Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BofA Securities quantitative strategist Savita Subramanian published her top picks for high quality U.S. dividend stocks. The screening method emphasizes strong credit ratings, return on equity and debt to equity multiples better than the S&P 500, and dividend yields above the benchmark.
The final list contains 12 stocks – C.H. Robinson Worldwide Inc., Quest Diagnostics, Emerson Electric Co., General Dynamics Corp., Johnson & Johnson, Norfolk Southern Corp., Procter & Gamble Co., Pfizer Inc., Public Storage, Robert Half International Inc., Republic Services Inc., Snap-on Inc. and Texas Instruments Inc..
Quest Diagnostics and Republic Services are new additions this month. Tyson Foods Inc. was dropped from the list.
“@SBarlow_ROB BoA; Top U.S. picks for high quality and dividend yield” – (table) Twitter
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Citi analyst Maximilian Layton is very bullish on copper prices (my emphasis),
“We find that a broadly balanced 2020 copper market and a 300kt [kiloton] deficit in 2021 … would justify $8,000/t copper over the next 6-12 months … Overall, we see crude, copper and palladium as having at least 30% upside potential in the bull case strong recovery scenario over the next 6-12 months. The findings of our second feature article – which shows that crude and metals tend to outperform asset classes during periods of reflation – support this take.”
The current three-month copper price is US$6688 per tonne.
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Scotiabank analyst Phil Hardie published his list of top value picks in the domestic diversified financials sector,
“On one end of the spectrum are the sought after, highly resilient names that are likely to continue to perform well in an uncertain environment, but likely offer lower relative return opportunities. On the other hand are the value plays that have likely been overlooked, unloved, and entail greater uncertainty given the current environment, but offer significant upside potential … In our note, we highlight our top deep value and “recovery trade” ideas. On the largecap side, these include Sector Outperform rated Onex and Brookfield Business Partners. On the small-cap side, our top value idea remains Guardian Capital Group, which we also rate Sector Outperform. The average one-year expected return across this group is roughly 30%. On our radar, but potentially requiring a longer investment horizon, are Fairfax Financial and Power Corp.”
Mr. Hardie described Onex as “too cheap to ignore.”
“@SBarlow_ROB Scotia calls Onex ‘too cheap to ignore’’ – (research excerpt) Twitter
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Also from Scotia, strategist Jean-Michel Gauthier provided four ‘trades of the month’, including bank of Montreal and Seven Generations Energy Ltd.
“BMO: While “slow” moving Growth metrics [long term earnings per share/sales per share growth trends] are still deteriorating in rankings, “fast” moving ones (Earnings Revisions, Stock Price Reaction to Earnings) have shot upward post Q3/20 results … Seven Generations: Despite an essentially non-existent P/E metric, VII is a highranking Value name on account of its Cyclically Adjusted P/E and P/BV metrics. Moreover, a lack of formal dividend does not stop it from ranking among the best TSX companies on the Total Yield metric since it has one of the most aggressive net buyback yields in Canada”
Barrick Gold and Intact Financial were also highlighted as companies with worrying trends that may see them drop out of Scotia’s most favoured list.
“@SBarlow_ROB BMO, VII among Scotia’s ‘trades of the month’” – (research excerpt) Twitter
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Diversion: “Has the vinyl bubble burst for Canadians? It might have” – A Journal of Musical Things
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Scott Barlow