Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Goldman Sachs U.S. equity strategist Arjun Menon explained the firm’s upgrade of the consumer discretionary sector and provided a list of stocks for further research,
“We recommend investors boost their allocation to the Consumer Discretionary sector (to Overweight from Neutral) and maintain overweight holdings in Industrials and Information Technology… In the near term, stocks that are most levered to the global economic recovery and US consumption growth will likely outperform. Sales for Consumer Discretionary stocks will benefit from elevated household consumption growth in the coming months, driven in large part by significant “excess” savings and the continued re-opening of the economy… Industrials will benefit from continued global economic acceleration while US growth decelerates … In the medium term, by contrast, stocks with strong secular growth prospects will outperform. Given that US growth on an annualized basis is peaking in the current quarter, Information Technology stocks with strong secular growth prospects and long-duration cash flow profiles should outperform.”
The report includes a list of the largest U.S. consumer discretionary stocks. Amazon.com Inc. and Tesla Inc. top the list, but they don’t fit the reflation theme as well as McDonald’s Corp., Nike Inc., Starbuck’s Corp., Target Corp., Booking Holdings and TJX Companies Inc.
“@SBarlow_ROB GS upgrades consumer discretionary stocks, provides list of largest co.s in the sector” – (table) Twitter
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The research team at Credit Suisse outlined a list of top picks in global infrastructure stocks that includes a number of Canadian stocks,
“The Global Infrastructure Team’s recent report applied the Dividend Discount Model (DDM) framework to a cross section of regions and infrastructure sub-sectors. In a low interest rate environment, the Team focused on identifying opportunities within and between various infrastructure sub-sectors. In terms of the average required rate of return, Americas ports, APAC power generation, APAC utilities and Americas timberlands had the highest … value while power generation and toll roads had the highest average historical dividend growth rates.”
The accompanying list of top picks doesn’t include a lot of detail but includes domestic firms AltaGas Ltd., Northland Power Inc. and TransAlta Corp.
Infrastructure stocks will be boosted by numerous large scale global public investment plans, including those announced by the federal governments of the U.S. and Canada.
“@SBarlow_ROB Canadian stocks among CS’s top picks in global infrastructure” – (full list) Twitter
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BMO economist Robert Kavcic detailed the fiscal damage done to Canadian provinces during the pandemic,
“Almost all provincial governments have now tabled FY21/22 budgets (waiting on Newfoundland & Labrador), so we have a pretty good picture of the pandemic fallout for provincial finances. From a net debt-to-GDP perspective, Alberta has seen the biggest deterioration from FY19/20 (i.e., pre-pandemic), with the ratio jumping about 13 ppts. Atlantic Canada and Quebec have seen the lightest hit, but are still up about 5- to-6 ppts (New Brunswick is the outlier managing to limit fiscal damage altogether). Some of these swings reflect the denominator also (i.e., Alberta saw the biggest overall hit to nominal GDP). When looking at just the percentage change in net debt, Alberta still leads, but BC moves up into the second spot—much higher borrowing in that province has been somewhat masked by a firmer economy. Of course, the biggest thing to keep in mind here is that Ottawa’s debt-to-GDP ratio is up 20 ppts (i.e., off the chart). The federal government has shouldered the majority of the COVID burden…”
“@SBarlow_ROB 19m Provincial finances: The Fiscal Damage Done (by COVID) via BMO” – (research excerpt) Twitter
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Diversion: “Discovery of Mass Death Site Bolsters Theory That Tyrannosaurs Hunted in Packs” – Gizmodo
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Scott Barlow