Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities quantitative strategist Savita Subramanian predicts U.S. equities will stall out here (my emphasis) ,
“The US economy is estimated to have contracted 3.5% and S&P 500 earnings are estimated to have fallen by 15% but the S&P 500 finished 2020 at an all-time high (+18.4%), setting 33 record highs during the year. Stocks are now up 56% in two years. Following these big gains, sentiment has jumped, with our Sell-Side Indicator (Wall St strategists’ average recommended weight in equities) closer to a “Sell” signal since the Financial Crisis, and funds’ cash levels plummeting to < 4%. Our year-end target of 3800 implies de minimis returns from here and we see 2021 as a year of rotation rather than another strong market rally … 2020 was one of the best years in history for Growth and mega cap stocks. The Russell 1000 Growth index outperformed the Value index by the largest annual spread in history since 1979 (+36ppt), and mega-cap stocks (Nifty 50) led the other 450 in the S&P 500 by 14ppt, the biggest spread since 1998. But reversals since September are likely to continue given the expected economic and profit recovery in 2021, and we prefer Value and small caps to Growth and mega caps this year”
This view is good news for Canadian investors as banks and resource stocks dominate value indexes
“@SBarlow_ROB BoA: Rotation, not rally for stocks ahead” – (research excerpt) Twitter
Value stocks dominate Scotiabank’s list of top Canadian stock picks as 2021 begins,
“Value has Rarely Scored as High [against] Other Factors. Value has been broadening its strength, with rising Momentum/Growth rankings. Momentum Shifts Away from Quality. Momentum lists dumped Quality names (Tech and defensives) in Q4/20, highlighting sector and theme rotation. [Quantitiative recommendations] Canada Top 30 Additions/Deletions: CPG, WCP, PXT, MX, MG, TCL/A, HBM, and ELD are in. REAL, WDO, STN, AGI, BTO, MRU, GRT-U, and CJT are out. Miners maintained six names, though Gold (four names) fell to its lowest level since early 2020. The model went all in auto parts (MG, LNR, MRE) and reached its highest Energy content (five names) since 2018.’
Other stocks on the recommended list not names above are Seven Generations Energy, Tourmaline Oil, Dundee Precious Metals, First Quantum Minerals, Yamana Gold, Equinox Gold, Canfor, Interfor, West Fraser Timber, Intertape Polymer, TFI, Ritchie Brothers Auctioneers, Richelieu Hardware, Sleep Country Canada, BRP, North West Co., Celestica, Northland Power , Artis REIT and H&R REIT.
“@SBarlow_ROB Value stocks dominate Scotia’s top 30 stock picks for Canada’ – (table) Twitter
Ms. Subramanian likes U.S. small cap stocks, which makes Citi’s report on their top small and mid-cap stock picks timely,
“Our 2021 SMID [U.S. small and mid-cap] outlook is for moderate gains on the heels of the strong finish to 2020. Stock selection will remain crucial as the markets navigate ongoing pandemic impacts, but with increasing confidence in an eventual path to the other side. This annual note highlights our SMID Focus List and analysts’ top SMID picks per Citi’s Road Ahead and sector ETRs. “Value Creators” SMID Focus List Additions/Deletions: We are adding ACI, RETA, CHNG, JBL, FUL, and LPLA to our SMID Focus List. To make room, we are removing ETSY, EPZM, SGRY, SNX, PWR, and OMF "
“@SBarlow_ROB Citi’s 20 top picks for U.S. small and mid-cap stocks” – (table) Twitter
Also from BofA, analyst Bob Hopkins published the firms top picks in the medical technology sector,
" on a 12 month view, we think exposure to the procedure based medtech names that underperformed the broader market in 2020 (MDT, BSX, ZBH) makes strong sense given positive vaccine news. MDT is our top idea within this group - to us, the set up for MDT seems optimal. MDT should be resilient in a recession but benefit from a recovery. Consensus estimates look reasonable. Growth at MDT is improving. And MDT has real catalysts coming in 2021. As a result, we are raising our PO on MDT to $150 from $130 based on our increased confidence. We also see solid upside for BDX in the next 6 months on the potential for multiple expansion as the company delivers on promises in 2021. Consensus numbers are down, BDX’s valuation is attractive and we expect BDX to refile Alaris on time to ahead of expectations - a meaningful potential catalyst.”
“@SBarlow_ROB Top large cap medtech picks from BoA” – (research excerpt) Twitter
Diversion: (Cinefix is my preferred source for movie recommendations) " The Top 10 Movies of 2020″ – Cinefix
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