I read a ton of research every business day and the enjoyability factor for the process ranges from fascinating to boring to pure psychological torture depending on what’s available. On good days there are reports from analysts like Citi’s U.K.-based credit strategist Matt King, one of the world’s most interesting and influential market followers.
Mr. King graciously agreed to an extended e-mail interview that has been going on for two weeks now, in between his travel schedule. As a preview to the final full reports, here are a few of the best quotes so far.
On how much equity investors need to know about credit: “95 per cent of the time, equity investors can get by just fine without having to worry about balance sheets. But the remaining 5 per cent of the time, credit suddenly rears its ugly head and bites them. That tends to be right around late- or end-cycle – exactly where we are now.”
On central bank independence: “Cross-border effects have grown so much in recent years that individual national authorities are often far less in control of their own destinies than it is comfortable for them to admit … To take one trivial (if stunning) example I stumbled across: Australian house prices, and Sydney’s in particular, correlate far better with credit growth in China than they do with credit growth in Australia.”
On global markets’ increasing vulnerability to shocks: “Each of the shocks in the post-crisis era – the Eurozone sovereign crisis, the EM [emerging market] weakness in 2015, and the oil price drop which followed it – has gone on to have a much more negative and far-reaching effect than it was ‘supposed’ to.”
On China’s global financial reach: “It’s amazing when I’m travelling how often I ask about this or that construction or infrastructure project only to be told it’s being financed with Chinese money. But with 70 per cent of the world’s credit creation now occurring in China, perhaps it shouldn’t be.”
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Neo Performance Materials Inc. (NEO-T). This newly listed stock may appear on the positive breakouts list in the future if analysts’ forecasts are correct. The Street is anticipating the stock will deliver a one-year price return of 35 per cent, or total return (including the dividend yield) of 37 per cent. The small-cap dividend stock has research coverage by several large firms with a unanimous buy recommendation. Toronto-based Neo Performance Materials is a manufacturer of rare earth and rare metal-based materials with 10 manufacturing plants located across the globe. Jennifer Dowty reports (for subscribers).
Pollard Banknote Ltd. (PBL-T). This stock appears on the negative breakouts list with its share price falling 10 per cent in the past 10 trading days. Operationally, the company is delivering solid results. The small-cap stock is covered by three analysts – all have ‘buy’ recommendations. The average 12-month target price suggests the share price may rally over 20 per cent in the next year. Winnipeg-based Pollard Banknote is a leading provider of lottery products, supplying over 60 instant ticket lotteries. Jennifer Dowty reports (for subscribers).
Recipe Unlimited Corp. (formerly Cara Operations Ltd. CARA-T). Is that, like, a cookbook company or something? Nope, it’s the new name for Cara Operations Ltd., better known as the owner of Swiss Chalet, Harvey’s, East Side Mario’s, Montana’s, The Keg and other establishments where Canadians like to chow down. And it’s a fitting moniker, given that Canada’s largest operator of full-service restaurants has recently been cooking up some tasty returns after a period of sluggish sales. John Heinzl reports (for subscribers).
The Rundown
Where the smart money is placing bets: The top stock holdings of 778 actively managed U.S. funds
It’s always interesting to examine the top holdings of an individual mutual fund. But examining the top holdings of hundreds of mutual funds is far more riveting: What is the smart money up to? RBC Dominion Securities has lifted the lid on 778 actively managed U.S. large-cap funds that take long-only positions (no short-sellers here). And what we get is a deep look at the most popular U.S. stocks today, along with an indication of how fund managers are adjusting their portfolios during an unusual period of rising interest rates, global economic acceleration and market volatility. Who knew that Microsoft Corp. is the go-to name among the pros? David Berman reports (for subscribers).
Shopping around? These consumer-staple giants may be poised for a rebound
What’s ailing the great brands of America? Big U.S. consumer-staples stocks – the likes of Coca-Cola Co., General Mills Inc., Colgate-Palmolive Co. and Procter & Gamble Co. – have offered investors nothing but pain in recent months. The sector has lost 13 per cent of its value since January. In contrast, tech shares have delivered a buffet of joy. The fabled FAANGs – Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc. and Google’s parent, Alphabet Inc. – have held firm or climbed even higher, as have many lesser known tech names. The sector as a whole has gained nearly 10 per cent since the year began. The gap between these two corners of the market is now attracting the attention of contrarians, who believe consumer-staples stocks are poised to rebound. Based purely on valuation, the staples fans have an intriguing case. Ian McGugan reports (for subscribers).
How this underfollowed indicator guides global energy investors
It’s not entirely fair to say that futures markets are driving oil prices, but the shape of the futures curve is almost certainly the most underfollowed indicator for investors in global energy stocks. The recent weakness in the commodity’s price provides further evidence of the futures market’s predictive abilities. Scott Barlow takes a look at this chart.
Scotia Global Asset Management begins trading new ETF portfolios
Canada’s fourth major bank began trading on Wednesday its own proprietary exchange-traded funds that will follow a “fund of funds” investment strategy. The Bank of Nova Scotia’s asset-management division, Scotia Global Asset Management, announced the launch of the Scotia Strategic ETF Portfolios, a suite of smart beta ETF portfolios that include fixed income, domestic and global equity funds. The four ETF portfolios are: Scotia Strategic Fixed Income ETF Portfolio (SFIX), Scotia Strategic Canadian Equity ETF Portfolio (SCAD), Scotia Strategic U.S. Equity ETF Portfolio (SUSA) and Scotia Strategic International Equity ETF Portfolio (SINT). Clare O’Hara reports.
Investors are over-doing it with balanced funds
Stop two-timing your balanced fund. Chosen wisely, balanced funds are convenient blends of stocks and bonds can be your entire portfolio. If this convenience allows you to commit to a regular investing plan over the long term, then balanced funds can be a big win. The problem with balanced funds is that both individual investors and advisers often can’t stop at one – even though they should. Rob Carrick explains why.
Top Links (for subscribers)
No room for compromise in Trans Mountain pipeline dispute
Canada’s lack of competitiveness makes it an ‘also ran’ in global markets
Others (for subscribers)
Thursday’s analyst upgrades and downgrades
Thursday’s Insider Report: Companies insiders are buying and selling
Thursday’s small-cap stocks to watch
Wednesday’s analyst upgrades and downgrades
Wednesday’s Insider Report: Companies insiders are buying and selling
Wednesday’s small-cap stocks to watch
Others (for everyone)
U.S. steel, aluminum stocks gain as Trump moves ahead with tariffs
Trump’s tariffs make market havens desirable
Bill Gross, revered fund manager, is having a year to forget
Poll: U.S. stocks set to resume gains, rise 6% from here
Italian bond shock uncorks yet another ‘low volatility’ bottle
Number Crunchers (for subscribers)
Twenty U.S. stocks for both value and momentum investors
Eight energy companies poised to thrive in a green economy
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What’s up in the days ahead
Ian McGugan will explain why investors shouldn’t let Donald Trump and his latest moves on trade spook them out of the Canadian stock market. And David Berman gives us his take on the earnings season that just wrapped up for the Canadian banks.
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Gillian Livingston