Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi analyst Jenny Ping predicts a seven-fold increase in offshore wind power generation in the next decade,
“The exponential growth opportunities in offshore wind are blurring the lines between integrated oil companies (IOCs) and traditional utilities. As a result, competition is set to increase, which is likely to further deteriorate project returns, in our view. However, we see little choice for IOCs and Utilities alike but to continue to invest and make progress on their energy transition credentials. In this report, we take a look along the entire offshore wind value chain, integrating our views across a number of sectors… Vast growth opportunity. The Global offshore wind market is about to embark on exponential growth, spilling out of its domestic European markets into the U.S. and Asia at scale. We see a 7-fold increase in operating capacity from the current 22GW in operation by 2030. This is not accounting for any potential increase in targets from the EU Green Deal, nor the pending offshore wind strategy paper from the European Commission. In aggregate, this implies €320bn of investments over the next decade.”
Ms. Ping was writing from a European perspective. Her top stock picks to benefit from the trend are Total, Repsol, Siemens Gamesa, General Electric, Subsea, Vinci and Eiffage.
"@SBarlow_ROB Citi sees 7-fold increase in offshore wind power generation by 2030′ – (research excerpt) Twitter
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Morgan Stanley commodity strategist Devin McDermott assessed the sustainability of the rally in oil stocks in a Tuesday research report,
"[Monday’s] constructive Covid-19 vaccine update supported the Energy sector’s 14% rise, outpacing the broader market by 13%. Depressed product demand, in part due to airline travel that has yet to recover, has made Energy an outsized beneficiary of a macro recovery and ultimate post-Covid “return to normal” … with less of a valuation disconnect between the equities and commodity prices, more limited upside to oil prices from here, and downstream overcapacity, we see some risks of a near-term pullback and continue to have a bias for quality. That said, fundamentals continue to improve for the sector, including less regulatory & political overhang, potential inflationary pressures, and more visible free cash flow generation. Our top picks remain CVX in integrated oil, COP in US E&P, ENB in midstream, SLB in oil services, MPC in refining and SU in Canadian E&P"
“@SBarlow_ROB Canadian stock among MS commodity strategists' top picks in energy sector,” – (research excerpt) – Twitter
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Also from Citi, analyst Oliver Nugent outlined an investing strategy for commodity investors,
“We continue to be bullish on copper (decarbonization driving strong demand) and aluminum (eventual supply constraints in China) over the medium term, however there does not appear to be a big rush given the extremely long positioning by historical standards and near term economic headwinds in most of the world ex-China. Nickel and zinc may overshoot in the near term, especially the former, where we expect outperformance on positioning normalization and rising marginal costs of production. Since we suggested a long nickel and short copper position last week this is up ~1%.”
The “decarbonization” term refers to copper’s use in batteries and its role in converting from fossil fuel power.
“@SBarlow_ROB Citi bullish on copper, aluminum in mid-term” – (research excerpt) Twitter
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Diversion: “Why It’s a Big Deal If the First Covid Vaccine Is ‘Genetic’” – Wired
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