts versus a year ago, performance over the past three months has been almost perfectly in-line. This reflects better momentum in two heavyweight (for Canada) sectors. Banks have benefited from vaccine optimism and a steeper yield curve. At the same time, a rally in oil prices has lifted energy stocks again. The reality is that the TSX really can’t sustain any kind of momentum unless these two sectors are working—and they are doing so right now.”
BofA’s commodity forecast hikes noted above, if accurate, won’t hurt the TSX’s relative performance either.
“@SBarlow_ROB BMO details the TSX’s Road to Recovery” – (research excerpt) Twitter
Also from Citi, an interest update on green hydrogen,
“Siemens Energy and Siemens Gamesa have announced via Reuters that they are collaborating on producing an offshore wind turbine that produces green hydrogen inside the turbine… we see the announcement as supportive for sentiment for both, and reiterate our Buy ratings on either name. We would expect Siemens Energy to relatively react more to the announcement … The project is reportedly “supported by the German government,” though again details on what this means remain unknown … The new product would lead to a quite different approach to producing green hydrogen: instead of transporting electricity onshore via a power cable for producing hydrogen on the coast, the new product would instead require directly transporting hydrogen onshore.”
“@SBarlow_ROB C: “Siemens Energy and Siemens Gamesa have announced via Reuters that they are collaborating on producing an offshore wind turbine that produces green hydrogen inside the turbine.” – (research excerpt) Twitter
Newsletter: “Big tech no longer stock market darlings” – Globe Investor
Diversion: “RNA Vaccines And Their Lipids” – Sciencemg.org
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