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

The Morgan Stanley equity strategist Michelle Weaver developed a list of U.S. stocks she believes benefitted competitively during the pandemic but more importantly, cases where the companies can continue to build on their advantage,

“In February 2021 we followed up [our] analysis with a report that sought to identify which companies we believed could retain gains seen in the pandemic, and which would likely revert to pre-Covid norm … Even though the market appears to be pricing them as if it were, creating a value opportunity. We continue to gain a clearer picture of what the steady state ‘Life After Covid’ environment will be. As this is happening, our analysts have observed that some stocks have underperformed in recent months amid market fears these companies only did well amidst the Covid pandemic. Our analysts view these names not as narrowly-defined Covid beneficiaries but instead as solid businesses that are structurally positioned for long-term outperformance. We believe this disconnect has left many of them at a meaningful discount to intrinsic value.”

The stocks are Bath & Body Works Inc., Dick’s Sporting Goods, Five Below Inc., New York Times Co., Nike Inc., On Holding AG, Simon Property Group Inc., Sonos Inc., Wingstop Inc. and Zoom Video Communications Inc.

“MS: pandemic winners that will continue to win” – (tables) Twitter


Citi analyst Ephrem Ravi notes that global metals prices are “in freefall,” cut his price forecasts, and recommended caution on the sector in the near term,

“In line with the near term cautiousness that we have written about in our past two Metals Weekly’s, we are downgrading our near term metals price forecasts. We see LME copper falling to $8,500/t on a 0-3 month view, aluminium to $2,700/t, nickel to $25,000/t, and zinc to $3,300/t over the same period. Chinese data is coming in worse than expected and the Fed remains hawkish, as we discussed in our last two Metals Weeklies. China’s weakness is not just because of lockdowns but because policymakers have been behind the curve. We recommend selling rallies until China gets ahead of the curve and until the Fed starts to deliver ‘dovish’ hikes (perhaps sometime during 3Q’22) … we estimate that copper marginal mining costs are on track to rise to ~$8,000/t during 2022 (up ~30% from $6,150/t during 2021), please see Figure 1, driven by higher consumables, diesel and power prices in particular. Indeed, falling copper prices are set to squeeze miner’s margins in the near term and this is a dynamic true across metals markets.”

“Citi: ‘metals in freefall’” – (research excerpt) Twitter


Scotiabank strategist Jean-Michel Gauthier believes U.S. bond yields have further to fall, but only temporarily

“Mixed. Our U.S. 10-year yield Fair Value (FV) model is flashing warning signs that bond prices could see a sustained rally/fall in yield. In the last four months, bonds have gone from being deeply overvalued (10-year yield at 1.83% vs. FV at 2.66%) to being extremely undervalued (10-year yield at 2.87% vs. FV at 2.01%). In the last 30 years, actual 10-year yields exceeded their FV estimate by such an extent only three times. Extensive bond price rallies/decrease in yields duly ensued.

“Short-term rally only. Looking out to 2023, our FV increases dramatically near 3.4%. This is a more of a short-term tactical trade, akin to a rally within an extended bond bear market.”

“Scotiabank: Bond rally has room to run” – (research excerpt) Twitter


Diversion: “Disney vs. Netflix: The Death Match of Streaming” – The Ringer (podcast)

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