Barlow’s Research Roundup: RBC analysts’ best ideas portfolio sees 14 changes

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

RBC analyst best ideas

The research team at RBC Capital Markets made 14 changes to their Canadian analyst best ideas model portfolio,

“The RBCCM Canadian Fundamental Equity Weighting (FEW) Portfolio is set by a committee within the Canadian equity research department and represents a model portfolio built around our analysts’ best ideas, giving consideration to sector and stock-specific weightings in the S&P/TSX Composite Index. The Fall 2026 FEW Portfolio contains 52 stocks, with four additions this quarter (Canadian Natural Resources, Nutrien, Ovintiv, Whitecap), two weighting increases (Barrick, Franco-Nevada), two deletions (Alamos, Cascades) and six weighting decreases (BCE, Enbridge, Pembina, RB Global, Suncor, Wheaton Precious Metals)”

The stocks in the portfolio are BCE Inc. (BCE), Rogers Communications Inc. (RCI.B), Canadian Tire Corporation (CTC.A), Dollarama Inc. (DOL), Alimentation Couche-Tard Inc. (ATD), Loblaw Companies Limited (L), Cameco Corporation (CCO), Canadian Natural Resources Limited (CNQ), Enbridge Inc. (ENB), Enerflex Ltd. (EFX), Keyera Corp. (KEY), Ovintiv Inc. (OWV), Pembina Pipeline Corporation (PPL), PrairieSky Royalty Ltd. (PSK), Suncor Energy Inc. (SU), TC Energy Corporation (TRP), Whitecap Resources Inc. (WCP), Brookfield Corporation (BN), Canadian Imperial Bank of Commerce (CM), EQB Inc. (EQB), Fairfax Financial Holdings Limited (FFH), Manulife Financial Corporation (MFC), The Toronto-Dominion Bank (TD), Chartwell Retirement Residences (CSH.U), DRI Healthcare Trust (DHT.U), AtkinsRéalis Group Inc. (ATRL), Canadian National Railway Company (CNR), Canadian Pacific Kansas City Limited (CP), Cargojet Inc. (CJT), Chorus Aviation Inc. (CHR), Finning International Inc. (FTT), RB Global, Inc. (RBA), Celestica Inc. (CLS), Constellation Software Inc. (CSU), Kinaxis Inc. (KXS), Shopify Inc. (SHOP), Artemis Gold Inc. (ARTG), Barrick Mining Corporation (ABX) Capstone Copper Corp. (CS), First Quantum Minerals (FM), Franco-Nevada Corporation (FNV), IAMGOLD Corporation (IMG), Nutrien Ltd. (NTR), OR Royalties Inc. (OR), Teck Resources Limited (TECK.B), Wheaton Precious Metals Corp. (WPM), Granite REIT (GRT.U), Killam Apartment REIT (KMP.U), StorageVault Canada Inc. (SVI), AltaGas Ltd. (ALA) and Brookfield Infrastructure Partners L.P. (BIP.U).

Wells Fargo turns cautious

Wells Fargo strategist Ohsung Kwon turned cautious,

“We hear broad cautiousness around Sept. seasonality in midterm years, suggesting the pain trade may be higher. However, our Sentiment Indicator remains more positive than negative after ‘Sell’ in mid-Aug, and the upside skew is at the 92nd percentile vs. past 12 months. We are turning cautious, expecting rising peak capex fears. We also see data center moratoriums as a big risk … Assuming another $1-trillion of AI capex (ex-META) in 2028E (consensus; up 13 per cent year-over-year), AI demand will have to grow to $2.2-trillion by 2029E … We believe AI demand will continue to accelerate, but the economy/capital will be the constraint. We see a risk that the AI capex cycle will enter its late stage in 2027, unless the economy accelerates enough to warrant further investments. The growth rate is expected to peak next quarter. Info Processing Equip. (i.e., Semis & Hardware) is already expected to reach 3.2 per cent of GDP by 4Q and 3.5 per cent by 2027-end, above the Internet peak (2.9 per cent) and Railroad peak (3 per cent) … We favor Quality over Beta into the midterms. Our Liquidity Indicator also could potentially turn negative by Nov. We see more legs in Software vs. Semis, but the trade will hinge on how good Anthropic’s numbers are in its S-1 (good = Semis over Software). We prefer owning lower beta AI-adjacent sectors, like Capital Goods (contrarian “Buy” triggered) and Tech Hardware”

Mr. Kwon recommends lower beta, high quality stocks with strong return on capital and free cash flow efficiency including Apple, Mastercard, Visa, Palantir, Netflix, Intuit, TJ Max, Monster and Vertex Pharmaceuticals.

Charts for the beach

RB Advisors’ annual Charts for the Beach report highlights rising margin debt and ex-U.S. profit growth,

“Monetarist theory suggests that abnormal credit creation precedes abnormal price appreciation. We tend to think of that rule within the context of bank lending, the real economy, and price inflation. However, abnormal credit creation can also lead to abnormal financial markets. Might we have that situation today? Margin debt, as it has during other speculative periods, is growing considerably faster than either credit card debt or mortgage debt. Maybe the Federal Reserve (Fed) should consider hiking margin requirements instead of the fed funds rate? … The favorable story for non-U.S. stocks has long been that they are cheaper than U.S. stocks, but there was not a compelling growth story to accompany that undervaluation. Today, there is one. There are presently about two hundred companies around the world that have projected long-term earnings growth rates of 25 per cent or more. Interestingly, only one of the Magnificent 7 companies passes that screen, and analysts are now forecasting strong secular profits growth for companies in the broader U.S. market, in developed markets, and in emerging markets. Investors’ continued significant underweight to non-U.S. stocks suggests a meaningful investment opportunity”

“Charts for the Beach: - RB Advisors

Bluesky post of the day

Diversion

“El Niño is now stronger than at any point in the last 1,000 years, study finds” - Ars Technica