Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Record inflows to global equities has been a shockingly strong driver of returns so far in 2021, notes Bank of America.
“H1 annualized inflow to stocks, TIPS, financials, materials & infrastructure funds all greater than cumulative inflows in prior 20 years; e.g. ’01-20 stock inflow was cumulative $0.8tn and in ’21 inflow annualizing $1.2tn … H1′21 = 5th best for global stocks in past 100 years… annualized return following prior 4 best H1 gains = +9% in 6 months (in Apr’21 on a 6 month rolling return basis); H1′21 = 5th best start for commodities in past 100 years…annualized return following prior 4 best H1 gains = -2% in 6 months (in Apr’21 on a 6 month rolling return basis.”
“@SBarlow_ROB BoA: Equity inflows shockingly high during H1” – (research excerpt) Twitter
Citi U.S. equity strategist Tobias Levkovich warned clients that July could prove an ‘unsettling month’ for investors.
“Consensus bottom-up 2Q21 EPS projections call for a 63% y/y surge (almost 75% ex-Tech), with Value soaring more than 100%. However, the deceleration to just above 23% in 3Q21 and 15% in 4Q21 is noticeable. Interestingly, second quarter growth views moved from up around 50% at the end of March, capturing greater vaccination progress and stimulus checks. Yet, there appears to be a clear sense that things moderate thereafter. And, as our recent client survey pointed out, 2022 results may expand by only 5-10%... Upward estimate revision momentum is at a 25-year high of more than 81% and seems unsustainable. Indeed, 16 of 22 industry groups are near past peaks or have begun slipping… Historically, any such weakness was accompanied by stock price dips. Fascinatingly, Household & Personal Products as well as Utilities are generating some of the softest numbers and might explain their underperformance… When 1Q21 numbers came out, companies that beat estimates edged higher, while those that hit forecasts slid slightly, highlighting an investment community expecting even more impressive outcomes. In this context, the hurdles appear higher now than published outlooks suggest. Therefore, with loftier inherent expectations, the potential to miss climbs, thereby creating the environment for potholes to emerge. Accordingly, July could prove to be an unsettling month.”
“@SBarlow_ROB Citi: July could be an unsettling month” for investors” – (research excerpt) Twitter
Scotiabank strategist Jean-Michel Gauthier updated the group’s list of top 30 Canadian equities chosen using a combination of 16 factors covering fundamental valuations, growth, momentum and credit quality,
“Financials and Energy appears to be peaking in rankings at elevated levels. Meanwhile, Tech, Industrials, and Materials are forging a bottom, leaving overall Cyclical bias over Defensives relatively stable. Among defensives, Real Estate continues to rebound, but poor Growth rankings remains a negative in our view. Sector-wise, Financials, Energy ex-pipes, and Real Estate are the highest-ranked sectors… STLC and CS are in, replacing DOO and LUN. Financials have the largest presence, followed by E&Ps, Base Metals, and Lumber. Discretionary and Industrials complete the list. "
The final list of top 30 companies (ex-new additions Stelco Holdings Inc. and Capstone Mining Inc.) are Tourmaline Oil , MEG Energy, Crescent Point Energy, Enerplus, Parex Resources, Whitecap Resources, Centerra gold, Teck Resources, Dundee Precious Metals, Labrador Iron Ore Royalty, Interfor, Canfor, West Fraser Timber, Intertape Polymer Group, Russell Metals, Transcontinental, Richelieu Hardware, Magna, Linamar, North West Co., Home Capital Group, Equitable Group, CIBC, Cannacord Genuity Group, Power Corp., IA Financial Corp., Manulife Financial, and Celestica.
" @SBarlow_ROB BNS updates top 30 Canadian stock picks” – (table) Twitter
Diversion: “Man whose burned body was found in septic tank on Alberta farm identified by DNA 44 years later” – CBC
Tweet of the Day: " @pearkes We absolutely love to see it” – Twitter
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