Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
There are only deletions this month in RBC Capital Markets’ “Global Energy Best Ideas list” - Repsol SA and Tamarack Valley Energy Ltd,
“In April, the RBC Global Energy Best Ideas List was down 0.3% compared to the iShares S&P Global Energy Sector ETF (IXC) up 4.1% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) that rose 3.9% on a sequential basis. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 126.4% compared to the S&P Global Energy Sector ETF up 27.3%”.
The list as it stands now includes Shell, Suncor Energy, Topaz Energy, California Resources Corp., Diamondback Energy, Permian Resources Corp., Range Resources, ARC Resources, Tourmaline Oil, Canadian Natural Resources, Enerplus Corp., Santos Ltd., Liberty Energy, SLB, Pembina Pipeline Corp., Targa Resources, Cheniere Energy Inc., Energy Transfer LP, Superior Plus, Marathon Petroleum Corp., PG&E Corp. and Drax Group PLC.
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Scotiabank strategist Jean-Michel Gauthier outlined three trade ideas for Canadian investors,
“Intact Financial has been kicked out of the Top 30 list this month after a five-month stretch in the list. The name had been on the verge of deletions since the last few months and a sustained slowdown in earnings revisions finally got the better of it… Investors wanting to retain exposure to Insurers should pick MFC as the next best candidate: the name is on a ranking upswing and is Scotiabank GBM analyst Meny Grauman’s 2023 Focus pick … Teck Resources is getting kicked out of the Top 30 list this month following a strong run. Degrading Value rankings as well as two back to back poor earnings releases offset M&A-induced strong Momentum. In our view, we could interpret this as the model taking profits after the spin-off and M&A drama did much to unlock value at the company… CGI entered the Top 30 list this month after a string of better-than-expected quarterly releases jump started its Growth and Momentum rankings. In particular, we saw an uptick in earnings revisions and positive stock price reactions to earnings announcement. The name is a Top 30 Quality member as well, largely offsetting its lower Value rankings. Overall, this can be a welcome addition for investors looking for torque while avoiding the most egregiously over-valued Tech names.”
“Buy CGI among Scotiabank’s top three trades for May” – (research excerpt) Twitter
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BofA Securities U.S. equity and quantitative strategist Savita Subramanian takes an in-depth look into earnings seasons and comes away more bullish,
“265 S&P 500 companies, 65% of S&P earnings, have reported. 1Q EPS (actual + consensus) is tracking a 3% beat at $52.34 (-4% YoY), where companies so far beat by 6% in aggregate. The beat was led by Cons. Disc. (+10%) and Materials (+8%). Utilities is the only sector to miss (-2%). After a 13% drop since June, 2023E EPS rose 0.3% w/w, the highest revision since last June’s peak. Our corporate guidance ratio is at 1.65 double the average 0.8 - 65% more above-consensus guides. We see upside to our $200 forecast (consensus at $220), part of our bull case for stocks … Margin expansion from globalization and cheap financing is behind us, but productivity gains could be the next multi-year bull case for margins and multiples. This quarter is rife with evidence: “efficiency” mentions jumped +27% YoY, tight labor has spawned automation spend, AI spend accelerated and could add >1ppt to productivity. It is dangerous to underestimate Corporate America’s margin preservation skills.”
“BofA’s Subramanian looks at earnings and gets more bullish” – (research excerpt) Twitter
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Diversion: “Jack Dorsey Admits Elon Is Wrecking Twitter” – Gizmodo
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