Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO economist Robert Kavcic has analyzed the domestic labour market to uncover the sectors hardest hit by the pandemic,
“Canadian employment is down 14.1% overall between February and May, with some distinct differences below the surface. At the sector level, some like accommodation & food have caved almost 50%, while others (finance, public admin) are down barely 3%... part-time jobs have been hit much harder; so has youth employment (under age 25); and women have seen steeper job losses than men… Longer term, this is going to have an impact on things like real estate (harder hit at the low end of the price spectrum and/or rental market) and social policy.”
“@SBarlow_ROB BMO: “Cdn Labour Market: Where the Pandemic Has Hit Hardest”” – (research excerpt, chart) Twitter
CIBC analyst Ian de Verteuil has applied quantitative analysis to the REIT sector – incorporating U.S. companies to increase the sample size - to generate a list of top picks,
“We believe that the evolving nature of the Real Estate sector in Canada makes it fertile ground for factor-based quantitative investing … we apply our 19 specific factors (which are grouped in six Factor styles - Growth, Value, Quality, Market, Low Volatility and Momentum), [and] some do show good predictive powers. ... Whether it is three-month momentum, nine-month momentum or Price to 52-week highs, REIT performance seems to be very sensitive to historical price moves … We expected better performance from higher yields, but … buying the lowest-yielding REITs in Canada and the U.S., and selling the highest-yielding ones REITs generated alpha consistently … Our results validated the long-standing notion that NAV, dividend growth and FFO metrics are meaningful drivers of price performance.”
Combining all of the relevant factors, the resulting top 10 picks are (in order), InterRent REIT, Canadian Apartment Properties REIT, Granite REIT, Killam Apartment REIT, Summit industrial Income REIT, Allied Properties REIT, CT REIT, Northview Apartment REIT, Smartcentres REIT and Boardwalk REIT.
“@SBarlow_ROB CM: Quant approach produces a top 10 list of picks in REIT sector” – (table) Twitter
Ian McGugan: Five REITs that still hold long-term appeal
Citi U.S. equity strategist Tobias Levkovich notes a distinct difference between what institutional investors say about their forecast and how they are actually acting in the market,
“One of the most consistent pushbacks we get from clients is that so many people are cautious and the proof point is always the American Association of Individual Investors bearishness index. Yet, our Panic/Euphoria Model says something quite different, as do other measures like premiums paid for puts versus calls and the NY Fed’s survey on consumer expectations for the S&P 500. … There is a fascinating gap developing between statements of concern and not putting one’s money where his/her mouth is, as defined by buying protection. Looking back historically shows a breakdown versus past periods. Individuals are clearly entitled to their opinions, but sometimes data has to intrude and force an adjustment to potentially ill-advised perceptions… We suspect that too many fund managers do not want to miss the next possible Fed-induced S&P 500 advance, but now is not the time for such bravery, in our opinion.'
“@SBarlow_ROB Levkovich: " CBOE Total Put/Call Ratio vs AAII Bearishness” – (chart) Twitter
Newsletter: “Stock picks for the working from home revolution” – Globe Investor
Diversion: “Joel Schumacher Was an Avatar for How Blockbusters Used to Work” – The Ringer
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