Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The Teranet-National Bank domestic housing price index for September highlighted a near-record one-month surge in prices,
"In September the Teranet–National Bank National Composite House Price IndexTM was up 1.1% from the previous month, the second-biggest gain for a month of September in the 22 years of the composite index. The rise was led by Ottawa-Gatineau (2.3%), Quebec City (2.2%), Montreal (1.9%), Hamilton (1.9%), Edmonton (1.6%), Toronto (1.0%), Halifax (1.0%) and Vancouver (0.6%). There were respectable monthly increases for Winnipeg (0.4%) and Victoria (0.3%). Calgary edged up 0.1%.
“Another sign of firming markets is that for the first time since May, the number of sale pairs [difference in price for the same home sold again] entering into the 11 metropolitan indexes[1] was higher than a year earlier, and by no less than 29%. This development echoes the revival of home sales reported by the Canadian Real Estate Association beginning in July, recovering ground lost in the severe slowdowns of previous months due to Covid-19. The unsmoothed composite index,[2] seasonally adjusted, was up 1.2% in September, suggesting that the uptrend of the published (smoothed) index could persist.”
“@SBarlow_ROB Near-record surge for Canadian housing prices in September” – (excerpt) Twitter
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I’m always a bit uncomfortable talking about defence stocks because there’s a way in which owning them represents a short position on humankind. But, Credit Suisse is very bullish and a bargain is a bargain I guess,
“The main reasons for focusing on this area is that we think defence is still a structural growth story but unlike most structural growth stories it is now cheap. Defence stocks look cheap against the market in the US and the European names are cheap now against the US names … Defence spending as a share of GDP is still very low (40% below its norm in the US, 42% in Europe). Clearly many NATO countries are still spending too little on defence. If all countries were to spend 2% of GDP on defence, then spending would rise by 12%... If the US is perceived as being unpredictable on defence (e.g. President Trump withdrawing from Syria with little notice), then other NATO countries are also more likely to increase their own defence spending…China has appeared more assertive”
Credit Suisse strategist Andrew Garthwaite prefers the more pure plays in the sector, and highlights BAE, Cheming, Northrup Grumman and SAAB.
“@SBarlow_ROB Credit Suisse recommends put options on humankind” – (research excerpt, charts) Twitter
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The last few years has seen numerous large scale corporate network hacks, and I’m still surprised that companies providing network security software don’t have market caps like Facebook Inc. Still, demand is strong and Morgan Stanley analyst Hamza Fodderwala provided his top picks in the sector ahead of earnings reports,
“After largely better than expected Q2 results, our security reseller checks continued to highlight strong demand trends in Q3, driven by: 1) a higher level of [chief security officer] priority to secure a more cloud-based and remote workforce - all of which is increasing complexity and expanding the cyber threat surface area for enterprises, 2) some sales coming into fruition from pent-up demand in 1H after a number of projects were delayed earlier this year, and 3) stronger demand and budget flush from US Federal Govt during its fiscal-year close (Q3), which benefits a number of security vendors including [Tenable Holdings Inc., FireEye Inc., Sailpoint technologies Holdings Inc.], in particular. We continue to see security as a more defensible area of spend vs. broader IT budgets, as shown in our survey of Chief Security Officers (CSOs) earlier this year”
“@SBarlow_ROB MS' top picks in network security software” – (research excerpt) Twitter
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Diversion: “The 50 Best Movie and TV Show Twists of All Time” – The Ringer
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Scott Barlow