Scotia’s top 10 investment themes for 2021 include ‘the hunt for yield intensifies’

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

The equity strategy team led by Hugo Ste-Marie at Scotia Capital published 10 Themes for 2021 - Unleashing Excess Cash Tuesday morning.

The top themes are,

“1. Piles of stacked cash could soon turn into hot money. 2. Synchronized downturn, synchronized upturn 3. The road to US$200 EPS 4. Income scarcity: The hunt for yield intensifies 5. Bond yields: The great normalization 6. Go Global 7. Small could be big in 2021 8. Hard assets shining, CAD roaring 9. Sector rotation favors cyclicals 10. No Value left behind [and]11. Bonus - Capital markets spring back to life”

Here’s an excerpt from the section on yield scarcity,

“Interest rates on cash deposits and government bond yields should remain quite anemic next year. As traditional sources of income can’t fulfill their role anymore, the hunt for yield will likely intensify and investors will have to look for alternatives. Equities appear an obvious choice. After a challenging year, dividend growth should resume in 2021 on the back of improving profitability trends. Moreover, dividend yields have rarely been this attractive versus government bonds in over half a century”'

" @SBarlow_ROB Scotia: “10 Themes for 2021 - Unleashing Excess Cash” – (research excerpt) Twitter

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Morgan Stanley has updated its “Fresh Money Buy List” of top U.S. stocks picks, removing S&P Global Inc. because of “regulatory and/or policy restrictions”.

The remaining list consists of Ally Financial, Citizens Financial Group Inc., Walt Disney Co., Humana Inc., Johnson & Johnson, Linde PLC, Mastercard Inc., PVH Corp., and T-Mobile U.S. Inc.

“@SBarlow_ROB MS drops S&P Global from its Fresh Money Buy List of U.S. picks” – (table, including performance) Twitter

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Also from Morgan Stanley, the technology and telecom research team led by Katy Huberty published a report outlining the bright outlook for 5G-related stocks and provided a list of stock ideas (my emphasis),

“We are buyers of stocks exposed to stronger than expected consumer 5G demand. Consumer smartphone purchase intentions are the strongest in recent history according to our AlphaWise survey of nearly 3,500 consumers in the US and China. The main driver is demand for 5G, which is now the primary reason consumers are upgrading in the US and China – a comparatively bigger catalyst than any other recent technology upgrade and a more bullish signal relative to investors’ more cautious stance. We highlight key takeaways across our global technology and telco services teams and recommend owning a group of stocks that we view best positioned for 5G infrastructure investment and smartphone demand upside.”

The top 10 5G-related stock ideas are Apple Inc., T-Mobile US Inc., Qualcomm Inc., Delta Electronics Inc., Samsung Electronics Co Ltd., Sunny Optical Technology Company Ltd., China Mobile Ltd., Taiwan Semiconductor Manufacturing Company Ltd., Murata Manufacturing Co. Ltd. and Ericsson.

“@SBarlow_ROB MS: Top 10 5G-related stock picks” – (table) Twitter

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New column from me: “What investors can learn from the top performing U.S. value stocks” - Inside the Market

Diversion: The Ringer’s panel rewatches and discusses the 1980s movie Wall Street – The Ringer (podcast)

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