Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Keyera a top pick at CIBC
CIBC analyst Robert Catellier previewed earnings season for the energy infrastructure sector and provided top picks,
“We characterize Q3/25 as a continuation of conditions in Q2, a period marked by significant commodity price volatility and marketing headwinds, compounding the typical operating challenges of the quarter such as turnaround activity, heating shoulder season, and forest fires in Canada. A strengthening USD is starting to act as a renewed tailwind for companies with USD exposure. We have adjusted our estimates for the midstream companies under coverage to reflect weaker marketing conditions in Q3/25, but even larger pipeline companies were not immune due to lower differentials leading to less volumes through many liquids systems … We’re more than 5 per cent above consensus for KEY on EPS, while being more than 5 per cent below for SPB on EBITDA and both ALA and TRP on EPS … Top Picks Heading Into Q3 Results: We favour KEY due to unrealized value in the pending acquisition of Plains’ NGL assets, and WMB as its outlook statement may be strong due to U.S. gas exposure. PPL also has some upside in the Greenlight Energy Centre project, although propane pricing may pressure 2025 marketing guidance.
Seniors housing still best bet says Scotiabank
Scotiabank analyst Mario Saric prefers seniors housing and Montreal Retail space among national real estate markets,
“TAKE: Neutral. Our est. CBRE Survey Q3/25 avg. national cap rate [profit margin] was flat quarter-over-quarter (Q2 and last 12-month average = flat; ) at approximately 7.0 per cent vs. 14bp higher CAD10YRGOC and flat quarter-over-quarter REIT implied cap, implying a stable-gap between public and private cap rates quarter-over-quarter, but slightly wider spread to 10YR GoC. The flat quarter-over-quarter change = 5th quarter of stability; this was the first quarter in a year where percentage of markets with cap rate declines did not exceed increases (i.e., 8 per cent vs. 8 per cent).
“We think the winners = Seniors Housing and Montreal Retail (Q2 winners = Retail), while remaining asset classes/markets were largely flat. No notable geographic winners (last quarter = Halifax and Montreal) or laggards (Q2 = Quebec City and Vancouver). Seniors Retirement Class A fell 25 basis points across each market, while the avg. 50bp jump in Montreal Office (think AP) was partially offset by a 25bp decline in Montreal Retail (we think FCR has largest exposure).”
Fund managers stay risk-on
Citi global strategist Alex Saunders reported activity for global asset allocation funds,
“Asset allocators stay risk-on, adding to equities and selling bonds. Managers increased overweight positions in Japan, UK, and China equities, as well as in small caps. Duration trades were reduced across DM, with the exception of Gilts, which saw an increase in their overweight alongside EM rates. In credit, IG remained mostly unchanged, unperturbed by the negative headlines, while HY weakened, the U.S. flipping to negative. The EM credit overweight increased significantly. Managers remain overweight commodities; the gold position was reduced but is still a consensus long – most reports came out before the 4.7σ down move this week. Across FX, the short USD and long EUR/EMFX consensus views remain. Consensus trades include short JGBs and US IG, as well as USD short and EMFX long. EM bonds are still preferred in rates, while JGB and UST underweights stand out.”
Diversion
“Amazon claims the headline isn’t robots taking jobs as it reveals new cost-cutting robots” - The Verge