A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
A potential breakthrough in the U.K.’s Brexit negotiations with the EU highlights a very interesting trade idea from Citi strategist Chris Montague.
Earlier this week, Mr. Montague published a report arguing persuasively that U.K. companies with more than 50 per cent of revenue in U.S. dollars are currently unfairly discounted – trading at stock prices understating future profits.
A list of stocks uncovers undervalued British companies with strong global presences in health care (like GlaxoSmithKline PLC, with a yield of 4.8 per cent) , leisure (Carnival PLC), and commodities (British Petroleum PLC, 6.6 per cent dividend).
Investors will have to be careful to buy the stock in a way that keeps the full benefit of dividends (foreign holdings tax is in play in some cases). There remains considerable political risk, so the opportunity should be limited to risk-tolerant investors.
“ @SBarlow_ROB C: Undervalued U.K. and EU USD earners” – (full table of stock ideas) Twitter
“European Commission President Jean-Claude Juncker says a Brexit deal has been reached” – Bloomberg
Scotia analyst Hugo Ste-Marie predicts mediocre TSX profit growth in the upcoming earnings season,
“Q3/19 EPS Running out of Steam. Bottom-up consensus projects TSX Q3/19 EPS at $267, 2.3% below Q2/19 ($273, most profitable quarter since Q3/08). Earnings growth remains positive on a YoY basis (+1.2%), but stands noticeably lower than 2016 to 2018. On a 12M trailing basis, TSX EPS should ascend to a new high of $1,041 in Q3/19 (+0.3% YoY). Still, positive growth is visibly in danger of negative surprises.”
Mr. Ste-Marie is much more optimistic about domestic profits in 2020 thanks to a stabilizing housing market and improving global economic growth.
“SBarlow_ROB Scotia: "Q3/19 EPS Running out of Steam'” – (research excerpt) Twitter
The strategy team at Morgan Stanley has produced a list of long and short ideas going into earnings. They expect companies like Boston Scientific Corp., Deere & Co. and Microsoft Corp. to beat estimates and rise. They expect profit misses or reduced for guidance for United Parcel Service Inc. and Proctor & Gamble Co..
“@SBarlow_ROB MS: Long and short ideas into earnings” – (full list) Twitter
Nomura strategist Masanari Takada focuses on the world’s most speculative and aggressive large funds to predict market direction. In his report released Thursday, he provided hopes for an upcoming risk-on rally,
“We expect little clear direction in sentiment until around 5 November, but we see this as a period in which the market will be laying the foundation for the next risk-on phase (which we expect to begin on or around 5 November) … US equity sentiment seems to have formed a double bottom with troughs in August and October, and this may be a positive sign. This pattern suggests that US equity supply and demand is likely to take a turn for the better toward the end of the year”
“@SBarlow_ROB Nomura’s Takada: Risk-on rally ahead” – (research excerpt) Twitter
Tweet of the Day:
Diversion: “Wildlife photographer of the year 2019 winners – in pictures” – The Guardian
Newsletter: “Bonds aren’t doing their job for investors” – Globe Investor