Scotiabank strategist supports top REIT picks with low PEG ratios

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

Low PE-to-Growth Ratios Outperform

Scotiabank analyst Mario Saric helpfully identifies PEG ratios as predictive of future REIT returns,

“Lower PEG ratio REITs typically [outperform] over the following 3-6 to 12-month periods. This is most true for REITs trading at a PEG ratio in the 0-1 range, but we also show that relative outperformance generally declines as the PEG ratio increases. Chartwell (CSH) is the lowest at 1.2 on an FFO basis [PEG = 2026E P/FFO [price to funds from operations] divided by 2025E-2027E FFOPU CAGR), with several REITs/REOCs in the 1.0-1.5 range (i.e., BN, CIGI, NWH, D, SVI, DIR, and SIA) … It is not very often (i.e., only 16 per cent of the time since 2005; REITs that met the definition more than 15 per cent of the time = BEI, KMP, SGR, AP, GRT, NWH, CSH, SIA, SVI, and NXR; 25-per-cent-plus = SGR, NWH, CSH, NXR, and SVI), but a REIT in the 0-1.5 PEG ratio range delivers an average 3 per cent and 7-per-cent total return outperformance over N6M and NTM [next six months and next 12 months], respectively, with a 60-per-cent frequency of outperformance … The PEG ratio analysis supports our Outperform ratings on CSH, SIA (i.e., Seniors Housing), CIGI and, perhaps to a lesser extent, DIR and SVI. Exhibit 3 illustrates individual REIT PEG ratios. While we have none in the 0-1 range presently, CSH, BN, CIGI, SVI, DIR, and SIA trade below 1.5 and the 2.2 sector average”

LNG Exports Soar

CIBC analyst Jamie Kubik details record Canadian LNG exports and a sharp jump in U.S. gas prices,

“LNG Canada recorded its highest number of LNG cargo deliveries in January. According to Bloomberg, nine LNG cargoes have departed from the LNG Canada facility since the beginning of January, marking the highest monthly count since the facility was commissioned in July 2025. We expect it to reach its nameplate capacity of 2.0 Bcf/d in the first half of 2026. Last week, Western Canadian field receipts remained relatively flat, averaging 18.7 Bcf/d, while demand rose by 1.4 Bcf/d to an average of 9.9 Bcf/d. Western Canadian storage declined by 17 Bcf and now stands at 636 Bcf — 135 Bcf above the five-year average. Spot Henry Hub closed Wednesday at US$9.34/MMBtu (up US$4.38/MMBtu W/W). The AECO basis widened to -US$7.74/MMBtu (from -US$2.91/MMBtu last week), while the Station 2 basis widened to -US$7.79/MMBtu (from -US$2.73/MMBtu last week) … Geopolitical risk premiums could be added to global LNG benchmarks. Potential conflicts between the U.S. and Iran may impact global LNG markets, as Iran has threatened to block the Strait of Hormuz and disrupt the transit of energy vessels. European gas inventories decreased by 191 Bcf, widening the deficit against the five-year average to 550 Bcf”

Mr. Kubik has an “outperformer” rating on ARC Resources Ltd. (ARX-T).

Top European Stock Picks

The U.S. president has been openly threatening Canada which might make European stocks more attractive to some investors. BofA Securities recently updated their list of top 25 stock picks in the region,

“We have identified “25 stocks for 2026” across our BofA European research coverage. These are Buy-rated stocks that we believe are exposed to significant business or market-related catalysts in 2026 that have the potential to drive outperformance in the upcoming year”

The stocks are ACS, Adyen, Airbus, ASML, AstraZeneca, DSV, Engie, EssilorLuxottica, Ferrovial, Glencore Plc, Hermes, L’Oreal, RELX PLC, Rentokil Initial, Rolls Royce, RWE, Saint-Gobain, SAP, Siemens, Siemens Energy, SocGen, Straumann, Telia, TotalEnergies, and UBS.

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