A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
UBS strategists have helpfully provided a list of the Morgan Stanley All Country World Index’s most overbought and underweight stocks.
Research done by Merrill Lynch (among others) shows that over longer time frames, stocks overweighted by portfolio managers underperform underweight companies.
The over-owned list is led by Visa Inc., Alibaba Group Holdings and Alphabet Inc.
The most under-owned stocks are Apple Inc., nestle SA and ExxonMobil Corp.
“@SBarlow_ROB UBS: World’s most overweight and underweight stocks” – (full lists) Twitter
See also: “@SBarlow_ROB HSBC: U.S. co.s with most exposure to fastest growing intl markets’ – (list) Twitter
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Canada’s dependency on foreign investment to fund its current account deficit doesn’t get the attention it deserves – the issue is highly technical and most investors would rather not hear about it. nonetheless, Merrill Lynch foreign exchange strategist Ben Randol believes it’s a big deal, threatening the stability of the loonie’s value,
“February's C$6.7bn net [portfolio investment] surplus is a solid number; however, we question its sustainability given a likely contentious and highly uncertain USMCA ratification process this year … Canada requires at least C$6-7bn per month on average to fund its basic balance (current account + net direct investment) deficit, -C$72.7bn over the 4 quarters through 4Q 2018. The February data clearly fall within that range, but we are skeptical that they will be as supportive in the months ahead. Over the medium-term, Canada's persistent external sector underfunding is likely to further contribute to weakness in the Canadian dollar, in our view. Our [Canadian dollar] forecast calls for a retest of US$0.7352”
“ (ML) “Official securities flow data suggest financing of Canada’s large external deficit was merely adequate to maintain the exchange rate at stable levels in February”” – (research excerpt) Twitter
“@SBarlow_ROB “Canada requires at least C$6-7bn per month on average to fund its basic balance”” – (research excerpt) Twitter
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The Bank of Canada will announce its decision on interest rates Wednesday. National bank economist Krishen Rangasamy warns investors not to expect too much of a dovish turn as the outlook for the economic growth in the second half of 2019 improves,
Recall April 1st when Governor Poloz said in a speech that “economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary.” … There is reason to believe a significant rebound is in the works in Q2. Why the optimism? Because oil production, whose mandated cuts hammered growth in Q1, is reportedly returning to normal. The sharp increase in oil prices combined with persistent weakness of the Canadian dollar, is a boon to both corporations and governments, the latter benefitting from a likely boost to nominal GDP. Moreover, Canada stands to benefit from stronger U.S. GDP growth in the second quarter.”
“@SBarlow_ROB National Bank not expecting big dovish turn for Bank of Canada today” – (research excerpt) Twitter
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RB Advisors founder Richard Bernstein reminded investors that initial public offerings are not charitable operations for the issuing company,
““You have to realize that when companies become public, it’s usually when there is enough interest in them. It’s not like they want to share with you the great fortune”… “It looks like profits are going to decelerate in 2019 and 2020,” the Richard Bernstein Advisors CEO said Monday on CNBC’s “Trading Nation. ” “Tech should be one of the sectors that feels that deceleration of corporate profits.”’
“Big tech stocks could tumble as earnings decelerate, long-time bull Richard Bernstein warns” – CNBC
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Tweet of the day:
Diversion: “Frank Lichtenberg and the cost of saving lives through pharmaceuticals” - Marginal Revolution
Scott Barlow