Research and analysis roundup from The Globe and Mail’s market strategist Scott Barlow
Apple Inc. warned markets that previous sales targets would not be reached due to coronavirus effects, and that news is covered everywhere Tuesday morning.
Citi helpfully offered more detail in terms of broader implications through the technology hardware space by highlighting the companies with the highest revenue exposure to China.
Prominent stocks include Cisco Systems Inc., Corning Inc., and Amphenol Inc.
Importantly, Citi projects that Apple’s revenue shortfall will be made up in June quarter results.
“@SBarlow_ROB C: IT hardware companies with largest exposure to China’ – (table) Twitter
“If Apple is hurting due to the coronavirus, its suppliers and rivals likely are too” – Reuters
See also (separate Citi report) : “ Our basic conclusion is that markets are overconfident in expecting a v-shaped recovery in all activities impacted in China and in global markets. Far more likely is a longer, u-shaped recovery in the real, physical markets and a “w” – if not a series of w’s – in financial markets for bonds, equities and commodities” - (research excerpt) Twitter
Morgan Stanley’s U.S. strategy team updated their list of “fresh money” top 10 stock picks. The list is more interesting than most, having outperformed while tilting towards value stocks rather than growth. Prominent names on the list include Coca Cola Co., Proctor and Gamble Co., and Johnson and Johnson.
“@SBarlow_ROB MS: list of top 10 'fresh money' stock picks (tilts value)” –(full table) Twitter
Citi economist Veronica Clark sees reasons to fade the recent rise in Canadian insolvencies. Ms. Clark first notes that insolvency data is based on proposals rather than bankruptcies. The number of bankruptcies continues to decline. In addition,
“While the total number of insolvencies has been rising over the last 10 years, so, of course, has the population and the amount of debt. As a share of the working age population, insolvencies remain more-clearly below mid-crisis levels in reached in 2008-09… The contrast is even clearer when considering how much debt has increased in recent years. While an imperfect comparison, the ratio of insolvencies to the number of residential mortgages in Canada is well below 2010 levels.”
“@SBarlow_ROB C: Rise in Canadian insolvencies is misleading - bankruptcies continue to decline’ – (research excerpt) Twitter
“ @SBarlow_ROB C: "population-adjusted insolvencies remain low and bankruptcies continue to fall'” – (charts) Twitter
BofA Securities (formerly Merrill Lynch) published their widely-anticipated monthly fund manager survey for January. Strategist Michael Hartnett interprets the results and describes his outlook as ‘irrationally bullish’, a term that hurt my brain initially and wasn’t full explained. Summary of global fund manager survey included following results,
“BofA Feb FMS shows investor sentiment less bullish than in Jan, full capitulation into QE-forever theme; BofA Bull & Bear Indicator unchanged at 6.5; we stay “irrationally bullish” … The deflation theme: combo of tepid macro, COVID-19 virus, oil plunge offset by QE-forever consensus...full capitulation into “deflation assets”...most “crowded trade” is long US tech/growth stocks, big Feb rotation into US, bonds, tech, EM (Exhibit 1), out of banks, energy, value, and highest expectations of growth sectors to outperform value since July'08… FMS positioning reflects massive underperformance of value stocks, resources, cash, inflation assets vs. US growth stocks, deflation assets; 10-year Treasury yields >2% needed to trigger big contrarian trade.’
“@SBarlow_ROB hartnett sees FMS results and stays 'irrationally bullish'. No, i don't know what that means” – (research excerpt) Twitter
Diversion: “The Hottest New Literary Genre Is ‘Doomer Lit” – Wired
Tweet of the Day: