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

BofA Securities U.S. quantitative strategist Savita Subramanian established her forecast for the S&P 500 for 2022, only 2 per cent higher than current levels,

“S&P 500 EPS is up 50% from the COVID trough, and the S&P 500 has doubled. We mark our models to market, but downside risks remain. Sentiment is all but euphoric with our Sell Side Indicator closer to a sell signal than at any point since 2007. Wage/input cost inflation and supply chain shifts are starting to weigh on margins. Interest rate risk is at a record high … Every 10 basis pointincrease in the discount rate [the 10-year Treasury yield] equates to a 4% decline [in equities], all else equal. And valuations leave no margin for error … Our 5-factor framework applied to next year yields muted returns. Our EPS Revisions Model is most bullish (+11% ann. rets), but the (leading) Management Guidance Ratio just dropped. Our Fair Value Model is most tepid (-3.5%) … We’re bullish on the economy; why not stocks? It was the economy. Now it’s the Fed. We’re bullish on the economy; why not stocks? The economy and earnings were the critical drivers of equities pre-GFC; then central banks became the white knight. Pre-GFC, earnings explained 50% of S&P 500 returns vs. 17% post-crisis… If taper means no upside to the S&P 500, tightening would be worse .”

“@SBarlow_ROB B of A’s 2022 target for SPX only 2% above current levels” – (research excerpt) Twitter


BMO chief investment strategist Brian Belski notes that his “consistent growth” Canadian stock portfolio is handily beating the TSX,

“Our Consistent Growth screen outperformed the S&P/TSX in August, gaining a solid 3% compared to the 1.6% total return for the TSX. Furthermore, our Consistent Growth screen saw nine new names added to the screen this month and no names removed. Meanwhile, our Dividend Growth screen underperformed, gaining just 1% on a total return basis… To implement our consistent growth strategy, we screen the S&P/TSX monthly based on the following parameters: Five-year earnings growth volatility lower than the S&P/TSX Composite, Positive one-year change in return on common equity, and FY1 [current fiscal year] EPS growth higher that the S&P/TSX Composite.”

The stocks on the list, in alphabetical order, are ATS Automation Tooling Systems Inc., Aritzia Inc., Artis REIT, BMO, Bank of Nova Scotia, Boyd Group Services Inc., CIBC, Descartes Systems Group Inc., Equitable Group Inc., First Capital REIT, Franco-Nevada Corp., Finning International Inc., goeasy Ltd., Home Capital Group Inc., Inter Pipeline Ltd., Intertape Polymer Group Inc., Laurentian Bank, Linamar Corp., Magna International Inc., Martinrea International Inc., National Bank of Canada, New Gold Inc., Power Corp., Richelieu Hardware Ltd., Royal Bank, Shaw Communications Inc., Smartcentres REIT, TD Bank, TFI International Inc., Toromont Industries Ltd., Wheaton Precious Metals Corp. and WSP Global Inc.

" @SBarlow_ROB BMO’s ‘consistent growth’ portfolio is handily beating the TSX” – (full table) Twitter


I spent a couple hours reading about renewable natural gas (RNG) Tuesday, which I knew nothing about previously. The process involves collecting waste gasses from landfills and livestock and converting them to usable fuel. An in-depth report from BofA listed a few companies involved in the trend as subjects for further research for investors,

“In utilities, we continue to see UGI Corp. (UGI) and South Jersey (SJI) as the best ways to capture potential upside from RNG expansion. UGI has announced multiple RNG projects to date, and has plans to invest roughly $500M+ in RNG over the next five years. Additionally, the acquisition of GHI Energy in mid-2020 (a modest investment) gives UGI access to the [California subsidized government markets] LC … we believe management is being conservative in their assumptions on return contributions of the credits. Advancement of RNG for SJI continues through its partnership/partial ownership of REV LNG. SJI is developing eight projects at dairy farms for in-service in 2022. We could see a significant step up in earnings and cash flows in ‘22/’23, especially as more targets are reached”

“@SBarlow_ROB Looks like I need to add Renewable Natural Gas to the list of things I need to read more about” – (B of A research excerpt) Twitter


Diversion: “Everything We’ve Seen in The Matrix: Resurrections’ 180,000 Teasers (So Far)” – Gizmodo

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