A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
A potential breakthrough in the U.K.’s Brexit negotiations with the EU highlights a very interesting trade idea from Citi strategist Chris Montague.
Earlier this week, Mr. Montague published a report arguing persuasively that U.K. companies with more than 50 per cent of revenue in U.S. dollars are currently unfairly discounted – trading at stock prices understating future profits.
A list of stocks uncovers undervalued British companies with strong global presences in health care (like GlaxoSmithKline PLC, with a yield of 4.8 per cent) , leisure (Carnival PLC), and commodities (British Petroleum PLC, 6.6 per cent dividend).
Investors will have to be careful to buy the stock in a way that keeps the full benefit of dividends (foreign holdings tax is in play in some cases). There remains considerable political risk, so the opportunity should be limited to risk-tolerant investors.
“ @SBarlow_ROB C: Undervalued U.K. and EU USD earners” – (full table of stock ideas) Twitter
“European Commission President Jean-Claude Juncker says a Brexit deal has been reached” – Bloomberg
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Scotia analyst Hugo Ste-Marie predicts mediocre TSX profit growth in the upcoming earnings season,
“Q3/19 EPS Running out of Steam. Bottom-up consensus projects TSX Q3/19 EPS at $267, 2.3% below Q2/19 ($273, most profitable quarter since Q3/08). Earnings growth remains positive on a YoY basis (+1.2%), but stands noticeably lower than 2016 to 2018. On a 12M trailing basis, TSX EPS should ascend to a new high of $1,041 in Q3/19 (+0.3% YoY). Still, positive growth is visibly in danger of negative surprises.”
Mr. Ste-Marie is much more optimistic about domestic profits in 2020 thanks to a stabilizing housing market and improving global economic growth.
“SBarlow_ROB Scotia: "Q3/19 EPS Running out of Steam'” – (research excerpt) Twitter
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The strategy team at Morgan Stanley has produced a list of long and short ideas going into earnings. They expect companies like Boston Scientific Corp., Deere & Co. and Microsoft Corp. to beat estimates and rise. They expect profit misses or reduced for guidance for United Parcel Service Inc. and Proctor & Gamble Co..
“@SBarlow_ROB MS: Long and short ideas into earnings” – (full list) Twitter
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Nomura strategist Masanari Takada focuses on the world’s most speculative and aggressive large funds to predict market direction. In his report released Thursday, he provided hopes for an upcoming risk-on rally,
“We expect little clear direction in sentiment until around 5 November, but we see this as a period in which the market will be laying the foundation for the next risk-on phase (which we expect to begin on or around 5 November) … US equity sentiment seems to have formed a double bottom with troughs in August and October, and this may be a positive sign. This pattern suggests that US equity supply and demand is likely to take a turn for the better toward the end of the year”
“@SBarlow_ROB Nomura’s Takada: Risk-on rally ahead” – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “Wildlife photographer of the year 2019 winners – in pictures” – The Guardian
Newsletter: “Bonds aren’t doing their job for investors” – Globe Investor
Scott Barlow