Barlow’s Research Roundup: BMO analyst picks biggest winners from an expected energy investment boom

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Energy investment boom

BMO analyst Ben Pham outlined the potential winners from an expected boom in domestic oil and gas investment,

“We believe the development of large scale oil pipeline projects in Western Canada is shaping up as a major investment opportunity for Canadian energy infrastructure companies. Rising oil production, favorable macro and political backdrop, higher commodity prices and tight pipe capacity are the key drivers. Fortunately, there are 2.5M bbl/d of proposals in various stages of development just in the nick of time, though it is unlikely that all will be built and/or built on time. Companies that are participating directly include SOBO (’market perform’), PPL (Mkt), and ENB (’outperform’) with proposed oil infrastructure projects. We also flag ALA (OP), KEY (OP) and PPL (Mkt) for follow-on NGLs/ condensate/exports requirements, GEI (Mkt) for oil storage, ACO.X (OP)/CU (Mkt) for regulated ‘wires’ and CPX/TA (both OP) for power generation”

Bright outlook for cybersecurity

The outlook for cybersecurity corporate profit growth continues to brighten, according to BofA Securities analyst Tal Liani,

“Cybersecurity sentiment continues to improve as investors focus on the security implications of agentic AI. Over the past month, cyber ETFs HACK/CIBR 7.3 per cent/6.4 per cent have outperformed the IGV software ETF and S&P 500 up 2.8 per cent/down 0.9 per cent, respectively. The AI conversation has flipped from disruption risk to recognition that AI creates new attack surfaces, new identities, and new governance needs which demand additional security investment. We believe the market is increasingly pricing in a step-function increase in cyber risk, supporting both higher security spending and a more constructive valuation framework across the sector. We are raising our POs [price objectives] for CrowdStrike, Okta, and SailPoint and view cybersecurity as a mega-theme and enabler of the AI era”

Tech rally intact

Scotiabank strategist Hugo Ste-Marie found signs of an intact tech rally,

“Preliminary Korean trade data are providing another encouraging signal for global tech demand … South Korean semiconductor exports during the first ten days of September surged by roughly 270 per cent compared with the same period last year, the strongest readings on record. The magnitude of the increase reinforces the momentum seen in August, when semiconductor exports from Korea and Taiwan rose by 206 per cent year-over-year and 60 per cent year-over-year, respectively. Historically, strength in Asian semiconductor exports has also been closely associated with U.S. Tech outperformance. This trend is consistent with the conclusions from our recent report, Scotiabank 360°: Multi-Asset Investment Ideas – AI Boom: Your Capex, My Revenue. While U.S. hyperscalers remain at the centre of the AI investment boom, a significant share of their capital spending is flowing abroad through purchases of semiconductors, memory, networking equipment, and other electronic components …With forward EPS momentum shifting sharply in favour of EM relative to the S&P 500, EM equities offer compelling exposure to AI-driven demand without bearing the full burden of U.S. financing strains. This remains an important reason behind our OW position on Emerging Market”

Oil shock

Citi economist Adam Pickett made an interesting observation regarding crude’s ability to upset the global economy,

“The Fed joined the ECB with a hawkish message. There’s an increasing risk that they view the previous 3 cuts as labour market insurance that need to be removed. Still, MSCI World is only 3 per cent off the all-time highs despite rates markets already pricing tightening cycles across G3 CBs. The investment cycles around AI, improving energy supply chains and defense seem to be supporting strength in global export orders, global data momentum and global earnings. In a world where energy intensity of GDP continues to structurally fall, we may need bigger shocks to turn bearish”

Bluesky post of the day

Diversion

“3-Year-Old Boy’s Cancer Disappears After He Gets Experimental Immunotherapy” - Gizmodo