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

RBC analyst Geoffrey Kwan provided more detail on Canada’s red-hot mortgage binge and offered two top picks to play the theme,

“Investment thesis: We maintain our positive view on our mortgage coverage universe, as we believe it offers attractive valuation upside, reflecting: (1) continued favourable housing/mortgage activity; (2) stronger EPS growth driven by improving loan growth, loan loss reversals, non-interest income plus positive operating leverage; (3) OSFI potentially lifting its ban on share buybacks, dividend increases and special dividends sometime over the next year - this could lead to significant share buyback activity and dividend increases given increased excess capital generated during the ban; and (4) improving valuation multiples reflecting the factors above. We view HCG [Home Capital Group Inc.] and EQB [Equitable Group Inc.] as the best ways to play this theme. Existing home sales in Canada were up 53 per cent year-over-year in Q1/21 (up from +36% in Q4/20), driven by continued historically low mortgage rates and pandemic-driven desires for larger living spaces. For Canada’s major cities, Q1/21 home sales were +91% Y/Y for Vancouver; +89% for Calgary; +69% for Toronto; and +5% for Montréal.”

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“@SBarlow_ROB RBC: How to play Canada’s mortgage binge’ – (research excerpt) Twitter

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BoA U.S. quantitative strategist Savita Subramanian published a great report Thursday, but it was all charts, no text, which makes it difficult to summarize here.

I posted a few charts on social media.

Highlights included a chart showing the U.S. sectors with the highest expected profit growth rates from now until 2022 – energy, industrials and materials.

Another chart showed BofA’s projections for global energy production. They expect renewable energy consumption to match fossil fuel sources in 2033. In 2040, they expect solar and wind power consumption to equal falling fossil fuel energy usage.

The last section of the report highlighted Ms. Subramanian’s concerns about technology stocks. The strategist notes that tech stocks are currently cheaper than they were in 2000, but trailing and forward earnings growth is much lower.

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“@SBarlow_ROB Few good charts from a Subramanian report ( BoA) Tech is cheaper than 2000 but fundamentals weaker” – (table) Twitter

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Credit Suisse U.S. equity strategist Jonathan Golub is bumping his S&P 500 target higher to reflect earnings growth well above consensus estimates,

“We are raising our 2021 S&P 500 price target to 4600 from 4300, representing 9.2% upside from current levels, and 22.5% for the year. We are also raising our 2021-22 EPS forecasts to $200 and $215 (from $185 and $210), implying 40.5% and 7.5% growth … In the early stages of an economic cycle, analysts tend to underestimate operating leverage, leading to positive revisions, a trend that can last 2-3 years. For example, on March 31, 1Q21 EPS was forecasted to grow 20%. With 71% of results in, it appears that EPS will finish closer to 44%. Between 2Q20-1Q21, results have topped estimates by 15-23%”

“@SBarlow_ROB CS’s Golub jacks S&P 500 target higher” – (research excerpt) Twitter

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Diversion: “The Semi-Sadistic Seven-Minute Workout” – The New Yorker

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