Barlow’s Research Roundup: Copper stocks on sale, says Scotiabank analyst

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

Miners oversold

Scotiabank analyst Orest Wowkodaw thinks copper miners are on sale,

“Copper Market Fundamentals Bending But Not Broken; Equities on Sale as Middle East Crisis Escalates. OUR TAKE: Mixed. After updating our copper (Cu) supply-demand outlook to reflect the impact of 2026 guidance season (including 2025 performance), weaker expected near-term demand, and other factors, we continue to forecast a sizable market deficit this year, transitioning to a finely balanced market in the 2027-2029 period as supply recovers. We also take stock of current equity valuations in the context of spot commodity prices as heightened macroeconomic uncertainty due to the escalating Middle East conflict represents a significant new overhang (mining equities have notably underperformed commodities since the conflict began, partially on profit-taking). Although markedly higher fuel prices (if sustained) will negatively impact costs for the miners, we forecast relatively solid margins at spot prices … With the Cu miners now trading at a notably weaker 2% average implied discount to spot (vs. premiums of 15% in 2025 and 19% over the last 3 years), at average spot 2026E-28E EV/EBITDA multiples of 7.8x, 5.9x, and 5.5x (vs. 3-year average of 7.3x), and at a spot 8%P/NAV of 1.08x (vs. 3-year average of 1.27x), equity valuations appear reasonably attractive at lower current commodity prices. However, prices may not have bottomed yet”

Scotiabank has outperform ratings on First Quantum, Ivanhoe Mines, Lundin Mining, Capstone Copper, Ero Copper and Foran Mining Corp.

Markets might not be complacent

JP Morgan’s Mislav Matejka is not surprised about the market’s resilience in light of precedents,

“Given that MXWO [MSCI World Index] is down “just” 7% over the past few weeks, does that suggest that equity markets are bound to see prolonged weakness from here? Clearly, if oil prices spike further, equities would have to reprice lower. It goes without saying that as long as heightened uncertainty persists, quality large caps, Energy and Defense are likely to be favoured, but if one has a longer time horizon, this might not be a winning strategy on a 6-12 month timescale, and perhaps even on a 1-3 month horizon it might not work. • We do not think that current equity pricing is inconsistent with to date oil moves. Looking at all the instances of oil price advancing at least 50-60% in a short space of time, such as the magnitude we are up to currently, we note that equities on average delivered +1% move during these periods, vs current peak/low of -7%, suggesting that some of the risk is in the price. • Furthermore, out of those 50% oil move episodes, and most times the oil advance didn’t stop there, the 6 & 12 month forward equity returns were +7% and +14% for S&P500. The times when equities were down, ‘74, ‘00 and ‘22, all have big differences to the current backdrop, in our view … Fundamentally, one should keep in mind that oil intensity of GDP has moved steadily down over the past decades … we reiterate our call from the start of March that Mag-7 and AI at risk groups have likely lagged too much, with opportunities for some better tactical trading”

Enviable productivity

The Canadian economy has been terrible creating productivity advances but U.S. corporate productivity is surging,

“The volatile headlines from AI disruption, cracks in credit and Iran are masking something big – corporate productivity is surging. Real output per hour across non-farm businesses is rising significantly above its pre-Pandemic trend. Efficiency in America is now annualizing 2.2% since 2020, the highest rate since the Internet boom. And the best may yet be ahead. Conditions driving prior productivity booms in the 1960s and 1990s/early 2000s draw similarities to today – long periods of innovation get catalyzed by shocks, new technology and ongoing structural investment. Indeed, the Pandemic has catalyzed an era of digitization to produce the largest productivity shock in more than half a century. Ongoing AI adoption can further augment those strong gains, as the technology is in the very early innings of showing how it will be able to boost Economy wide efficiency. Put together, trends catalyzed by the Pandemic combining with rapid advancements in AI, could spur 3% productivity for the remainder of this decade (Figure 1). That could further underpin elevated corporate profit margins, mitigate building wage pressures from inflationary Demographic dynamics, and reinforces EVR ISI Strategy’s view that market highs for this Cycle lie ahead … While the largest post Chat-GPT productivity gains have been in the highly AI exposed sectors such as Information, Real Estate and Prof./Sci./Tech Services, in many cases, these were the sectors that already had strong productivity gains before Generative AI came to the forefront. To gauge how much GenAI is driving new productivity gains, it’s critical to assess how productivity has changed before and after GenAI was introduced. When comparing the 2010s vs the GenAI era post ChatGPT (1Q23 and onwards), productivity for sectors such as Mining, Construction, Manufacturing, Agriculture and Finance has turned from flat/negative in the 2010s to firmly positive post ChatGPT. Apart from Finance, none of these sectors rank high on AI exposure”

Diversion

“Scientists Just Found Something Rather Grim That Happens When You Stop Taking GLP-1s” - Futurism