Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The RBC global equity team is recommending Canadian market sectors with higher exposure to the U.S. dollar,
“The underperformance of the Canadian economy relative to the U.S. increases the odds that a gap in policy rate and a weaker CAD are more likely to be tolerated by the BoC, and RBC expects the BoC to cut rates before the Fed, and at a more aggressive pace afterwards. For now, the RBC Capital Markets Global FX Desk Strategy* team maintains an expected 2024 trading range of 1.3250-1.3750 for USD/CAD, but acknowledges that the onus is on US economic data to surprise to the downside to keep USD/CAD firmly below 1.3750; the 1.3600 area may act as a floor in the short term … Canadian sectors that tend to generate more earnings from the U.S. and therefore may benefit from a stronger USD vs. CAD include: Technology, Media, Financials, Health Care, Industrials and Paper & Forest Products. Canadian domestically-oriented sectors that generally have less exposure to CAD/USD fluctuations include: Telecom and Real Estate’
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BofA Securities analyst Wamsi Mohan provided some AI-related stock ideas amongst a sea of acronyms,
“As accelerated computing is a more critical part of the overall computing landscape, interconnect density and performance requirements are also significantly enhanced. We view Amphenol (APH), TE Connectivity (TEL), Molex for DAC/ACC cables and Corning (only for AOC (active optical cables) as particularly well positioned to take advantage of this trend. We raise our PO [price objective] for APH to $137 from $124 (based on 35x C25 vs. 32x prior) and TEL to $165 from $161 (21x C25 vs. 20x prior) on higher multiples, as we see this opportunity drive significant upside to estimates. In particular, there has been increased focus on the copper-based interconnect across Nvidia’s new GB200 NVL72 rack configuration. At GTC (GPU Technology Conference) Nvidia’s CEO unveiled the interconnect design to support 72 GPUs communicating with each other in real time”
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Deutsche Bank chief strategist Binky Chadha details the strength in U.S. quarterly earnings results,
“We were constructive on earnings coming into the Q1 season, expecting growth to remain robust at around 10 per cent year-over-year … Halfway through the season, earnings have surpassed even our constructive expectations. Beats are running at 9.2 per cent in aggregate, a near three-year high and almost double the historical average of 4.9 per cent. If these beats hold through to the end of the season, earnings growth is on track to accelerate into the double digits to 11.8 per cent, driven by a combination of steady mid-single digit sales growth and margins rising to the highest in nearly 2 years. Across sectors , mega-cap-growth (MCG) and Tech saw earnings growth remain very strong at 38 per cent year-over-year again despite the boost from base effects diminishing this quarter. Moreover, unlike last quarter, other sectors also stepped up, with growth of 3.2 per cent after four straight quarters of negative growth. Absent a large drag from Energy and Materials, their growth would have been even stronger at nearly 8 per cent”
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Diversion: “Smarter Than Monkeys? Scientists Challenge Claim of T. Rex Intelligence” – Gizmodo
Scott Barlow