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

Morgan Stanley analyst Stephen Byrd sees renewable power and clean tech stocks as down but definitely not out (my emphasis),

“Following a major industry-wide stock price pullback, MS Research Analyst Stephen Byrd recommends stocks with strong growth and cash flow: AES (OW [overweight], $30 PT [price target]), AY (OW, $45 PT), SEDG (OW, $329 PT), TPIC (Covered by MS Research Analyst Laura Sanchez, OW, $68 PT) and RUN ($86 PT), which he upgrades to OW. Stephen believes the significant pullback in stock prices across the Clean Tech industry represents a rare buying opportunity, with relatively modest growth now implied in many stocks. He sees continued strong growth in renewables and energy storage given favorable economics and further cost declines. He also believes the trend in favor of ESG capital being deployed on leaders in clean energy will continue to play out in the coming years, and notes that the recent pullback has resulted in many ESG investors reaching out to assess the best Clean Tech buying opportunities… Additionally, he believes an under-appreciated upcoming catalyst is likely federal legislation that will provide further support for the clean energy sector.”

Mr. Byrd does not cover Canadian companies in the sector, but I can point out that they were deeply oversold when I ran the numbers on Monday.

“@SBarlow_ROB MS: now is a ‘rare buying opportunity’ for clean tech” – (research excerpt) Twitter

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BofA Securities U.S. quantitative strategist Savita Subramanian believes markets are in mid-cycle mode and has screened for the appropriate stocks,

“Our US Regime Indicator has entered into a “Mid-Cycle” phase and we expect a continued cyclical rebound in 2021, where our economists forecast a robust 6.5% GDP Growth in the U.S. In this “Mid-Cycle” phase, companies with high FCFF[ free cash flow to the firm]/EV [enterprise value] typically do well. We also expect a policy peak to potentially reverse the recent multiple expansion in Low Quality stocks over High Quality stocks.”

The accompanying list of 25 stocks is ranked by FCFF/EV. The top ten are Cisco Systems Inc., Centene Corp., Phillip Morris International Inc., International Paper Co., Packaging Corporation of America, CBRE Group Inc. A, Parker-Hannifin Corp., Mondelez International Inc. A, Cognizant Technology Solutions Corp., and Robert Half International Inc.

“@SBarlow_ROB BoA: ‘In this “Mid-Cycle” phase, companies with high FCFF[ free cash flow to the firm]/EV [enterprise value] typically do well” – (full table) Twitter

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BMO economist Robert Kavcic believes that recent Ontario homebuyers are “playing with fire” where prices are concerned,

“From 2010 through 2016, it showed that Canada’s housing market was doing just what it should be doing based on interest rate and income fundamentals, despite relentless bearish talk (which we steadfastly argued against). In 2016/17, it showed that non-resident investment was overheating a strong domestic market—in some segments, the result was prices correcting and taking almost 4 years to recover after policymakers acted. Now, it suggests that the market might be playing with fire…if mortgage rates were to reset to pre-COVID levels, we’re back into late-1980s territory by this valuation metric. Alternatively, if mortgage rates stay where they are, but prices keep doing what they’re doing, we’re back into late-1980s territory by this time next year”

“@SBarlow_ROB BMO: Ontario homebuyers ‘playing with fire’ by hits metric” – (research excerpt, chart) Twitter

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Diversion: “Is lockdown wrecking our eyesight?’ – New Statesman

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