Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC analyst Paul Holden published a giant 127-page primer on Canadian banks while projecting a “new era of growth” for the sector,
“The key call that supports our investment thesis is that we anticipate a substantial economic recovery in 2021 and 2022 due to ongoing monetary stimulus and levels of fiscal stimulus not seen since the Second World War. Further, we expect the U.S. economy to recover faster than the Canadian economy given more rapid vaccination rates and differences in social distancing requirements in the U.S. Our positive thesis on the banks is underpinned by: 1) a return to loan growth with economic re-opening; 2) potential for NIM expansion due to loan growth, loan mix and higher interest rates; 3) excess credit reserves that are likely to be released in the second half of 2021; and, 4) potential capital deployment that will be additive to dividend yields and EPS. Given the much improved Q1/F21 results, we believe bank earnings are well under way to returning to pre-pandemic levels … Despite all the turmoil thrown at the banking sector over the last year, capital levels have reached new highs”
Mr. Holden’s outperform-rated stocks in the sector are Bank of Nova Scotia, Bank of Montreal and Toronto-Dominion Bank
“@SBarlow_ROB CIBC: Canadian bank stocks ‘entering a new era of growth” – (research excerpt) Twitter
BofA Securities U.S. quantitative strategist Savita Subramanian updated her list of top U.S. stock picks for both growth and value investors.
Ms. Subramanian is coy about the stock selection method, mentioning only “Consensus Earnings Surprise Model plus three additional screening criteria.” The strategist is currently recommending clients emphasize value stocks for new purchases.
The growth stocks are Amazon.com Inc., Facebook Inc., Freeport McMoran Inc., Alphabet Inc., Marathon Petroleum Inc., Netflix Inc., NRG Energy Inc., T-Mobil U.S. Inc., Vertex Pharmaceuticals Inc., and West Pharmaceutical Services Inc.
The value stocks, and there’s a lot of overlap with the growth list, are Allstate Corp., Cardinal Health Inc., Laboratory Corp of America Holdings, Marathon Petroleum Corp., Morgan Stanley, M & T Bank Corp., NRG Energy Inc., Principal Financial Group Inc., Progressive Corp., T-Mobil U.S. Inc.
" @SBarlow_ROB BoA: Top 10 stocks for U.S. growth and value investors " – (table) Twitter
A separate report from Ms. Subramanian Tuesday highlighted the increasing pessimism of BofA’s hedge fund clients (my emphasis),
“Clients were net sellers (-$2.2B) of US equities for the third week in a row as the market reached another record high and equity sentiment marched further toward euphoria. Clients sold both single stocks and ETFs for the second consecutive week … Retail clients were the only group to buy US equities for the third week in a row and have been net buyers for 10 straight weeks. Meanwhile, institutional clients sold equities for the third week in a row (but at a decelerating pace) while hedge fund (HF) clients sold for the fifth week (largest outflow in over a month). Extreme HF selling: Rolling 4wk avg. flows for HFs hit a record low in our data history (since 2008) and were three standard deviations below the average. The only other time flows were this extreme was at the end of last August after which the S&P 500 declined by 2.5% and 2.3% in the subsequent one and four weeks, respectively.”
“@SBarlow_ROB BoA: “Rolling 4wk avg. flows for HFs hit a record low in our data history (since 2008) and were three standard deviations below the average”” – (research excerpt) Twitter
Diversion: “Why rich parents have rich children” – VoxEU
Tweet of the Day:
Watch this Chart: Food prices have been going up and up! Wheat and corn are at the highest level since 2013. For a lot of people (and countries) already struggling this is the last thing they need; #inflation pic.twitter.com/YmfioLY1ud— Yousef Gamal El-Din (@youseftv) May 5, 2021
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