Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotia analyst Mario Saric’s REIT Stuff report highlighted his top picks in the sector including short-term opportunities in Boardwalk REIT and Northwest Healthcare Properties REIT,
“Industrial and Apartment REIT Q2/21E FFOPU [funds from operations per unit] is 4%-5% above Q2/19A (i.e. already eclipsing pre-pandemic FFOPU with Q2/22E +18% vs. 2019); broader sector should complete recovery in 2022 (Q2/21E = -4% vs. Q2/19A; Q2/22E = +6%) … Quarterly FFOPU prints matter; we see near-term opportunity in BEI and NWH. We are notably (3%+) above consensus on HOM, SVI, MRT, MI and BEI and below on SRG, ERE, CSH, GRT, and SRU. We think a ‘low bar’ for Office REITs looks appealing, while NWH could benefit from lower global healthcare cap rates … CRT, CHP (incl. last night), KMP, CAR and FCR have all met or beat consensus FFOPU 90%+ of the time since 2015; We still prefer Growth. Growth is +5% vs. Value in the past month (now -5% YTD), expanding the valuation differential to ~25% on P/NAV[ price to net asset value] (19% in June; 37% on Jan. 1st); we like Growth and Value at sub-20% and 30%+, respectively. Our Top Growth Picks = BAM, CRR, DIR, GRT, IIP, MHC, SMU, SVI, and TCN. Our Top Value Picks = AP, BAM, CSH, and ERE. Our Top Income Picks = APR, CRR, CRT, and NWH.”
“@SBarlow_ROB BNS’s top REIT picks for growth and value” – (research excerpt) Twitter
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BMO notes that Canadian businesses are looking to raise prices by record amounts,
“Smaller businesses in Canada are facing input cost and labour-supply challenges as the economy re-opens more broadly. Updated survey data from the CFIB will be out in a few days, but businesses at midyear were already planning steep price increases for the coming twelve months. On average, price gains are pegged at almost 5%, the highest on record (by a wide mile) dating back to 2009. In fact, more than a third of firms are looking at price increases in excess of 6%. Importantly, there is a solid correlation between what business say, and what they actually do. Note that the Bank of Canada’s CPI common-component measure correlates well, with a 12-month lag. It’s clear where the near-term inflation risks still reside…”
“@SBarlow_ROB Cdn businesses looking to jack prices higher (BMO)” – (research excerpt) Twitter
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Citi chief U.S. equity strategist Tobias Levkovich believes that the Delta variant, while highly unfortunate, will not significantly hamper the U.S. economic recovery,
“It is unlikely that the new Covid variants will force a significant change in US economic activity as broad-based lockdowns seem improbable. Some have decried the latest virus surges as a pox on the unvaccinated, and while more infectious, it appears less deadly (fortunately). The impact on younger members of society is disheartening, while so many aspects of fiscal and monetary policy suggest continued recovery… Our market concerns have been mostly driven by sentiment and valuation, which leaves investors vulnerable to pullbacks … we perceive complacency, especially when share prices rebound so quickly off of any reasonable selloff… One might suggest that stocks are just reflecting profits approaching $200 annually by the spring of 2022 (which is about the right run rate), but it also leaves little room for upside, especially in the face of likely higher corporate tax rates next year.”
“@SBarlow_ROB Citi: “stocks are just reflecting profits approaching $200 annually by the spring of 2022 (which is about the right run rate), but it also leaves little room for upside” – (research excerpt) Twitter
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Diversion: “Here Are the 12 Best iPhone Photos of 2021—and the Winner Was Shot on an iPhone 7” – Gizmodo
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Scott Barlow