Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief strategist Brian Belski recommends quality and dividend growth stocks,
“Dividend and Quality are two of the most consistent strategies in the TSX, often outpacing the broader market for extended periods of time. Indeed, their long-term return profiles are remarkably similar, with both strategies posting some of their best relative returns when markets are soft, and/or volatility is elevated. Additionally, these strategies can even keep pace with the market during periods of prolonged strength, making these ideal tools for diffusing profound market swings. While these strategies have similar return profiles, we believe they can be complementary to each other, particularly during the current period of heightened angst, to say the least. For instance, ‘Quality’ can reduce portfolio volatility and add greater downside protection, while Dividend Growth can add a more cyclical and growth-oriented component. Overall, we believe investors looking to continue to diffuse market uncertainty can benefit from adding higher quality and dividend growth names to their portfolios.
The “outperform” rated names on the dividend growth list are Alamos Gold Inc. ARC Resources Ltd., Alimentation CoucheTard Inc., AtkinsRéalis Group Inc., Bird Construction, Inc., Boyd Group Services Inc., CCL Industries Inc., CES Energy Solutions Corp., Choice Properties REIT, Colliers International Group Inc., Canadian Pacific Kansas City Ltd., Constellation Software Inc., Dollarama Inc., BRP Inc., Dundee Precious Metals Inc., Enerflex Ltd., Fairfax Financial Holdings Ltd., FirstService Corp., Finning International Inc., CGI Inc., Gildan Activewear Inc., Hudbay Minerals Inc., iA Financial Corp. Inc., Intact Financial Corp., Imperial Oil Ltd., Kinross Gold Corp., Linamar Corp., MEG Energy Corp. Metro Inc., Methanex Corp., OceanaGold Corp., Pason Systems Inc., Secure Waste Infrastructure Corp., Stantec, Inc., Toromont Industries Ltd., and WSP Global, Inc.
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RBC Capital Markets analyst Darko Mihelic is concerned about domestic bank profit guidance (his emphasis),
“We lower our Q2/25E estimates with the primary factor being higher performing PCLs. Last quarter we had thought the Canadian banks could have (should have) built meaningful stage 2 reserves and while they alluded to some overlays, it did not seem to us that last quarter’s stage 2 PCL builds were “serious”. In addition to higher reserve builds this quarter, we also expect modest underlying credit deterioration, softer loan growth, and softer wealth results while capital markets results will look “okay” with cautionary language for H2/25. We believe there is risk to 2025 guidance and cautionary language for (risk to) medium-term objectives and/or 2026 estimates. There will be a temptation for investors to gravitate to the bank that builds a large performing loan loss reserve because conservatism is favoured during periods of uncertainty in our view … We have seen notable increases in reserve adequacy at BMO and it scores well ahead of Q2/25; BNS/TD may need to prove reserves are adequate and/or build significantly more this quarter”
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Scotiabank analyst Paul Cheng remains bearish on oil prices,
“We remain bearish on the oil market’s outlook over the next 12-18 months and believe the latest OPEC+ June quota increase of another 411 mbbl/d will further pressure the already weakened oil market. Although the latest quota still falls behind their March production levels, we expect this decision, nevertheless, will lead to additional supply increase from the cartel of >150 mbbl/d as Saudi Arabia ramps up based on its latest quota. Accordingly, we forecast global supply potentially could exceed demand by up to 1 mmbbl/d for the remainder of 2025 and 2026. We reiterate our view that the oil market probably will not bottom until late 2025/early 2026 at the earliest. OPEC and OPEC+’s behavior have long been dictated by two basic human emotions – Fear and Greed. In our opinion, Brent prices will need to fall to $40s or below for the Fear factor to fully kick in and forces all members back to the negotiation table to settle respective production disputes. We continue to think that there is higher risk of the market to overshoot on the downside over the next 12 months”
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Bluesky post of the day:
The City of Ottawa has an annual target of 15,100 housing starts a year, as set by the province. Currently, starts are less than half of that. Yet the Ottawa planning community keeps telling me over and over how awesome everything is.
— Dr. Mike P. Moffatt (@mikepmoffatt.bsky.social) May 6, 2025 at 5:13 AM
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Diversion: “Man Bitten by 200 Snakes Helps Scientists Create a Super Antivenom” – Gizmodo