Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley strategist Adam Virgadamo screened stocks to find those with the most to gain from the economic recovery the firm believes remains intact,
“(1) Market cap > $1B, (2) rated OW [overweight] or EW [equal weight] by MS analysts, (3) at least 15% off of pre-Covid highs, (4) upside of at least 25% to 2022e EPS from current NTM levels, (5) implied price upside of at least 25% based on MSe 2022 EPS x a normalized P/E multiple (assumed reversion to median premium/discount to S&P 500 over the last few years and a P/E multiple of 20x on S&P 500), (6) excluded companies with high premiums to S&P 500 over the last few years to avoid growth stocks that have grown into their multiples.”
The resulting list includes 40 stocks. Some of these, like airlines Alaska Air Group Inc., likely entail more risk than many investors are willing to accept.
Stocks I’d highlight from the list include Coca-Cola Co. (potential 13.4 per cent upside based on the screen criteria), Exxon Mobile Corp. (98 per cent) , Urban Outfitters Inc., (34 per cent) , Western Digital Corp. (151 per cent), Citigroup Inc. (46.2 per cent) and Verra Mobility Corp. (69 per cent).
All of these picks carry risks and the potential returns are all dependent on a strong, V-shaped economic recovery.
" @SBarlow_ROB MS: stocks with the most upside in recovery scenario" – (full table) Twitter
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Bank of America has released a report highlighting the stocks that have gained most from the company’s list of most promising investment themes. The top performing themes include waste management, robots, esports, smart cities, education, cybersecurity and big data. The companies most exposed to these themes are (in order) LM Ericsson, Twitter Inc., Parker Hannifin Corp., Ultragenyx Pharmaceutical Inc., Microsoft Corp., Packaging Corp of America, Black Knight Inc. and Workday Inc.
" @SBarlow_ROB BoA: Top performing investment themes" – (chart) Twitter
"@SBarlow_ROB BoA themes ranked by ‘Beat factor’ - (definition) Twitter
“@SBarlow_ROB BoA: Stocks with most exposure to top investment themes” – (table) Twitter
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Also from BoA, U.S. quantitative strategist Savita Subramanian noted “Strong evidence of de-risking in September” (my emphasis),
"Ahead of election risk and friction around the passage of additional fiscal stimulus, factors indicate de-risking of the buyside: stocks “under the radar”, or neglected by institutional investors as measured by Low Analyst Coverage and Institutional Neglect factors, outperformed the index last month (-2.5% each vs -2.7% for the benchmark), as well as for the quarter. Moreover, the ten most underweight stocks in fund manager holdings outperformed the ten most overweight stocks by a wide margin (-4.8% vs -7.6%) last month"
"@SBarlow_ROB BoA: “Strong evidence of de-risking in September” – (research excerpt) Twitter
“@SBarlow_ROB The most recent list of over-owned and neglected stocks I can find from Subramanian was published September 19″ – Twitter”
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Diversion: “The 14 Juiciest Quotes From the House [technology] Antitrust Report” – Wired
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Scott Barlow