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A roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Scotiabank strategist Simone Arel detailed strong profit results for TSX companies (my emphasis),

“With more than two thirds of companies having reported so far, the TSX earnings season results have been coming in strong lately. TSX Q2/21 EPS is hitting C$317, 7.8% above estimates as 64% of companies beat by a median of +8.1%. The size of the beat was such that the initially forecasted sequential earnings contraction (-2.4% QoQ) turned into a +5.2% QoQ improvement … Tech sports the strongest beat so far (+22%), followed by Industrials, Energy, and Financials. Despite Auto Parts Makers suffering from the global chip shortage, Discretionary also delivered impressive results. While banks haven’t reported yet, insurance companies (+41%) are riding high with a median beat of 19%. Defensives remain laggards but still delivered mostly positive results ... Unlike the U.S., investors have been cheering these unexpected positive surprises with stock prices in cyclical sectors outperforming visibly on earnings announcements (especially among Financials, Technology, and Discretionary). Moreover, consensus expects that record Q2/21 earnings will be exceeded or equalled in each subsequent quarter until the end of 2022, leading to FY [fiscal year] 2021 enjoying the highest YoY growth since 2003 (+57%). Yet, 2022 estimates have been taken down a notch or two to the point where FY 2022 growth looks close to nil… "

I’m more concerned about near-zero profit growth for 2022, but things look good in the near term.

“@SBarlow_ROB Scotiabank details strong TSX earnings season so far but profit growth to slow in 2022” – (research excerpt) Twitter

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Goldman Sachs U.S. equity strategist David Kostin’s monthly Where to Invest Now? presentation emphasizes companies with strong sales and profit margin growth as the best options to overcome inflationary pressures, potential tax hikes and Fed tightening.

The list of companies as candidates for further research is too long to recount here (link to full table with valuation details below), but stocks likely to interest Canadian investors include Adobe Systems Inc., Microsoft Corp., Alphabet Inc., PayPal Holdings nc., Align Technology, HEICO Corp, United Rentals Inc., Church & Dwight Co., Estee Lauder Companies Inc., Vulcan Materials Co. and Starbucks Corp.

" @SBarlow_ROB GS: ‘Russell 1000 stocks with sales growth and profit margins above sector peers” – (table) Twitter

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Bof ASecurities’ report on the holdings of U.S. active portfolio manager holds included some surprises,

“Reopening is well underway and the consumer is increasing their services consumption (sometimes at the expense of goods), hitting e-commerce (as evident in our BAC card data) and AMZN earnings ... However, active funds are even more overweight AMZN than a year ago (by 31% vs. 29% a year ago) and also more overweight another of the largest stay-at-home beneficiaries, Comcast … Hedge funds have a record low exposure to [U.S.] Financials: Despite Financials’ outperformance YTD (+25% vs. +18% for the S&P 500), the sector remains shunned by hedge funds which are more underweight the sector today than at any point in our in our data history since 2011 … Since the financial crisis, equity markets have seen an accelerating shift from active investing to passive investing with the rise of ETFs. Today, US AUM is nearly evenly split: for every dollar in actively-managed funds, there are 98 cents in passive funds, a big jump from 20 cents back in 2008. But looking at Japan as an example (where passive funds represent over 70% of the overall equity AUM), the passive share can grow a lot more in the U.S.”

“@SBarlow_ROB BofA: U.S. passive AUM has reached critical mass” – (research excerpt) Twitter

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Diversion: “Google rolling out ‘pay calculator’ for work-from-home salary cuts” – New York Post

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