RBC REIT analyst revisits top picks after industry conference

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

RBC Capital Markets REIT analyst Pammi Bir recently held meeting with industry executives during a conference in New York and summarizes the takeaways in a Tuesday research report,

“Industrial: Confident messages, yet signs of stronger demand likely required to convince investors. Against a backdrop of tariff-related macro uncertainty, questions around the ability to hit SP NOI [same property net operating income] and earnings growth guidance were understandably topical. Management teams expressed confidence in their outlooks, with pent-up demand, shrinking new supply growth, and a recent increase in RFPs in Canada a common thread across meetings … Supported by above-average growth profiles and attractive valuations, our preferred picks remain DIR and GRT … Retail: For the most part, operational outlooks remain solid in the face of a slowing economy … among the grocery-anchored and value[1]focused retail names, we continue to see good value in FCR and SRU … Seniors housing: Fundamentals are firing on all cylinders. Supported by robust demographic-driven demand, limited new supply, and its effective sales strategies, SIA remains confident in its ability to deliver more than 10-per-cent retirement SP NOI growth in 2025”

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It’s not unheard of for an analyst to pound the table on one of their stocks but this case, where Scotiabank strategist Jean-Michel Gauthier writes an entire report citing reasons to buy Brookfield Asset Management (BAM-T), is more rare,

“BAM opened down 4.8 per cent and closed the day down 3.7 per cent, likely as speculators unwound some pre-positioning from the lack of a BAM U.S. domicile assignment by S&P. Recall BAM has been engaged in a re-domiciling process leading to our forecasts of positive index flows in 2025. We believe many other investors (and us!) saw the new Canadian S&P methodology as a workaround for a BAM US domicile that also keeps it in S&P Canadian indices. This would have culminated in an estimated 6.3M shares demand on June 20 from S&P TMI and S&P Completion indexers buying BAM. BAM Selling Off Is a Tactical Buying Opportunity. BAM is still slated for a Russell inclusion on June 27 and we also expect it to be added to CRSP (rebalance from June 17 to 24, +13M shares,) which should provide strong tailwind. Fundamentally, we still like both BAM and BN (both rated SO), noting our prior expectation for S&P 500 inclusion was 2026+”

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It’s not a surprise to see that Chinese exports to the U.S. have fallen hard but the sheer scale of the slowdown on a chart is remarkable, as BMO senior economist Jennifer Lee reports,

“The pain caused by tariffs was fairly evident in China’s May trade data. Domestic demand weakened, as evidenced by the 3.4-per-cent year-over-year drop in imports. But foreign demand was also impacted. Broader export growth slowed to a 4.8-per-cent year-over-year pace, down from April’s 8.1-per-cent year-over-year jump. Still, that is not too bad considering what happened with shipments to America. Now for the interesting tidbits: Exports to the U.S. plunged 34.5 per cent year-over-year, the most since the days of the pandemic, while imports from the U.S. took a 18-per-cent year-over-year drop. Recall that it was about halfway through the month (May 12) that both sides announced their 90-day pause, so the June data might be a bit better. Regardless... this puts pressure on both sides to make the most of Monday’s talks in Britain. Exports to Southeast Asia slowed to but are still respectable at 14.8 per cent year-over-year. They were up a steady 22 per cent year-over-year to Vietnam, 21.6 per cent to Thailand, and 7.5 per cent to the Philippines”

“Not a surprise but the scale is remarkable (from BMO):” – (excerpt, chart) Bluesky

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Bluesky post of the day:

Diversion: “Sexual selection: Human odor-based mating preferences do not guarantee gamete-level compatibility” – phys.org