A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
I’m always a bit squeamish touting investment themes that benefit from human frailty but there are an unfortunately large number of them. Alcohol and tobacco are two obvious examples and the obesity crisis has been great for revenue growth in the dialysis equipment and orthopaedics industries.
Defense stocks are the poster children for this theme as the ultimate put option on aggregate human psychology. Citi analyst Jonathan Raviv published a report Tuesday morning with his top picks in the sector.
“Defense names have outperformed this year after a painful 2018 thanks to some catch-up, rising geopolitical concerns & worries around trade war dynamics… Defense got a robust FY20 budget request in March asking for +5% y/y; better than late 2018 worries of down 2%, which we think has helped recent performance… We continue to prefer HII [Huntington Ingalls Industries] and NOC [Northrup Grumman] due our expectation of both companies’ earnings acceleration into 2020. HII’s a 2H story, especially with its 4Q report retiring the Carrier risk to drive that earnings growth. And we think the company’s positioning to report a cleaner FCF in 2020 as net pension cash benefits roll off ahead of others. We like HII but not sure there’s much to do on 2Q itself. NOC faces easing comps into 2H and especially 2020”
“@SBarlow_ROB C's top picks in defence stocks, for those looking for a put option on our species’ – (research excerpt) Twitter
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Canada and New Zealand are the two countries most at risk of a correction in housing prices, according to a new Bloomberg study, although the story also allows that measures like foreign buyer restrictions may prevent a huge decline,
“Canada, New Zealand Show Signs of Housing Bubble ... “ - Bloomberg
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Merrill Lynch has released this month’s version of their widely followed survey of global portfolio managers. Highlights include: “Dovish Fed & trade truce have caused investors to reduce cash and add risk; but expectations of EPS recession & debt deflation still dominate FMS [Fund manager survey] investor sentiment and the summer “pain trade” remains up in stocks & yields … 69% expect Fed to cut in July: asked which assets would perform best should the Fed return to ZIRP, investors said gold, 30-year Treasuries & EM debt … the contrarian would position for higher growth & yields via long cyclicals-short cash, long stocks-short Treasuries, long value-short growth.’
“@SBarlow_ROB Highlights from ML's monthly global PM survey” – (research excerpt) Twitter
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Macleans covered the rise of Albertan ‘petro-patriots’ who are increasingly vocal and visible in support of the province’s most important industry,
“Merchandise bearing the petro-positive logo has existed for about six years, but around Alberta lately it has become remarkable for its near ubiquity. People sport it walking through Calgary’s downtown mall on casual Fridays, or waiting on transit platforms. It’s on the sides of office buildings and highway billboards. It’s the uniform for a Little League baseball team in Drayton Valley. It’s on the welcome sign to the Spirit River rural district.”
“The rise of Alberta’s unapologetic petro-patriots” – Macleans
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Tweet of the Day: “ @ReformedBroker I have some extra capital I don’t particularly want to see again - negative-yielding European junk bonds or Bill de Blasio campaign contribution?” – Twitter
Diversion: “They Went to the Moon: Reflecting on humanity’s first steps on the lunar surface, fifty years after the epochal event” – The Atlantic
Newsletter: “Industries set to die with the baby boomers” – Globe Investor
Scott Barlow