Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets analyst Pammi Bir surveyed the domestic REIT sector and reiterated top picks,
“Our Outperform ratings are intact and include Allied, Boardwalk, BSR, CAPREIT, Chartwell, Colliers, Dream Industrial, FirstService, First Capital, Flagship, Granite, InterRent, Killam Apartment, Minto Apartment, Morguard Residential, RioCan, SmartCentres, and StorageVault. On balance, Q4 marked a decent finish to 2023, with healthy FFOPU [funds from operations per unit] growth and strength in fundamentals across most subsectors. Organic NOI [net operating income] growth remains near record levels, aided by seniors housing where the recovery is in full stride and brisk advances in multi-family. Our earnings and NAV estimates took a slight step back, with a moderate, yet healthy outlook for growth in the year ahead. In short, we believe the sector remains on sound footing. Still, higher rates continue to weigh on investor appetite. With this in mind, we expect capital to follow the lead of fundamentals and earnings growth, with our preferred picks still leaning toward multi-family, industrial, select seniors housing, self-storage, and defensive retail”
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BMO analyst Doug Morrow has developed the BMO Climate Opportunities Screen for stock ideas arising from the systemic risks involved,
“We created the BMO Climate Opportunities Screen to help investors identify companies that are well[1]positioned to navigate what is arguably the most important systemic challenge facing the capital markets – climate change. The screen that we have developed seeks out companies with a compelling climate strategy (management & governance/reduction targets/adaptation measures), declining carbon intensity and a commercial upside to our warming world, either from established products and services or substantive side bets—what we call “climate acorns”. Climate change is not fully priced in by debt or equity markets. But we think this is set to change with the planet heading toward long-term warming of between 2.1°C to 2.7°C. We believe climate change will become a much more salient driver of asset values in the future”
The stocks are Adobe Systems (ADBE) Astrazeneca, Avery Dennison, Ваker Hughes Co., ВНР, Brookfield Renewable Раrtners, ВXР, CIBC, Equinix (EQIX), Federal Realty Investment (FRI), Freeport-McMoRan, Magna International, Microsoft, Moody’s Corp., National Bank, Pfizer, Prologis, Regency Centers, salesforce.com, ServiceNow, SLB, Stantec, TransAlta, Vale S.A., Wheaton Precious Metals and WSP Global.
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Scotiabank strategist Hugo Ste-Marie expects energy stocks to continue outperforming,
“Oil prices have been steadily rising so far this year, with WTI prices now up 14% YTD and crossing the US$80/bbl level for the first time since last fall … solid U.S. economic growth and a rebound in global activity (PMIs are recovering) appear to support demand. In its latest oil market report, the International Energy Agency (IEA) indicated that global oil demand was forecast to “rise by a higher-than-expected 1.7 mb/d in 1Q/24″, while “world oil production is projected to fall by 870 kb/d in 1Q/24″. The U.S. Energy Information Administration (EIA) also points to subdued production growth as a result of OPEC+ extending their supply cuts while demand keeps being revised upward as economic activity surprises ... demand is thus seen outstripping production in 2024 by the EIA, which should be supportive of prices … In the U.S., oil inventories are also down 7% YOY … spot WTI is now trading well above sell-side forecasts over the next few quarters. All else equal, that increases the probability of seeing positive EPS/CFPS revision in the space, which could support outperformance. YTD, TSX E&Ps are up +12.9% vs a gain of +4.2% for the TSX Composite”
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Diversion: “The Best Bio-Pics Ever Made” – New Yorker (soft paywall)
Scott Barlow