A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Morgan Stanley analyst John Glass released a report on Restaurant Brands International Inc., the holding company that owns Tim Hortons. Mr. Glass calculates that Canada’s favourite coffee and doughnut chain is deeply undervalued,
“Not only does our analysis support close to our $69 [ price target], but it also suggests that if one were to isolate the Tim Horton’s business as the cause for the discount, our analysis shows that it is effectively trading at a ~25% discount to DNKN for similar current fundamentals.”
I’m definitely not recommending the company as an investment but for those willing to do extra research, the Tim’s operation exhibits some obvious Warren Buffett traits – a brand representing huge competitive advantage within Canadian borders (somewhat tarnished, but still…) trading at a significant discount.
“@SBarlow_ROB MS: Tim Horton’s is cheap” – (research excerpt) Twitter
TD and Royal Bank joined CIBC with profit results that easily exceeded analyst estimates. Market reaction will be interesting as the domestic bank stocks have stubbornly refused to respond to good news so far in 2018. Summary of earnings reports available at link below,
“Before the Bell: Wall Street futures mixed on trade concerns; Bay Street weighs TD, RBC results” – GlobeInvestor
See also: “This indicator will signal big problems ahead for Canada’s housing market” – Barlow, Inside the Market
President Trump called Canada ‘spoiled’ under NAFTA and Foreign Affairs Minister Freeland’s having none of it,
“Trump blasts ‘spoiled’ Canada and Mexico over NAFTA talks” – CBC
“Freeland responds to Trump’s assertion Canada has been ‘spoiled’ under NAFTA” – (video) Report on Business
“Trump aims at NAFTA allies with imported-vehicle tariffs” – Report on Business
“U.S. launches national security probe of vehicle imports” – CBC
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A second major investment grade bond issue was pulled yesterday due to lack of interest. This is an issue for all global investors to watch. Easy money has been an important driver of stock returns through share buybacks and other channels, and tightening of the credit screws will be a hurdle for markets if it becomes a broader trend. The high quality debt market has already endured substantial price weakness in recent weeks,
“ Wednesday saw the second investment-grade deal pulled in short order, a ten-year bond from washing machine group Whirlpool, following a similar path to a Bertlesman deal which didn’t get away, the German media group citing market conditions.”
“The credit market mis-fires” – FT Alphaville (free with registration)
Related: “‘Some of the worst covenants that we’ve ever seen’” – FT Alphaville
“U.S. corporate bonds sink fast in one of worst tumbles since 2000” – Report on Business (May 21)
“You need to rifle through 18 years of history to find selloffs that compare to the one investment-grade corporate bond investors are now enduring. “ – Bloomberg
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Tweet of the Day:
Diversion: “The awesome beauty of Jupiter captured by Juno, in 13 photos” – Vox
Scott Barlow