Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi U.S. equity strategist Scott Chronert went hunting for growth stock bargains,
“The Russell 1000 Growth index is down modestly from recent highs. But there is more carnage under the surface. Our recent view to buy growth on pullbacks is coming into play. We advocate adding names that have declined at least 10 per cent from recent highs but have a stable fundamental outlook and reasonable implicit medium-term free cash flow growth expectations. 20 Large Cap Growth stocks stand out … The Russell 1000 Growth Index has sold off over 6% from its mid-July high. However, two-thirds of the stocks in the index are down 10 per cent or more, with a third of the stocks down worse than 20 per cent … Our screening approach within incorporates an estimate of market-implied free cash flow growth expectations (using our “reverse DCF” framework) to compare to longer-run consensus estimates”
The 20 stocks are Las Vegas Sands, Teradata, Datadog, TKO Group Holdings, Lockheed Martin, Bruker, Draftkings, Insulet, Pinterest, Chipotle Mexican Grill, Netflix, Hubspot, Lam Research, Rockwell Automation, MongoDB, Apple, KLA Corp., Paycom Software, Nvidia and Intuitive Surgical.
BMO economists continue to hammer away with their belief that home construction can’t be a complete solution to the nation’s housing affordability crisis.
Chief economist Doug Porter and senior economist Robert Kavcic wrote Pie in the Sky on Housing Supply for their weekly Focus report,
“Given Canada’s robust population growth, rapidly rising rents and lofty home prices, there is no debate that the nation requires a strong and steady supply of new homebuilding … However, where we fundamentally diverge from the conventional wisdom is on two points: 1) ramped-up supply alone is not going to “solve” Canada’s affordability issues, and 2) raging demand, including investment demand, has been every bit of a driver of the lack of affordability as a perceived supply shortfall. Accordingly, the current all-consuming focus on dramatically boosting supply may be misplaced and is frankly unrealistic… It’s good to have lofty aspirations for homebuilding given the tightness in Canada’s housing market and rapid-fire population growth. But we can’t be led down a blind alley of wildly unrealistic targets; then, expect a major push to build will alone solve affordability strains. If demand is allowed to continue to run amok, then even torrid supply will simply be quickly swallowed whole”.
The entire piece is worth a read.
“Focus: Pie in the Sky on Housing Supply” – BMO Economics
RBC bank analyst Darko Mihelic took a closer look at sector net interest margins [NIMs, profits on basic lending] and then reduced price targets on all stocks,
“Our view: In this report, as a result of analyzing NIMs, we make adjustments in most cases to our NIM assumptions (as well as other small adjustments to other line items). At the all-bank level, NIM expansion has been “best” at TD, whereas BNS has had NIM declines since interest rates started rising. Looking at recent NIM performance and NIM sensitivity, we note that there were larger differences in the disclosed vs. implied NIMs for BNS and CM than for the other banks in our coverage. We lower our NIM estimates for BNS but still expect BNS to have the strongest NIM growth in 2024, as it is the only large Canadian bank positioned to benefit from falling rates (RBC Economics forecasts a drop in interest rates next year). Unfortunately, the positive position to lower rates for BNS is much smaller now than historically. This report also touches on our expectations of improved capital markets earnings and provisions for credit losses. Although our estimates show a rebound in core EPS growth in 2024, there is still significant uncertainty in the macro environment and on the regulatory front, leaving us with lower than usual conviction on the group. We slightly lower our price targets for all of the banks”
“Monday’s analyst upgrades and downgrades” - The Globe and Mail
Diversion: A New Dinosaur Discovery Challenges ‘Everything We Think We Know’ – The Atlantic