Daily roundup of research and analysis from the The Globe and Mail’s market strategist Scott Barlow
Citi U.S. equity strategist Tobias Levkovich noted a rarity in a Monday research report – hedge funds are outperforming the S&P 500 by a significant 6.7 per cent so far in 2020.
This makes his accompanying list of top hedge fund stock holdings more relevant. The top ten in order are Amazon.com Inc., Microsoft Corp., Alibaba Group Holdings, Facebook Inc., Fidelity National Information Services Inc., Alphabet Inc., Netflix Inc., Apple Inc., Allergan PLC and JD.com Inc. The longer list of top holdings includes Proctor & Gamble Co., Lowe’s Cos Inc., Tesla Inc. and Johnson & Johnson.
“@SBarlow_ROB C: "Actively Managed Hedge Funds: Largest Holdings"” – (table) Twitter
BofA Securities’ widely circulated survey of global portfolio managers was released Tuesday with some surprising results in light of the strong rally in equity markets,
“Just 10% expect a V-shaped recovery, 25% a new bull market; in contrast 75% expect a U or W-shaped recovery, 68% a bear market rally … Cash: high at 5.7%, down from 5.9%, well above 10-year average of 4.7% … Macro trough: FMS global growth expectations jumped but investors don’t expect global manufacturing PMI to rise back above 50 before November … Contrarian trades: investors looking to play upside…long EM debt-short US tech, long energy-short healthcare, long Europe-short US; investors looking to play structural reshoring theme…long value-short growth, long small cap-short large cap.’
“@SBarlow_ROB BoA: Summary of May FMS” – (research excerpt) Twitter
Scotiabank strategist Hugo Ste-Marie summarized the earnings reporting season for the TSX,
“TSX Q1/20 EPS is hovering at C$138, 37% below consensus, and the lowest quarterly print since Q1/09. This is also the largest miss on record. Revisions to subsequent quarters foresee double-digit EPS contraction rate throughout 2020, on par with the profit decline seen in 2008/2009. Still, we believe Q1/20 could potentially mark a bottom in profitability for the TSX. Sector wise, misses are broadly distributed, with most sectors reporting a steep YoY contraction in profitability. While it’s hard to see any positive, we note that Lumber, Transportation, Staples, and Technology all managed decent earnings beats, with Staples and Technology also reporting YoY earnings expansion.’
“@SBarlow_ROB Scotia summary of Canadian EPS so far” – (research excerpt) Twitter
Morgan Stanley global equity strategist Andrew Sheets published “‘Good’ Things That Are Bad, and ‘Bad’ Things That Are Good” over the weekend.
He noted that negative U.S. interest rates would likely not be good for equity prices, the market is not badly positioned for a U-shaped economic recovery and that inflation pressures should not be a concern. It is, however, his observations about the early reopenings of U.S. state economies that I found most relevant to investors,
“Two weeks ago, market strength was attributed to the hope that many economies would see a faster easing of restrictions. But we think that this is backwards. Markets have historically been very forgiving of slow recoveries and extremely weak data, as long as they’re set to improve. But markets have low tolerance for losing that positive rate of change, which conjures up all sorts of terrible scenarios. We think that some of the weakness this week reflects increasing market concerns about that sort of relapse, especially in the US.”
“@SBarlow_ROB MS: faster reopening likely not good for markets” – (research excerpt) Twitter
Diversion: “Archaeologists Will Excavate a Viking Ship for the First Time in Over 100 Years” – Gizmodo
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