Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The Credit Suisse research team has screened the U.S. health care (one of my two favourite sectors long term along with cloud spending) for cash flow profit margins and provided a list of top picks under three different categories – value, defensiveness, and quality growth. I’ll focus on the quality growth list where the stocks are chosen by ranking operational profit margins, earnings growth, risk and price to book value.
The picks, ranked by market capitalization, are Thermo Fisher Scientific Inc., Danaher Corp., Intuitive Surgical Inc., Zoetis Inc., Stryker Corp. (Disclosure: I own this one), Anthem Inc., Becton Dickinson & Co., Cigna Corp., Boston Scientific Corp., Illumina Inc., Edwards Lifesciences Inc. Veeva Systems Inc., Idexx Labs Inc., Resmed Inc. and Align Technology Inc.
“@SBarlow_ROB CS: Top picks in health care sector for high quality growth” – (table) Twitter
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Citi strategist Jeremy Hale is looking for a 10-per-cent drop in the trade weighted U.S. dollar,
“Our view is that Looser Fed + Larger Deficits = Lower USD. Loose-money/ loose-fiscal in the US is contrary to the tight-money/ loose-fiscal stance that sucked capital from RoW [rest of world] into the US throughout 2018. The DXY [U.S. trade weighted dollar index] is 10% off the March highs and 3.5% lower YTD. Should the DXY slide another 10%+ from current levels (driven by EUR/USD to 1.25+), the cross market implications are likely significant.'
Mr. Hale sees a falling dollar as beneficial for emerging market equities, and commodity sectors.
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BofA Securities strategist Michael Hartnett is urging clients to add inflation hedges for 2021,
“Stocks, consumers, China, inflation all putting upward pressure on bond yields - which is what ends bull markets … US CPI core in July up 0.6%, i.e. in one month core prices rose by as much as the 10-year nominal yield; bigger government (expansion of monopolistic public sector), smaller world (breakdown of global supply chains), dollar debasement (inflation solves excess indebtedness) all secular reasons to raise inflation hedges big-time heading into 2021…note 5yr forward break-evens up to 1.8% from March low of 1.1%.”
Morgan Stanley is also in this inflation camp. If yields rise significantly, dividend investors may be forced to adjust.
“@SBarlow_ROB BoA: “all secular reasons to raise inflation hedges big-time heading into 2021…note 5yr forward break-evens up to 1.8% from March low of 1.1%.”” – (research excerpt) Twitter
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Scotiabank energy strategist Michael Loewen took a look at the potential effects of president Biden on the energy sector,
“The two key deliverables of Joe Biden’s Sustainable Infrastructure and Clean Energy Future pillar of his Build Back Better platform are: 1. A carbon pollution-free U.S. power sector by 2035, and 2. U.S. economy-wide net-zero emissions by no later than 2050… Regarding the power sector: Roughly 63% of U.S. utility-scale electricity is generated through carbon-emitting fuel types, according to EIA data. The remaining 37% is from non-emitting sources including nuclear and hydroelectric, which account for 19.7% and 6.5% of aggregate capacity, respectively. If the United States were to phase out all carbon-sourced, utility-scale generation by 2035, the power sector would require 2.6 million GWh p.a.[gigawatts per year] of sustainable, renewable capacity, assuming current demand levels for electricity. This supply gap amounts to ~81 Palo Verde nuclear plants… The U.S. economy (i.e., not just the utility-scale power sector) consumes 94.6 exajoules p.a. of energy, of which 78.8 exajoules (83%) comes from coal, crude oil, and natural gas'
“SBarlow_ROB BNS: Biden presidency and the energy market” – (research excerpt) Twitter
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Diversion: An important case in that Apple and Google can’t let it become a final legal anti-trust decision,
“Epic Games’ Lawsuits Fire a Shot at Apple and Google’s App Store ‘Monopolies'’ – Wired
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Scott Barlow