Top REIT picks for growth, value and income from a Scotiabank analyst

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

REIT conference yields new top picks

Scotiabank analyst Mario Saric provided more detail on the company’s recent REIT conference and provided top picks for growth, calue and income,

“Last year, investor focus = market rent trends and the next equity issuer. While the former was still very topical (and occupancy inflection points), the latter shifted completely to REIT takeouts given the IIP and H&R news. We believe Corporate sentiment was much more differentiated by asset class (on average, slightly worse than last year), with Seniors Housing and Retail arguably the most bullish in tone (in our view), with the highest acceleration in Office (i.e., less bad). We believe the sector can still deliver a mid-teen Total Return (trades at a wide discount to domestic yield peers), but double-digit returns require solid 1.5-2-per-cent+ Real GDP growth (Scotia 2026 estimate = 1.6 per cent) more so than BoC rate cuts, in our view. Our intact Top Growth Picks = BAM, BN, CIGI, CSH, KMP & GRT. Top Value Picks = AP, BN, CRR, DIR, GO & SVI. Top Income Picks = AP, BAM, CRR, CHP & SIA … Our analysis indicates NAVPU Growth still remains the primary driver of stock performance in 2025, followed by AFFOPU [adjusted funds from operations per unit] growth, SPNOI [same property net operating income] growth, quarterly FFOPU results and FFOPU growth.

A troubling chart

National Bank economist Stéfane Marion published a troubling chart in Canada: The Industrial Implosion,

“We’ve written about the plight of Canada’s industrial sector [here, here, and here]. If that didn’t grab your attention, perhaps this will: according to the latest national accounts data, real investment in industrial machinery & equipment fell in Q2 to its lowest level on record (data back to 1981). As today’s Hot Chart shows, the divergence with the U.S. is nothing short of appalling. How did we get here? Years of excessive regulation, and a chronic lack of ambition by successive governments in promoting domestic transformation of our natural resources—recently made worse by Washington’s protectionist agenda. That failure has eroded Canada’s manufacturing base and left us at risk of becoming irrelevant in global supply chains. To Ottawa’s credit, the pledge to quickly ramp up military spending to 3.5–5 per cent of GDP could help catalyze a reindustrialization. But time is of the essence—if we are to salvage what’s left of the sector. What Canada needs is a wartime multi-pronged strategy that ends the dithering: a competitive tax regime, a sweeping reduction in red tape, and clear laws on how we intend to develop our natural resources. Clarence Decatur Howe—the architect of Canadian industrialization—showed what determined leadership can achieve. Canada must now draw on that inspiration to rebuild its industrial base before it’s too late”

“Canada: The Industrial Implosion” – (chart) Bluesky

Cut implications

Evercore strategist Julian Emanuel makes an interesting point about Federal Reserve rate cuts,

“Navigation – Because They Can, or Because They Have To – The Fed Rate Cut Playbook: The Fed (re)starting the rate cut cycle on 9/17 will surprise no one – 25bps is near certain, and twice more likely in both Oct and Dec. Still, this is one of the most surprising and challenging Interest Rate cycles the Fed has faced amid anemic Jobs growth, buffeted by a gradually slowing Economy and reduced labor supply, and sticky inflation. Whether the Fed is cutting Because They Can (cooling inflation) or Because they Have To (head off Recession) is critical. 12M fwd returns are robust when They “Can”, and anemic when They “Have To”. Stocks tend to be choppy in the near term either way when the Fed starts cutting, 1M negative on avg since 1970. Over 12M, NDX and Cons Disc (EVR ISI O/P) lead after the First Cut since 1970. Since 1994 (first cut cycle after GICS), Retailing, IT (EVR ISI O/P broad sector) Semis, Software and Hardware, as well as Biotech, are historical leaders. Energy (EVR ISI U/P) lags. Given near term volatility is likely, we Tactically continue to prefer hedging a portfolio overweight “AI Enablers, Adopters and Adapters” with QQQ downside puts or by tilting to Attractive Valuation/High Sentiment (Earnings Revision) names”

Bluesky post of the day

Diversion

“I loved how much I despised these 5 movie characters” - MakeUseof