Barlow’s Research Roundup: Six changes to Scotiabank strategist’s top 30 Canadian stock picks

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

Scotiabank top 30

Scotiabank strategist Jean-Michel Gauthier made six changes to his top 30 Canadian stock picks and discussed a potential change in sector leadership from energy to banks,

“The prospect of an Iran deal has weakened Energy Momentum, triggering another rotation in leadership. In Canada, Banks and other Financials are now the leading Momentum stocks as Energy and Mining fade. In the U.S., Tech remains ascendant despite several soft patches … Momentum factor volatility near record highs as leaders keep churning. Reversal risk is increasing. Momentum swings in Canada — Emerging leaders. Banks, Insurance, Industrials, and some Discretionary names are taking over. Resources may struggle to maintain leadership absent further positive earnings revisions. Momentum swings in the U.S. — Tech names at risk of Momentum exhaustion in July … BTE [Baytex Energy] replaces VET [Vermillion Energy Inc]. SKE [Skeena Resources] and FTT [Finning International] make way for BNS [Bank of Nova Scotia] and CURA [Curaleaf Holdings]. If positioning remains mostly unchanged, we believe Energy and Gold miners’ dominance could face serious challenges during Q2/26 (lower Growth rankings) just as their Momentum normalizes. Industrials are now ranked third, with Banks and Discretionary in fourth place”.

The move away from energy is threatened by news of renewed hostilities over the weekend. The full list of top 30 stocks is Enerflex, CES Energy Solutions, Tamarack Valley Energy, Athabasca Oil, Baytex Energy, Cenovus Energy, Parex Resources, Peyto Exploration & Development, Methanex, 5N Plus, Allied Gold, Discovery Mining, SSR Mining, OceanaGold, Centerra Gold, Wesdome Gold Mines, Bird Construction, Aecon Group, Russel Metals, NFI Group, Exchange, Linamar, Magna, Aritzia, Saputo, Curaleaf Holdings, TD Bank, Bank Of Nova Scotia, CIBC, and Atco.

Three high quality ideas

BofA Securities Research Investment Committee (RIC) surveyed U.S. analysts for their highest quality ideas,

“Quality is not one factor. It can mean profitability, durable cash flow, high returns on capital, balance sheet strength, or earnings visibility, depending on the index or manager. • Definitions matter. Since the start of 2025, a quality approach using both trailing and forward free cash flow has outperformed the S&P 500 … We think Vistra Corp. is compelling because it combines tight power markets, rising datacenter demand, and substantial free cash flow. Vistra owns scarce U.S. generation assets across natural gas, nuclear, coal, solar, and battery storage, giving it leverage to regions where reliable power is becoming more valuable. We have a Buy rating and $202 price objective, implying 21-per-cent potential upside … We think Moody’s Corp. (MCO) is compelling because it combines a ratings recovery, a high-quality analytics business, and AI-driven product upside. We have a Buy rating and $565 price objective, implying 21-per-cent potential upside, supported by strong margins, cash conversion, and recovery potential in the high-margin ratings business. The setup is tied to debt issuance and refinancing, which have historically tracked Moody’s stock performance … In our view, the selloff looks more like an opportunity than a falling knife, although the risk is real. Intuit is down 55 per cent over the last twelve months and fell another 20 per cent after the most recent quarter, largely due to AI concerns. We think that fear is too broad. The main AI risk is concentrated in lower-end DIY tax, while the higher-value parts of the business continue to grow. TurboTax Live (consumers) is expected to grow 36 per cent in FY26, the Online Ecosystem (enterprise) is expected to grow about 19 per cent, and total revenue is expected to grow 13.5 per cent. At roughly 11 times CY27E EV/FCF, we believe the valuation is too low for a franchise with Intuit’s margins, cash flow, and embedded customer relationships”

Cryptovolatility

Wells Fargo co-head of digital asset strategy Brian Rehling discussed weakness in the sector,

“Digital assets such as Bitcoin and Ethereum remain volatile investments. Volatility measures how much an investment’s price moves up or down over time. For digital assets, those moves have typically been much larger than for traditional asset classes such as stocks, bonds, or gold. For investors, this volatility is a central consideration because it creates both the potential for meaningful gains and the risk of significant losses. We believe investors should approach digital assets with realistic expectations, disciplined position sizing, and a clear understanding of how the exposure fits within a broader portfolio. Digital asset markets have tended to move through boom-and-bust cycles. For Bitcoin, these cycles are often discussed in relation to its roughly four-year halving events, which reduce the amount of new Bitcoin created. Past halvings have historically preceded periods of strong price appreciation but have not been the only driver of returns. After the 2016 halving, Bitcoin climbed from under $1,000 at the start of 2017 to nearly $20,000 by late 2017, before falling more than 80 per cent during the 2018 bear market. 2. After the 2020 halving, Bitcoin rose from below $10,000 to a high near $69,000 in 2021, before declining sharply during the 2022 crypto downturn. 3 The most recent halving occurred in April 2024, while the next halving is expected around 2028. ‘l The key takeaway is that sharp rallies and deep pullbacks have both been recurring features of digital asset market history”.

Halving refers to cuts in rewards for mining cryptocurrencies where miners are receiving half od previous amounts. The most recent halving occurred in 2024 where miners began receiving 3.125 coins per block, down from 6.25.

Bluesky post of the day

Diversion

" A device that revives eyeballs from dead donors could make eye transplants possible" - M.I.T. Technology Review