Brookfield headlines RBC analyst’s top picks in diversified financials

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

Top picks in diversified financials

RBC Capital Markets analyst Bart Dziarski published his top picks list for diversified financials, favouring Brookfield (BN-T),

“Our view for Q4/25 earnings: i) Brookfield entities (BN/BAM/BBU) - fundraising/deployment/monetization environment. We are positive on BAM heading into Q4/25 earnings and neutral on BN ii) P&C insurance (DFY, FFH, IFC, TSU) - we don’t believe Q4/25 results will be enough to change currently subdued investor sentiment iii) TMX - we are positive on Q4/25 earnings given continued strong volumes and IPO activity iv) EFN - we believe 2026 guidance could drive upward consensus earnings revisions and v) GSY - we are cautious on Q4/25 earnings and believe guidance is at risk of being cut. Our top 3 best ideas remain: (1) Brookfield Corporation, (2) Element Fleet and (3) Fairfax … BN/BAM/BBU - fundraising/deployment/monetization with our expectation that all three should accelerate in 2026 given a healthy macro and capital markets backdrop. For BN, we expect cash carried interest realizations to be benign and BWS growth to also be subdued given elevated competition and continued pressure on spreads. For BAM we revised our estimates higher primarily reflecting BBU incentive fee payment following BBU’s price increase in Q4/25. We believe investors will focus on BAM’s fundraising outlook given several flagships (i.e. PE, Infrastructure) are in market in 2026”.

Skepticism in tech

Evercore ISI strategist Julian Emanuel outlined the stressors in the technology space ahed of earnings,

“Navigation – Tech’s Test: Tech enters 4Q25 earnings season with among the most downbeat sentiment of the AI Bull market, despite pockets of strength – a sharp contrast to sentiment into the prior quarter that was met by ORCL’s negative 10.8-per-cent reaction to the report. Info Tech, driven by EPS growth this cycle, is trading at its lowest relative NTM [next 12 months]P/E vs. SPX in the post-Pandemic period. Mag7 P/E is in-line with its post-Pandemic average, while the “other 493” trade near all-time high multiples. Tech angst stems from the mood in Software – Kirk Materne cites existential concerns and momentum in other parts of the sector with a more visible path to monetizing AI – spilling into AI/Hyperscalers. Price action sets the (Now Cautious) Narrative. AI itself faces question on adoption, leverage, circular financing, and overspending. We do not see Systemic Risk – at least not as yet. AI adoption, critical to competitiveness, remains on track with our model. Leverage issues are largely focused on ORCL. There is opportunity in Tech’s Test ahead, Hyperscaler earnings reports over the next two weeks and others identified with high levels of short interest. We recommend April ‘Risk Reversals’ for MSFT (O/P, Materne), META (O/P, Mahaney) and AAPL (O/P, Daryanani)”

Time to hedge

BofA Securities head of global research Candace Browning Platt emailed a summary of top research reports that included a recommendation to hedge against volatility,

“Investors are the most bullish they’ve been since July 2021, according to the January Fund Manager Survey. Cash levels are at a record low 3.2% and the percentage of respondents expecting a boom in the next 12M is 34%, the highest since the heady post-COVID days of 2021. There was a notable inflection lower in rate cut optimism from respondents but liquidity conditions are still perceived to be the best in years. Michael Hartnett suggests that long cash/bonds--short commodities/stocks, long UK stocks--short EM are among the contrarian trades. Protection against an equity correction is the lowest since Jan 2018, suggesting it’s time to do just that-increase hedges and exposure to safe havens. US Equity Strategy has a similarly cautious message, showing that stocks anticipate recoveries and that backdrops with strong earnings and GDP growth typically translate to the weakest returns. This should be another year of big growth for defense spending. For both commercial aerospace and defense contractors, however, tolerance for delays and missteps has dwindled. We expect the best performing companies in 2026 will be those that can adapt the quickest, successfully utilize and integrate AI, automate at scale and execute. We see $371-billion of incremental defence spending, about 70 pct above 2024 levels, if all NATO members (ex-US) were to spend 3.5 per cent of GDP on core defense. NATO members pledged to spend 5 per cent of GDP by 2035 at the June NATO summit. Ron believes RTX Corp (RTX), Lockheed Martin (LMT), Northrop Grumman (NOC) and L3Harris (LHX) are the best positioned within US defense stocks”.

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Diversion

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