RBC analyst’s top picks in red-hot copper sector

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

Copper picks

RBC Capital Markets analyst Sam Crittenden provides top picks in a strongly rallying copper mining sector,

“Copper and the equities have rallied sharply after the incident at Grasberg [Indonesian mine collapse] further tightened an already tight market. Demand indicators have started to soften and the path forward depends on evolving trade dynamics; however, strength in copper intensive sectors have resulted in resilient demand ytd while supply disruptions can support strong prices. After lagging to start the year, the copper equities have now significantly outpaced the commodity (up 61 per cent vs. copper up 21 per cent). Strong copper and precious metals prices remain a tailwind for Q3 results with average copper and gold up 3 per cent and 2 per cent … Preferred names: Hudbay as they continue to demonstrate strong FCF and de-risk Copper World, Capstone as they execute on a production and FCF inflection. We still see upside in First Quantum as they work towards a restart in Panama, and Ivanhoe as they ramp back up at Kakula”

Health care

BofA Securities is newly optimistic about U.S. health care stocks, as the company’s global research marketing department highlights,

“Savita Subramanian, in this note: upgraded the healthcare sector to Overweight today after having an Underweight on the sector for two years. Savita believes that regulatory and fiscal risks are likely priced in as long only fund managers sold healthcare stocks to chase the AI theme … In light of Savita’s sector upgrade, our U.S. fundamental analysts volunteered several stocks they believe are most attractive. The selected stocks with the name of the covering analysts are as follows and more detail on each of these is provided within. Tim Anderson - Eli Lilly (LLY), Gilead (GILD), Tazeen Ahmad - Argenx (ARGX), Ascendis (ASND), PTC Therapeutics (PTCT), Jason Gerberry - Jazz Pharma (JAZZ), Ionis (IONS), Jason Zemansky - Bridge Bio (BBIO), Travere (TVTX), Alec Stranahan - Agios (AGIO), Revolution Medical (RVMD). Mike Ryskin - Thermo Fisher (TMO), Allen Lutz - Henry Schein (HSIC), Kevin Fischbeck - Cigna (CI), Joanna Gajuk - Encompass Health (EHC), Travis Steed - Boston Scientific (BSX), Dexcom (DXCM)”

The theme includes obesity treatments where BofA likes Eli Lilly and Co. (LLY-N).

Energy sector

Scotiabank analyst Kevin Fisk is bullish on domestic oil stocks,

“We maintain a structurally positive view of Canadian differentials, underpinned by years of underinvestment, sustained capital discipline, surplus pipeline egress capacity, and robust global demand for heavy crude. TMX has brought structural change to the Canadian oil market by improving transport efficiency, reducing price volatility, and diversifying market access beyond PADD’s 2 and 3 to Asia. Additionally, approximately 780 mbbl/d of pipeline optimization and debottlenecking opportunities have been identified, potentially extending the egress runway well into the 2030s … CNQ is our top pick. The company’s industry-leading cost structure provides downside protection from weaker oil prices, and we estimate that CNQ can fund its dividend and sustaining capex at less than $50 WTI. Further, CNQ is positioned to benefit from stronger natural gas prices. On Scotia’s price deck, which assumes $5.35 AECO in 2026, CNQ has a DAFCF yield of 6 per cent vs SU and IMO at 5 per cent and 4 per cent, respectively. At strip prices we estimate that CNQ can achieve its $15B net debt target in mid 2027, which will trigger buybacks increasing from 60 per cent to 75 per cent of free cash flow after dividend”

Bluesky post of the day

Diversion

“Where has beauty gone in the modern world?” – Marginal Revolution