Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC Canadian energy analyst Dennis Fong provided his top picks in the sector,
“Energy stocks performed modestly well in 2023, beating the S&P/TSX Composite Index return by 1 per cent despite recessionary concerns impacting energy pricing. Sector balance sheets have been repaired, and are in a good position to navigate weaker commodity prices through 2024. Fears of a recession have kept a ceiling on oil prices, despite the risk of supply interruptions resulting from increased tensions in the Middle East, and continued sanctions against Russia ... We hold a stronger bias for liquids over natural gas for 2024. Our top ideas for 2024 include ARX [Arc Resources Ltd.], CVE [Cenovus Energy Inc.], and SU [ Suncor Energy Inc.] for large-cap E&Ps and KEL [Kelt Exploration Ltd.] and LGN [Logan Energy Corp.] for small‑cap E&Ps”
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There are few sociopolitical issues more serious than the rapid jump in rent costs but as BMO chief economist Doug Porter describes, there is no respite in sight,
“Canada’s CPI provided few major surprises in December, with headline inflation popping back up to 3.4 per cent (same as in the U.S., again) and the two main core measures a bit higher. The ongoing pain point is shelter, now up 6.0 per cent year-over-year. And that meaty rise is in spite of a dip in new home prices and double-digit declines in natural gas and fuel oil costs. The sustained upswing is being mostly driven by the usual suspects—mortgage interest costs and rents—but also by hefty rises in insurance (7.4 per cent), electricity (6.5 per cent), property taxes (4.9 per cent; watch this space!), and repairs & maintenance (4.8 per cent). There’s little mystery behind the ongoing surge in rents … After a tiny respite in the prior month, rents picked back up 7.7 per cent year-over-year. That is entirely consistent with the rollicking population growth seen in the past year of more than 3 per cent year-over-year”
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Morgan Stanley’s daily research summary covered chief strategist Michael Wilson apparent shift to optimism,
“MS Chief US Equity Strategist Mike Wilson highlights that over the past 6 months, interest rates have been the most important determinant of equity index performance. Mike sees this continuing in the near-term, and believes interest rate volatility is an important consideration for equity investors, particularly as economic forecasts have centered around a narrow range of outcomes. Mike notes that the consensus 4Q EPS estimate is down 7 per cent over the past 3 months, creating a lowered bar and a higher probability of a solid, mid-single-digit EPS surprise for 4Q earnings. He points out that Healthcare, Tech, and Communication Services are expected to see the strongest EPS growth in 2024 (15 per cent, 15 per cent, and 13 per cent, respectively) driven by a combination of margin expansion and top line growth. Mike highlights that for 8 of 11 sectors, second half 2024 EPS growth is expected to be stronger than first half growth, and Materials, Healthcare and Industrials are expected to see the most significant inflection in 2H growth”
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Diversion: “The key to capturing wildlife images? Patience, says Canadian Geographic’s Photographer of the Year” – CBC
Scott Barlow