Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets analyst Bish Koziol made one change to the firm’s quantitatively based top 40 Canadian stock pick list, removing FirstService Corp. (FSV-T) to add Trican Well Service Ltd. (TCW-T).
The list results from a screen of all domestic stocks by value, price and earnings momentum, growth and predictability.
The stocks on the top 40 are now Imperial Oil Ltd, Pason Systems, Enerplus Corp., Canadian Natural Resources, Ovintiv Inc., Trican Well Service Ltd, Cenovus Energy, ARC Resources Ltd., Suncor Energy, Stella-Jones Inc., Teck Resources Ltd., Dundee Precious Metas, First Quantum Minerals, Labrador Iron Ore, Richelieu Hardware Ltd., Thomson Reuters Corp., Toromont Industries Ltd., Finning International Inc., TFI International Inc., Magna International Inc., Loblaw Companies Ltd., Metro Inc., North West Co. Ltd., EQB Inc., Intact Financial Corp., Great-West Lifeco, Fairfax Financial Holdings, TMX Group Ltd., IA Financial Corp., Bank of Montreal, Open Text Corp., Enghouse Systems Ltd., Celestica Inc., CGI Inc., Constellation Software Inc., Quebecor Inc. and Cogeco Communications Inc.
***
Wells Fargo equity sector analyst Ian Mikkelsen sees higher crude prices by the end of the year,
“Recently, investor sentiment toward Energy equities has been weighed down by global economic uncertainty. These concerns are fair, in our view, as we forecast continued softening economic conditions in 2024. However, negative sentiment may prove to be shortsighted once the economy finds more stable footing, which in turn should support commodity prices. This outlook is embedded in our West Texas Intermediate oil price forecast of $85 — $95 for year-end 2024, which we would expect to drive positive performance for the Energy sector. In the near term, however, uncertainty may continue to drive periods of downside volatility for Energy equities”
***
CIBC analyst Robert Catellier offered top picks in the dividend-heavy energy infrastructure sector,
“Overall, we see mid-single-digit increases in fee-based EBITDA in our newly introduced 2025 estimates. Valuations are generally still at a modest discount to historical averages, but this is likely appropriate given higher rates and the possibility of a recession. Continued progress on the energy transition should also be notable given a number of incentives, especially in the U.S. Methane emission reductions are also likely to remain a focus… Top Picks: Our preferred names include PPL [Pembina Pipeline Corp.] for its solid financial profile and a number of potential catalysts from new projects, and BIP [Brookfield Infrastructure Partners LP] as a more stable interest rate outlook may increase transaction activity. Price Target & Rating Changes: We have increased our price targets for GEI, KEY, SPB, TRP, and WMB, while our price target for BIP declines slightly”
***
Morgan Stanley’s daily research summary featured chief U.S. equity strategist Michael Wilson predicting the best investment strategies for three different economic outcomes,
“In Scenario 1, a soft landing, Mike notes that stock-specific risk likely remains high in this outcome (i.e., a stock picker’s environment). He would expect his defensive growth + late cycle cyclicals barbell to continue to outperform. Mike highlights that lower volatility growth stocks also are likely to outperform. More specifically, from a factor standpoint, Mike would expect large cap quality to perform well with a particular focus on earnings stability and operational efficiency. In Scenario 2, a soft landing with an acceleration in nominal growth, Mike sees small caps, cyclicals, and economically-sensitive industries leading in this environment as the rally broadens out in a durable manner. Further, Mike would expect value to outperform growth and lower quality to outperform higher quality. Mike notes that longer duration assets may underperform in relative terms as rate cuts are taken out of the market. In Scenario 3, a hard landing, Mike highlights that from a sector standpoint, traditional defensives would likely outperform in this backdrop – Healthcare, Utilities, and Consumer Staples. From a broader factor perspective, Mike would expect high quality to outperform low quality from an earnings and balance sheet standpoint. Mike would also expect large caps to outperform small caps and growth to outperform value”
***
Diversion: “Historic Moon Mission Is Falling Apart After ‘Critical’ Fuel Loss” – Gizmodo
Scott Barlow