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A daily roundup of research and analysis from what The Globe and Mail’s market strategist Scott Barlow

Rapidly climbing commodity prices and a soaring loonie have markedly improved the outlook for Canadian equities, but domestic investors continue to buy foreign assets.

CIBC’s Royce Mendes reports,

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“Canadian investors remained hungry for foreign securities in March. After acquiring $13.1bn of foreign securities in February, Canadians scooped up another $21.2bn in March. Demand for US shares remained strong, particularly for large cap technology firms and funds tracking broad market indexes. However, Canadian pension and mutual funds did pick up $3.8bn worth of non-US foreign equities in March. Demand from abroad for Canadian shares also remained strong in March, with foreign investors scooping up another $10.6bn worth of equities after buying $9.5bn in February… The combination of strong Canadian demand for foreign securities and weaker foreign demand for Canadian securities generated a net outflow of funds worth $18.0bn.”

“@SBarlow_ROB Commodities, CAD soar. Canadians buy foreign securities. via @RoyceCMendes” – (research excerpt) - Twitter

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I’m not generally a fan of thematic investing reports – there is too much flavor-of-the-month influence where most investors would prefer more stable, long-term growth opportunities – but Citi’s Global Theme Machine is an exception. They follow the returns on more than 80 different, often arcane, themes and track them closely, providing stock ideas based on the best performing ideas.

The most recent update was published Monday,

“Themes which have remained constant in their top quintile attractiveness include Services Offshoring, Deequitisation, Wearable Tech, Artificial Intelligence, IT Services, IoT[internet of things], and Video Gaming. Best & Worst Performers — Particularly strong performance can be seen in Belt & Road (+8.0% in April, +23.2% last 3 months; MSCI +11.1%), Novel Biothreats (+7.2% April +14.4% L3M), and Sustainable Materials (+7.1% April, +15.2% L3M). Weakest performance in April was found in Biotech, DNA/Genetics, Hydrogen, Solar. Laggards & Leaders — For those digging into Themes on a contrarian basis, we note the weakest YTD performance has been seen in Space Race (-0.3%), DNA/Genetics (+2.0%), Solar Energy (+4.1%), SaaS (+4.5%), with other notables including Green Mobility (+5.8%), Cyber Security (+6.0%) Electric Vehicles (+7.2%), and Cloud Computing (+7.9%) – compared to MSCI World +10.0%. Strongest trailing 12 month performance is headed by Hydrogen (+104.3%), Belt & Road (+94.6%), Sharing Economy (+93.6%), Timber (+91.1%), Manufacturing Onshoring (+88.6%) - compared to MSCI World +46.0%.”

Stocks with the most exposure to top performing themes are LG Display, Taiwan Semiconductor Manufacturing, Samsung Electronics, Silicon Labs, Gopro, NVIDIA , Nintendo, NC soft, Kingsoft and Accenture.

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“@SBarlow_ROB Citi: best and worst performing investment themes” – (table) Twitter

" @SBarlow_ROB Citi: Stocks with exposure to best performing themes” – (table) Twitter

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BofA Securities monthly survey of active portfolio managers finds record optimism,

“Bottom line: BofA May FMS shows investor sentiment unambiguously bullish; 69% expect “above-trend” growth and inflation, a record high … signs “peak optimism” on growth (90% to 84% May), profits margins (46% to 26%), capex (54% to 51%), inflation (93% to 83%); … “value” remains most consensus outperformance “factor” (48%), but big April jump in “high quality” (41% from 17%) & “high dividend” (39% from 24%) factors, while “small-cap” continues to fade (14% from 41% in Jan)… stagflation bears (i.e. weaker growth) should short Europe, financials, materials, consumer cyclicals; inflation bulls (i.e. lower inflation) should go long Treasuries, tech stocks, EM; our H2 cyclical value to defensive growth view here. '

“@SBarlow_ROB BoA fund manager survey finds PMs ‘unambiguously bullish’ - (research excerpt) Twitter

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Newsletter: “Why we’ll never see 1970s inflation again” – Globe Investor

Diversion: Best article about fungus ever, “From Its Myriad Tips” – London Review of Books

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