Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO Capital Markets’ North American Income list of dividend paying ideas has easily outperformed the S&P/TSX Dividend Aristocrats since inception. The five-year average annual return is 9.4 per cent.
Current members are AbbVie Inc. (ABBV-N), BCE Inc. (BCE-T), Brookfield Infrastructure Partners (BIP.UN-T), Citigroup (C-N), Canadian Natural Resources Ltd. (CNQ-T), Emera Inc. (EMA-T), Entergy Corp. (ETR-N), Barrick Gold Corp. (ABX-T), Intact Financial Corp. (IFC-T), National Bank of Canada (NA-T), NiSource Inc. (NI-N), Prologis Inc. (PLD-N), Pembina Pipeline Income Fund (PPL-T), Rogers Communications Inc. (RCI.B-T), and Thomson Reuters Corp. (TRI-T).
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Citi global commodity strategist Max Layton is tactically bullish on iron ore, copper and aluminum prices but only until Chinese New Year. Overall, he is neutral to bearish on the materials complex for 2024,
“We are neutral to bearish on ENERGY (both OIL and GAS) for 2024, as the recent moves by OPEC+ are a decent stop gap, but not enough to stop a gradual deterioration in the balances assuming our base case of substantially weakening mature market demand growth, and solid non-OPEC supply growth… We are tactically bullish iron ore, copper and aluminum between now and Chinese New Year since our base case is for further China easing measures to support risk assets exposed to China over the next 3 months … As 2024 wears on, we expect a substantial deterioration in mature/ developed/industrial economy growth, as we agree with our economists that rate hikes have not delivered their biggest hit to growth yet, with rising debt service burdens (as debt matures) and the lagged impact of tightening financial conditions set to drive developed markets into recession Specifically, for each 20 per cent (or $30tr) of mature economy household, non-financial corporate and government debt (of $150tr) that matures, interest costs rise by 2.5% of mature economy GDP.”
Citi is bullish gold with a target of US$2150 and bearish on lithium until mines begin to close.
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Goldman Sachs U.S. equity strategist David Kostin made the interesting observation that U.S. stocks that are favoured by both hedge funds and long-only mutual funds tend to outperform,
“Empirical data show that stocks that are the most popular among both hedge funds and mutual funds have historically performed well. Using 41 quarters of hedge fund and mutual fund positioning data, we divided stocks into quintiles of hedge fund ownership (measured by the number hedge fund owners) and mutual fund ownership (measured by the overweight of the average fund relative to its benchmark). Stocks ranking in the top quintile of ownership for both fund types have typically posted strong performance during the year following the observation. Stocks that are well-owned by just one of the fund types also tend to perform well, even when the other fund type has light ownership… There are 10 shared favorites this quarter: FI [Fiserve Inc.], HUM Humana Inc.], KVUE [Kenvue Inc.], MA [Mastercard Inc.], PGR [Progressive Corp.], PXD [Pioneer Natural Resources Co.], UBER, UNH [Unitedhealth Group Inc.], Visa, VRT [Vertiv Holdings LLC]. “Shared favorites” – stocks that are constituents of both fund types’ popular position baskets – have beaten the S&P 500 in 60 per cent of months since 2013 (+1 pp annualized outperformance)”
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Diversion: “RIP Canadian rock legend Myles Goodwyn. The leader of April Wine was 75″ – A Journal Of Musical Things
Scott Barlow