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

Scotiabank real estate analyst Mario Saric notes that REIT investors have been moving to a more value-oriented approach and he has adjusted his top picks accordingly. His REIT Stuff report released Monday also includes some valuable information on valuation,

“Our investment philosophy primarily favours Growth over time given our long-standing analysis highlighting NAVPU [net asset value per unit] growth as the predominant driver of REIT total returns (followed by same-property NOI [net operating income] growth and AFFOPU [adjusted funds from operations per unit] growth, in that order)… With that said, we appreciate everything has a price… In a nutshell, when Growth is priced 30%+ higher than Value (on a NAV basis), Value outperforms in the following six months with an 85%+ frequency (closer to 100% if the 10-year GoC yield is moving higher). Conversely, Growth does the same (i.e., frequent outperformance) when the gap is sub-20%... [ gap is currently 29 per cent] … we note the q/q Scotia NAVPU growth in Q2 for Growth versus Value was 13% and 3% … we recommend tactically reintroducing some Value into portfolios heading into the school season … Our top REIT value picks = Allied Properties (still strange for us to think of it as a Value REIT), Dream Office (Normal-course issuer bid should help; we think Office REITs are undervalued), H&R REIT, Northwest Healthcare (global inflation-protected Healthcare assets are in high demand; should show up in NWH unit price eventually).”

“@SBarlow_ROB Cdn REIT market shifts back towards value (Scotia)’ – (research excerpt) Twitter


Credit Suisse analyst Andrew Kuske details the rise of carbon capture technology in Canada,

“Advantage Energy Ltd.’s (AAV) Entropy Inc. (Entropy) initiated “a formal process to explore alternatives for raising external capital, including a private placement of equity securities”. Net proceeds will “be used to fund the commercial development of Carbon Capture and Sequestration (CCS) projects using Entropy’s patent-pending process design, Entropy23(TM) solvent, and deep expertise in geological carbon storage.” As outlined in our recent series of notes, we continue to believe CCS will be a very meaningful infrastructure investment and broader environmental transition theme for the foreseeable future … Beyond the Entropy news, for some stock specifics and CCS exposure, we highlight TC Energy (TRP) and Pembina Pipelines (PPL) partnership to build the backbone of Alberta’s CCS infrastructure with the Alberta Carbon Grid, which will look to transport 20m tonnes of CO2 annually by leveraging existing pipelines”

“@SBarlow_ROB CS: Top Cdn picks for carbon capture” – (research excerpt) Twitter


Goldman Sachs U.S. equity strategist David Kostin highlighted the extraordinary asset flows into ESG funds despite the fact there is no broad agreement about how exactly to define the sector,

“Amid some of the strongest equity inflows on record, ESG flows are a highlight. US equity inflows total $177 billion so far this year, the largest YTD inflows on record. ESG has experienced dramatic growth recently as global assets in ESG-focused funds have doubled over the last 12 months to $1.6 trillion. However, US ESG adoption lags the rest of the world and $900 billion of inflows would be necessary for the US to match the international allocation to ESG-focused funds.”

" @SBarlow_ROB GS: “US equity inflows [to ESG] total $177 billion so far this year, the largest YTD inflows on record”” – (research excerpt) Twitter


Diversion: " A Superhero Movie That’s Worth Seeing for the Villain Alone” – The Atlantic

Tweet of the Day: " @ISABELNET_SA GWIM Equity Allocation BofA private clients’ equity allocation remains at record high” – Twitter

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