Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The pandemic has highlighted the need for investment in medical technologies. Stocks like Teladoc Inc. – a provider of virtual medical treatment – are up 130 per cent year-to-date. In a Tuesday report, BofA Securities analyst Bob Hopkins published a list of top stock picks in larger cap segment of the sector,
“Our main takeaway after two weeks of diligence calls is that medtech procedure volumes have continued to recover in August over July … Both Medtronic PLC and Baxter International Inc. have attractive valuations, conservative consensus numbers and upcoming catalysts. Between now and year end, these are two of our best ideas. We also note that, of all the companies we spoke to recently, Stryker Corp. sounds among the most bullish both in terms of confidence in the recovery in procedures and, surprisingly, the outlook for the capital portion of their business. SYK has exposure should a deep and lasting recession manifest, but SYK also has multiple durable growth tailwinds that position the company extremely well long term”
“@SBarlow_ROB BoA: Top picks in large cap medical tech [includes SYK which I own]” – (research excerpt) Twitter
RBC energy analyst Michael Tran is not particularly excited about the short-term outlook for crude,
“The summer of status quo pricing is over. Crude prices were supported despite percolating signs of weakness in the physical market throughout much of August. The undercurrent of a softening physical market, which has been building for weeks, is leading the 8% price collapse today. Our real time global mobility trackers plateaued weeks ago, refiners are rejecting crude given the abysmal global refining margins and several OPEC countries have cut Official Selling Prices (OSPs) in an attempt to lure buyers … The structural rebalancing of the global oil market is a multi-step process. Sequentially, refined product demand must improve, product inventories must draw, refining margins must expand, and crude demand must firm while prices rally”
“@SBarlow_ROB RBC not thrilled with the outlook for crude” – (research excerpt) Twitter
HSBC strategist Alastair Pinder believes the Softbank-driven volatility in large cap technology stocks will continue,
"Signs of uneasiness and stretched positioning in the options market have been visible in recent weeks, with the put/call ratio collapsing, an extremely steep front-end VIX term structure, and unprecedented volumes of options traded in tech companies, particularly calls. In our view, the developments have a number of consequences for the market: First, dealers still appear to have “short gamma” exposure to the Nasdaq which would suggest further bouts of volatility are likely in the near term. Indeed, given the unprecedented scale of options traded for the FAANGMs (USD200bn notional volume a day in August, vs USD70bn at the beginning of January), it is unlikely that the recent volatility has completely cleansed positioning."
To the extent I understand “short gamma,” it means the major finance companies that sell options are positioned for option volatility [specifically the price sensitivity of options relative to the underlying stock] and if they’re wrong, they will have a lot of equity trades to do.
"@SBarlow_ROB HSBC: "dealers still appear to have “short gamma” exposure to the Nasdaq which would suggest further bouts of volatility are likely in the near term" – (research excerpt) Twitter
“Long Gamma and Short Gamma Explained” – Project Option
" Why Softbank’s bet on prominent tech stocks has the market rattled" – Inside the Market
Diversion: “Can artificial intelligence create a decent dinner?” – BBC
Tweet of the Day:
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.