BMO economist wonders ‘Where are the real estate investors at?’

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

Buyers’ market

BMO senior economist Robert Kavcic wonders Where the Real Estate Investors At?,

“This week’s edition of Focus will lay out the Canadian housing market outlook for 2026. One thing we see is a continued absence of investors in the market, which will keep new home sales depressed and ultimately curb the pipeline of new supply. Cash flow dynamics are one reason. That is, they still aren’t compelling enough, although they have certainly improved over the past year. There are also better options out there likely grabbing investors’ capital. Using Toronto as an example, we estimate that total real estate returns (price growth plus rental income) have now been flat for almost five years. Over that same period, the TSX has posted a massive 16-per-cent annualized total return. Investors are looking at 10-year risk free returns of around 3.5 per cent, and strong equity returns, with solid dividend yields, low transaction costs, no maintenance and instant/partial liquidity. They seem to be turning their back on real estate given the alternatives”

Peripheral plays on high growth semiconductor sector

BofA Securities analyst Vivek Arya uncovers peripheral plays in the red hot semiconductor sector. In U.S. terms these are mid-caps but they would be considered large caps in Canada,

“We highlight our favorite SMidcaps that could benefit from above-average sales/EPS growth, catch-up potential and ongoing market rotation. The 21 stocks in our analysis have a median market cap of $17-billion (range $3-$36-billion), compounded (CY [calendar year] 25-27E) annual sales/pf-EPS growth of 11 per cent/22 per cent, trading at a 29 times CY27 PE or 1.2 times PEG ratio. The group underperformed the SOX [semiconductor] index in the last two years, but year-to-date is outperforming, up around 17 per cent on a median basis vs. the SOX up 13.5 per cent. Our picks are well-levered to a combination of secular drivers including AI (CRDO), semicap/rising chip complexity (MKSI, AEIS, TER) and A&D (MTSI). We flag CRDO as the SMidcap with the fastest growth rate, most compelling relative value (0.9 times PEG) and the highest (44-per-cent) upside potential to our PO”

Heavy oil glut?

BMO oil and gas analyst Randy Ollenberger sees the possibility of a heavy oil glut,

“President Trump’s ‘takeover’ of Venezuelan oil production creates a potential threat for Canadian oil sands producers; however, there are a lot of “i’s” to dot and “t’s” to cross before higher Venezuelan production becomes a reality. Our “market watch” section looks at the fall of the Venezuelan oil industry and how the recent U.S. intervention in the country could disrupt tightening heavy oil dynamics in the PADD III market. Heavy oil differentials have widened in response to the “takeover” (notably at the USGC), which could have negative cash flow implications for several heavy oil producers in Canada. GFR, IPCO, and ATH could be the most exposed to wider differentials, while there is likely limited impacts to SU’s and CNQ’s cash flows”.

Bluesky post of the day

Diversion

“Obesity Isn’t Just a Risk Factor It May Cause Dementia” - SciTechDaily