Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank analyst Mario Saric reiterated the firms’ top picks in the domestic real estate sector – Tricon Residential Inc., Brookfield Asset Management Inc., and Brookfield Property Partners LP ,
“We reiterate our positive views on Tricon, BAM, and BPY (high-conviction calls) which trade at excessive discounts to NAV despite our view of superior [forward 12 months net asset value per share] potential. [Tricon’s] tactical decision to accelerate consolidation of the midmarket U.S. Sunbelt space (started in 2012) and provides incremental validation over the longevity of the asset class, which we think can drive multiple expansion … over time and reduce its trading discount … Bottom line, we still believe TCN can gravitate toward [Price/NAV] parity which could drive the share price in the C$13.00 range in 2021 … BAM is an alternative asset manager and not just a “retail” asset manager, which one may incorrectly conclude based on headlines over the past several months … Despite the low valuation, we still forecast 10%+ upside to our $42.00 Forward NAVPS on attractive anticipated third-party capital growth through 2022. BAM remains a top core holding for us… "
“@SBarlow_ROB BNS’s “high conviction” calls in Canadian real estate” – (research excerpt) Twitter
Citi global economist Catherine Mann notes a potential stalling out for the U.S. economy,
“High frequency data in consumption/ hiring has signalled a possible plateau in US activity. Against this, consensus forecasts are also moving higher, so the bar for continued positive surprises may be also higher in coming months. We are not turning outright bearish … as the number of new COVID-19 cases continues to rise in the US, the Dallas Fed’s national mobility and engagement index has begun to plateau. As the economy began to open up post-lockdown, human (and economic) activity started to naturally pick up, with mobility indices leading the economic surprise indices higher by approximately two weeks. Could the opposite be true this time?”
Ritholtz Wealth Management’s director of research Michael Batnick sees signs of market froth in “Why everyone’s trading”,
“There are 170 names in the Russell 1000 that are up 100% or more from their bottom… You can only see your friends doubling and tripling their money for too long before you get sucked in, and that’s just what happened to my plumber… This will end badly, you’re probably thinking. I’m not gonna lie, I can’t help but think of the Joseph Kennedy line, where he reportedly said “If shoe shine boys are giving stock tips, then it’s time to get out of the market.” The problem with this line of thinking is that it’s not an investment strategy. People have been sharing anecdotes like this for years now. .. There are always reasons to sell, and stories like this are one of them. But before you do that, you have to understand that It’s easy to get out of the market, it’s incredibly hard to get back in”
“Why Everyone’s Trading” – Batnick, Irrelevant Investor
Column: “Valuations paint an ugly picture for equity returns” – Barlow, Inside the Market
Diversion: “Unequal consequences of COVID-19 across age and income” – VoxEU
Tweet of the Day: “@Ole_S_Hansen U.S. 10-yr real yields, our favorite #gold support indicator, are at -0.92% on route to post the lowest weekly close in more than 25 years” – Twitter
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