Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Wells Fargo U.S. equity strategist Christopher Harvey published That Was Ugly — Now Let’s Put Money to Work, arguing that a number of stocks are now on sale,
“It is time to put new money to work. The 10% correction we saw coming in 2022 occurred intraday Monday, taking froth out of the market and increasing our expected market return to 7% based on our year-end SPX price target of 4715. What to Buy. The sell-off has improved the risk/reward for many stocks, and with a peak in Omicron cases we think our High Covid Beta portfolio is a good starting point. The portfolio has pulled back 7% from its recent high, but the group is seeing positive EPS revisions while new US Covid cases are declining. Within the portfolio, VIAB,BBWI, GPS, MGM, FANG and BA are all Overweight-rated names by our analysts … Heading into 2022 we called for a 10% pullback in equities and for the ‘bend-not-break’ mentality to crack. With Monday’s intraday slide we checked bothboxes… Small caps outperformed large caps on Monday. We sometimes see this when hedgefunds are at or close to the end of an aggressive de-grossing cycle. IWMs (Russell 2000ETFs) are often used for short exposure, and small-cap outperformance during times ofstress implies aggressive de-grossing.”
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Credit Suisse is bullish on Canadian energy stocks,
“Our Global Equity Strategy Team published thoughts on positioning in relation to the rising price of crude oil and energy weights as per Global Equity Strategy: The Pain Threshold: Be At Least Benchmark Energy or Overweight If You Don’t Own the Oil Proxies. … In terms of Energy sector and selected Albertan exposure, we highlight the following Outperform rated stocks: (a) Energy: Cenovus Energy Inc. (CVE) and Suncor Energy Inc. (SU); (b) Energy Infrastructure: TC Energy (TRP) and Tidewater Midstream and Infrastructure (TWM); (c) Power/Renewable Power: Capital Power Corporation (CPX) and TransAlta Corp. (TA); and, (d) Utilities: AltaGas Ltd. (ALA) and ATCO Ltd. (ACO)”
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BofA Securities’ North American mining analyst Lawson Winder is extremely bullish on Teck Resources Ltd. and Cameco Corp.,
" We set-out our top expected themes in North American Metals and Mining for 2022. Buy rated Teck Resources (TECK) is our 2022 top pick given transformational copper growth and estimate upside from met coal mark-to-marking. Versus copper miners TECK is at 50%+ EV/EBITDA and P/NAV discounts that should narrow. Our PO is $47 (C$59), +45%... BofA is bullish uranium, aluminum, nickel, silver and gold and neutral/cautious met coal, NdPr (rare earths), copper and zinc. Of note are uranium and silver where spot prices are well below BofA’s 2022E. Get exposure via Cameco (CCJ) and Pan American Silver (PAAS). Consensus is too bearish met coal in our view. Teck Resources (TECK) should benefit. We are cautious copper on growing supply in H2′22, but low inventories risk price squeezes…Strong financials = capital return for some: Free cash flow (FCF) for our coverage is forecast to rise 69% to $12.3bn in 2022E while 2021E year-end total net debt is just $12.7bn with net leverage of 0.53x. Expect nice capital returns from some (TECK, FCX).”
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Unlike Mr. Harvey at Wells Fargo, Citi’s U.S. equity strategist Scott Chronert expects further market volatility,
“S&P (-1.0) and Nasdaq (-3.1) futures positions have switched net short, with NDX futures the most negatively extended with short profit levels rapidly rising. With selling across markets now accelerating and little in terms of new macro information, we believe this to be more of a momentum/sentiment play, Nasdaq futures positioning is one-sided short with profit levels rapidly rising which could lead to a short term rebound. However, the overall picture across futures flows is one of continued weakness and weak conviction… of concern are longs in NDX, where 100% of long positions are offside, and averages losses are near 10%. A further unwind of these could potentially add further downward pressure, but limited by the smaller size of existing long positions”
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Diversion: “We’re Not In the Pandemic ‘Endgame’ Yet, WHO Chief Warns” – Gizmodo
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Scott Barlow