Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC analyst Paul Holden is optimistic about the prospects for Canadian bank stocks, as he detailed in a Friday research report called Tilting Towards a Rapid Recovery,
“We are increasingly positive on the outlook for the banking sector. Our FQ1 estimates are higher than consensus by 2% on average. The average P/E multiple is back to pre-COVID-19 levels, implying that positive EPS revisions represent the next leg higher. NII [net interest income] growth may remain challenged this quarter, but we foresee potential for positive earnings revisions from fee income, capital markets and PCLs [ provisions for credit losses] ... Our favoured names are BMO and TD, which are best positioned to benefit from a U.S. economic recovery.”
“@SBarlow_ROB CIBC sees Canadian banks “Tilting Towards a Rapid Recovery’' – (research excerpt) Twitter
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Citi analyst Ephrem Ravi is bullish on electric vehicle (EV)-related materials despite a huge year to date surge already,
“Spot lithium carbonate and cobalt prices have each surged ~40% year-to-date and nickel premiums in China have also leapt. This is not a coincidence and points to sizeable demand growth and stocking activity from the EV battery supply chain. Given the 6-12 month lead-time in battery raw materials demand to EV sales, improved outlooks for forward looking sales can impact spot purchases today. EV sales proved to be extremely resilient in 2020 growing by ~35% y/y whilst overall passenger vehicle fell ~20%. For 2021 our base case is a further 55% growth in EV sales. This is not just China, European sales surged +137% y/y in 2020 amid new C02 targets, and President Biden’s green policies may soon make the US the 3rd engine of growth for EV’s.”
“@SBarlow_ROB Citi: More upside ahead for lithium and cobalt prices” – (research excerpt) Twitter
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BMO strategist Brian Belski highlighted the unorthodox leadership in Canadian equity markets in 2021 (my emphasis),
“The relative and absolute price performance domination of Cannabis and Shopify to start the year has made the job of a Canadian-centric equity portfolio manager exceedingly difficult to outperform, to say the least. Indeed, while the rally in stocks has been broad (which is positive longer term) only the Health Care, Technology, and Energy sectors have outperformed the market. In fact, while Health Care had a modest 1% weight to start the year, the sector is up 58%, adding almost 100 bps to the TSX’s 5.4% price performance year to date as of February 17, 2021. Furthermore, the Technology sector is up 17% on a 10% weight, adding another 170 bps to the TSX price return this year. Thus, having exposure to these areas has been critical for relative performance given their outsized moves… we believe a more neutralized position is still warranted for both the Cannabis industry, which is likely to continue to see positive news flow and sentiment for an extended period, and Technology, which is experiencing a broad secular tailwind from a sharp shift to e-commerce. Furthermore, these companies and industries have started to turn a profit and are experiencing among the highest levels of earnings and revenue growth in the TSX.”
“@SBarlow_ROB BMO: The strangeness of TSX market leadership in 2021” – (research excerpt) Twitter
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Diversion: “Chatham woman stunned after scoring 365 points on a single word in Scrabble” – CBC
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