Daily roundup of research and analysis from the The Globe and Mail’s market strategist Scott Barlow
Credit Suisse quantitative strategist Patrick Palfrey made some bold statements about the performance of economically sensitive and value stocks in a new report (my emphasis),
“Factors Indicate Value/Cyclical Rotation Is Over. While [last week] wasn’t a huge week for factor leadership, Quality factors (ROA [ return on assets], low Financial Leverage and high Gross Margins) edged higher at the expense of Value factors (low P/E and P/S). Importantly, this new trend has now persisted for the last 3 weeks, a reversal from the prior 4 weeks. There have been 5 Value rotations in 2020. All of them have failed to continue for much more than a month.”
“@SBarlow_ROB CS: ‘Factors Indicate Value/Cyclical Rotation Is Over”’ – Twitter
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Morgan Stanley analyst David Risinger published a convenient list of large cap global health-care stocks ranked by dividend yield. Domestic investors will have to be careful to get the full after-tax payouts, but the list is a good starting point for investors looking for yield. The table in the report includes Morgan Stanley’s rating on each stock, from overweight to underweight. The overweight-rated names with the highest yield are China Medical System, Abbvie, Takeda, Sanofi, Novartis, Amgen and Bristol-Myers [disclosure, I own a position in Bristol-Meyers].
“@SBarlow_ROB MS: large cap health care stocks with the highest dividend yields” – (table – all stocks yielding more than 2.0 per cent) Twitter
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My pick for the most interesting research report released over the holidays was written by Citi’s U.S. equity strategist Tobias Levkovich on December 23 [my emphasis],
“Millennials have become the largest cohort in terms of percentage of [the U.S.] population … with a greater focus on perceived social injustices. Note that this group (roughly 25% of the American population) own only about 3% of the country’s wealth as compared with 21% held by baby boomers, and arguably are thereby willing to support forgiveness of debt even if it means higher taxes for others, particularly on proposed wealth taxes… Approaches on ordinary income taxation treatment for capital gains and dividends which generally accrue to wealthier people might gain traction with potentially negative consequences for equity holders. Debt forgiveness could free up cash to be used in the economy as poorer people have a higher propensity to spend when given more money while the rich can save/invest the extra funds… the top 20% of American income earners who own roughly 90% of all equities also spend disproportionately more and they are responsible for 37% of all consumer expenditures (and plausibly 50% of discretionary purchases). Thus, the debate is fierce as to how any such policies can affect economic activity.”
Millennials, like every generation before them, are likely to vote for their own financial well-being, and this may inconvenience older investors in the years to come.
“@SBarlow_ROB Citi: Millennials “own only about 3% of the country’s wealth as compared with 21% held by baby boomers, and arguably are thereby willing to support forgiveness of debt even if it means higher taxes for others’” – (research excerpt) Twitter
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Diversion: “Is Technology Making Me More Depressed?” – Gizmodo
Tweet of the Day: “@SBarlow_ROB Canada: Wealth by Age Group (% of total). Statscan data as of 2019” – Twitter
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