Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Energy infrastructure
RBC Capital Markets analyst Maurice Choy traveled Europe and found strong interest in Canadian energy infrastructure stocks,
“Our view: We were recently on the road meeting investors in Europe, with many discussions focused on our outlook in the year ahead, the implications of recent events in Venezuela and in Davos (e.g., PM Carney’s speech), data center-related announcements, and our Canada Comes to London conference (please click here). On the proverbial ‘Why Canada?’ and ‘Why now?’ questions, we offer the thoughts below. Holistically, we came away with asense that investor interest in our sector is strong (even if conviction levels varied across the board), with most lines of questioning and investors’ willingness to ascribe premium stock valuations being related to the durability of and upside to a company’s cash flow growth profile, instead of balance sheet health or return of capital. We maintain our pecking order of Power, Midstream, and Utilities; that said, given the events since the start of the year, USMCA renegotiation uncertainty, we now have a tighter gap between these ranked options, leading us to be increasingly stock selective”
Mr Choy has outperform ratings on AltaGas Ltd., Brookfield Infrastructure Partners LP, Capital Power Corp., Emera Inc., Gibson Energy Inc., Keyera Corp., Pembina Pipeline Corp., Rockpoint Gas Storage Inc., TC Energy Corp. and TransAlta Corp.
Financials
Scotiabank analyst Mike Rizvanovic provided top picks in the diversified financials sector,
“We continue to have a constructive view on the large Canadian lifecos heading into Q4 earnings season as we expect the group to report another good set of results, albeit with modest EPS declines from the prior quarter, which for some was aided by lower-than-expected credit losses and slightly elevated insurance experience gains. We see strong upside potential for the group over the medium-term, supported by solid regulatory capital levels, which we believe may accelerate the pace of share buybacks in the coming quarters. We have not made any changes to our ratings ahead of the quarter, although our target prices move up across-the-board as we use a slightly higher P/BV multiple to value the lifecos to reflect our increased confidence in the group’s ROE trajectory. Among the peers we still prefer GWO as our top pick, despite the lifeco’s strong revaluation in recent months that has resulted in a group-high P/BV multiple, while we are also very optimistic on IAG’s outlook”
Software
JP Morgan technology analyst Mark Murphy did a great job outlining the carnage in the software sector, so much so that I quoted his most recent report extensively in yesterday’s Market Factors newsletter. Here’s an excerpt from the report,
“The latest catalyst appears to be Anthropic’s release of a number of Plugins for its Claude Cowork product. The plugins currently focus on “departments” including Legal, Sales & Marketing, Finance & Accounting, Data Analysis, and Productivity & Search. The main trend being observed is the evolution of Claude from a chatbot that answers text-based questions to an agent that executes labor across your Mac’s local files and browser. In our view, generalist money flows responding to the rapid AI product rate-of-change dynamic are overwhelming the deeper-thinking fundamental software sector specialists who are slightly more grounded in the principles that create stickiness for Enterprise software businesses. These generalist money flows are invoking more knee-jerk selling, which is being exacerbated by index arbitrage basket selling, programmatic de-grossing, cross-correlation factor contagion, and a passive flow liquidity vacuum … We have repeatedly highlighted the lack of head count growth across the software landscape and broader economy as an unusual trend partially tied to AI … In recent months our sense is that investor concerns have finally caught up with the rate-of-change vector for AI and likely begun to overshoot to the downside. 2) Our CIO Survey series does not suggest the imminent death of the broader software landscape, to any material extent … our view remains to recognize the narrative shift we identified three years ago and position accordingly with a barbelled approach spanning value and growth, avoidance of overly generous valuation frameworks, and consideration of top performers in our CIO survey work with appropriate FCF valuation support and resilient/sticky revenue streams”
Bluesky post of the day
GS DESK: “.. There is no smoking gun for today’s move, it just happens that the market is chasing the strongest earnings revisions possible .. “.. a larger unwind of the winners could cause more pain than a rotation given where nets are in our Prime Book (89th percentile over last year).”
— Carl Quintanilla (@carlquintanilla.bsky.social) February 4, 2026 at 2:37 PM
[image or embed]
Diversion
“What Really Happened on Easter Island? New Evidence Challenges Long-Held Myths” - SciTechdaily