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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Savita Subramanian is the chief quantitative strategist at B of A Securities, the brokerage firm formerly known as Merrill Lynch. In a mammoth 93-page report published January 6, Ms. Subramanian recommended a ‘YARP’ – yield at a reasonable price – strategy for investors in U.S. equities,
“ We have long maintained a preference for dividend growth over high dividend yield. But with bonds in negative yield territory and central bank easing, a yield grab will likely persist. While we continue to recommend dividend growth stocks for long-term investors, stocks with the highest dividend yields could continue to attract a disproportionate amount of assets. Thus, we target stocks with higher dividend yields but look for “Yield at a Reasonable Price” (YARP). Favored sectors generally offer a balance between yield, relative valuations, and above-market dividend growth”
The attached graphic highlighted U.S. financials and utilities as the best sectors to find YARP stocks.
“@SBarlow_ROB ML: ‘Yield at a Reasonable Price’ strategy (U.S.)” – (research excerpt, chart) Twitter
Financial Times oil expert David Sheppard listed five reasons crude prices failed to soar on Middle East tensions. The five, in order, are investors expected a quick de-escalation, the passage of oil tankers seems safe so far, OPEC has scope to increase supplies, prices had already rallied, and higher prices would just lead to more global production which would pushing prices right back down. The explanation under the final category was most relevant,
In the back of every oil trader’s mind is this simple calculation, which has arguably become even more germane with the rise of the US shale industry. While shale’s supercharged growth is projected to slow this year, as companies prioritise generating cash over boosting drilling, stronger oil prices may well bring a swift response from the shale industry to increase output. That is likely to damp enthusiasm among oil traders. “Oversupply concerns will continue to stalk the energy complex,” said Stephen Brennock at PVM, an oil brokerage”
“Five reasons oil prices failed to soar on US-Iran tensions” – Financial Times (paywall)
Nomura strategist Masanari Takada follows the trades of the world’s most speculative and aggressive hedge funds. He seemed bemused about the market’s rapid turnaround Wednesday in a research report released overnight,
“It is quite rare for a piece of research to have a shelf life as short as that of yesterday’s edition of this memo… The risk-off mood that struck during trading hours in Tokyo came and went in short order, passing like a freak thunderstorm. Markets in Europe and the US then proceeded to experience a relief rally across a broad range of asset classes … the ultra-short-term traders tracked by the SG Short Term Traders Index (NEIXSTTI), which typically have investment horizons of 10 days or less, had started off the year reducing their net exposure to US and European equities, but then appear to have piled into accumulating longs once the de-escalation of the Iran situation gave birth to a relief rally”
“@SBarlow_ROB Nomura: “The risk-off mood that struck during trading hours in Tokyo came and went in short order, passing like a freak thunderstorm” – (research excerpt) Twitter
B of A analyst Gregory Francfort downgraded Restaurant Brands International, parent company of Tim Hortons, to underperform and slashed the price target by $$14 to $80. He writes,
“ We think Tim Hortons (TH) struggles will weigh on RBI until the brand is stabilized and the Dec 27 announcement of the departure of Tims president Alex Macedo suggests that may take longer than expected… Despite Tims representing just 20% of system sales, it is 49% of total EBITDA… We think Tim Hortons has lost share over the past several years in Canada to its two biggest competitors, Starbucks and McDonald’s. With Starbucks, strong Canadian store growth of 3%-4% has accelerated over the past two quarters to 5.9%, which may be contributing to a deceleration in recent sales growth at the market share leader Tims.”
“@SBarlow_ROB Tim Hortons parent co downgraded to Underperform at B of A Securities (ML)” – (research excerpt) Twitter
Newsletter: “ It’ll be either feast or famine for investors in 2020” – Globe Investor
Diversion: “ Inside the corrosive new generational blame game: The generational divide is society’s new battleground, pitting boomers against millennials and everyone in between. Who’s really to blame?” – Macleans
Tweet of the Day: Tweet of the Day: “@SBarlow_ROB ML: [Elizabeth] Warren: Optics vs Reality” – Twitter
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