Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets released their new top 30 global stock ideas which includes a hefty helping of Canadian stocks,
“We present our Top 30 Global Ideas for Q2 2023. This list remains one of high-conviction, long-term ideas, with quarterly updates that enable dynamic changes into names that we think offer higher[1]conviction upside potential. In Q1/23, the Top 30 list delivered a total return of +11.9% in USD terms, above the MSCI World Index at +7.7%, with Top 30 performance led by Meta Platforms (META US) at +76.1%, Palo Alto Networks (PANW US) at +43.1%, and R1 RCM (RCM US) at +37.0%. Since inception of our quarterly list at YE2019, the Top 30 has delivered a total return of +37.8%, above the benchmark at +24.5%”
New additions are Alnylam Pharmaceuticals, Boston Scientific and London Stock Exchange Group. Nutrien, R1RCM and SBA Communications were removed. Canadian names are Alimentation Couche-Tard, Canadian Natural Resources Ltd., Element Fleet Management, Canadian Pacific Railway Ltd., Constellation Software Inc., and Telus Corp. Picks mostly of interest to domestic investors include Crowdstrike Holdings Inc., Ferrari NV, Mastercard Inc., S&P Global Inc., and Anheuser-Busch Inbev
“RBC top 30 global stock ideas” – (table) Twitter
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Morgan Stanley chief U.S. equity strategist Michael Wilson does not trust the recent rally and continues to recommend defensive portfolio positioning,
“Not all reserves are created equal and it appears to us like the velocity of money this time is more than offsetting the increase in the Fed’s balance sheet. As a result, Money Supply (M2)growth is still decelerating and is now the lowest in at least 60 years … regional bank stocks acting risk-off even after the Fed/FDIC intervention, we think investors should continue to position portfolios more defensively and focus on companies that exhibithigh operational efficiency and high quality of earnings (high cash flow relative to reported earnings and stable accruals). We see little evidence that a new bull markethas begun … Our work suggests [tech stocks are] it’s higher beta and more pro-cyclical than the traditional defensive areas of the market”
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Wells Fargo strategist Christopher Harvey’s Don’t Look a Gift Rally in the Mouth research report included some nuggets I found useful,
“Overall, we favor Growth (GARP), longer duration, and better balance sheets, which should hedge against tighter financial conditions and a weaker economy — a function of post[1]SVB capital retrenchment and/or further Fed hike. Unforgiving Earnings Season. We believe 1Q23 will be one of the most unforgiving earnings seasons in some time. With the specter of recession on the horizon, a material EPS miss will likely be penalized more than in previous quarters. It is still difficult to identify the most at-risk companies, but the more cyclical firms (especially within Financials) could see some of the bigger penalties for EPS weakness … We see potential for a behavioral shift by consumers/corporations in reaction to bank stress. For consumers, the recent retail sales data (MoM) are troubling, with three of the last four months showing a contraction despite a strong January report. One wild card — student loan forgiveness — has significant potential (both ways).”
“From Wells Fargo’s Harvey” – (research excerpt) Twitter
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I didn’t get BofA Securities strategist Michael Hartnett’s weekly report until late Friday, but it included the sentence of the week (in bold),
“Zeitgeist: “Panic, flush, unwind, then Fed blinked and off we rally into April, which always up in 3rd year of Prez cycle; and then we’ll see if recession or new CRE or US Treasury panics await in H2; if SVB was Bear Stearns we going to new lows, if LTCM then we going to new highs.” The Biggest Picture: US nominal GDP up 35% from ‘20 Covid lows = fastest recovery since end of WW2/Marshall Plan in ‘49 ; Q1′23 US nominal GDP likely up 6%... why there’s no EPS recession; note inflation & growth ‘20-’22 aided & abetted by $5.2tn fiscal stimulus & $4.8tn Fed QE stimulus; note past 6 months US deficit up $700bn (war, infrastructure, Social Security) & past 4 weeks Fed balance sheet up $370bn . The Price is Right: cost of ticket for Beatles at Shea Stadium Aug’65 was $5.65, for Beyonce at MetLife Jul’23 it’s $1568 (acc to Ticketmaster for comparable seat) if inflation had kept pace with the price of pop royalty (10.2% p.a.) cost of Hershey bar would be $14 (was 5c), NY subway fare $42 (was 15c), house price $5.5mn (was $20k).”
“BofA’s Hartnett on inflation” – (research excerpt) Twitter
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Diversion: “RIP Red Robinson, Canada’s first rock’n’roll DJ” – A Journal of Musical Things
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