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How to invest for the rise of Gen Z. Plus, the stock picks of award-winning fund managers, and what BMO is predicting for the TSX in 2021 – The Globe and Mail

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BofA Securities recently published a series of reports on the economic and market effects of Generation Z, the cohort born between 1996 and 2016, providing a number of promising investment themes and some truly surprising data points.

Working life is set to begin for those born in the early years of Gen Z, so BofA’s survey of 15,000 people sought to gain insight into changing consumption habits. Gen Z will account for an estimated 27 per cent of global income, or US$33-trillion, by 2030, out-earning Millennials the following year.

The survey results highlighted a demographic group almost constantly online, spending more than 10 hours per day on their phones. Arguably, the best investment opportunity that arises from this are stocks with exposure to online payments – Gen Z prefers to pay by phone over every other method, with credit cards a distant third place.

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Only half of U.S. teens have a driver’s license – a definite cause for concern for automakers – and less than 50 per cent consume alcohol and more than half restrict meat intake in some way.

Media consumption appears to be the sector where the most change is set to occur. Only 25 per cent of Gen Z watch broadcast television ever, compared with 45 per cent for Millennials. Only a quarter of Gen Z watch traditional sports, and that makes the future of broadcast TV even more dire.

More than half of Gen Z reported playing three hours or more of video games per week, and followed eSports. They prefer user generated video content services like TikTok over professional productions available on Netflix and Amazon Prime.

The research report listed a number of stocks set to benefit from all of these trends. Ubisoft Entertainment SA for video gaming and eSports, Ascential PLC for online payments, are two examples.

I used to roll my eyes at these generational change research reports, but I don’t anymore. Yes, the changes take place over long time periods and often the investment ideas aren’t immediately actionable. The analysts can get it wrong, choosing to emphasize the wrong trends. In hindsight, however, the major economic trends predicted as Millennials entered the work force were the rise of social media and streaming content, and as investments, those trends worked out extremely well.

— Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

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Stocks to ponder

BRP Inc. (DOO-T) Just last month, the stock was trading at a record higher. However, since Pfizer Inc. released positive clinical trial data for its coronavirus vaccine on Nov. 9, BRP’s share price has tumbled 16 per cent. The recent pullback reflects concerns by investors that once there is a coronavirus vaccine, the heightened demand for BRP’s products will drop off as demand was pulled forward. But the stock is now oversold and pullbacks in the share price may represent buying opportunities, according to our equities analyst Jennifer Dowty, who provides this profile of the company. (for subscribers)

Enthusiast Gaming Holding Inc. (EGLX-T) Shares in the TSX gaming stock have surged over the past week following a quarterly earnings report that blew past analysts’ forecasts. Now, it’s about to make its Nasdaq debut, attracting even more investor attention. Brenda Bouw tells us more. (for subscribers)

The Rundown

BMO predicts big gains ahead for the TSX and S&P 500

BMO Capital Markets’ chief investment strategist Brian Belski, one of the Street’s more reliably bullish prognosticators, doesn’t believe skyrocketing COVID-19 cases and spreading lockdowns will get in the way of the equity market’s upward trajectory. On Thursday, he released his 2021 market outlook, setting a year-end S&P 500 target of 4,200 – a more than 17-per-cent rise from current levels. For the S&P/TSX Composite index, he set a target of 19,500, a rise of more than 15 per cent that would bring it to record highs. Darcy Keith reports on Mr. Belski’s rationale and his new sector recommendations. (for subscribers)

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Gap between vaccine hopes and pandemic reality poses market hazard

As winter approaches, U.S. equity investors are weighing brightening prospects for a COVID-19 vaccine against a resurgence of the pandemic across the United States. Several market strategists have predicted significant gains in U.S. stocks in 2021, as long as Congress passes further fiscal stimulus and a vaccine becomes widely available in the first half. But the path for stocks could be bumpy while investors await those developments, they said. April Joyner of Reuters reports. (for everyone)

Also see: An overlooked key risk for markets: U.S. gridlock will hamper stimulus

These dividend mutual funds for DIY investors stack up well against a popular ETF

It’s worth keeping an open mind about mutual funds. Occasionally, they put up a strong fight against ETFs. Rob Carrick provides some examples. (for subscribers)

Value investing’s return may only be just beginning – and these growth stocks have the most to lose

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Value stocks started to outperform their high-flying growth counterparts earlier this month when Pfizer revealed positive results on its COVID-19 vaccine. Savita Subramanian, U.S. quantitative analyst at Bank of America, believes this rotation away from tech and into stocks trading at a much cheaper price relative to earnings has only just begun, in what would be a massive change from recent market trends. She provided a list of large cap U.S. growth stocks most at risk of steep declines if market leadership changes from growth to value. Scott Barlow reports (for subscribers)

Another bitcoin bubble? This time it’s different, backers hope

With bitcoin surging to the cusp of its 2017 record high, backers are hoping fewer frenzied retail investors means less chance of a crash this time around. But with little mainstream usage as a form of payment and global uncertainty clouding financial markets, bitcoin is still far from a safe bet, analysts said. Tom Wilson and Anna Irrera of Reuters report. (for subscribers)

The 2020 Lipper fund manager awards (for everyone)

Three top dividend stock picks from the portfolio of an award-winning fund manager

Three small-cap stock picks from Mawer’s $2.5-billion fund manager Jeff Mo

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Are bonds done? Not according to these award-winning fixed income fund managers who are generating strong returns this year

Top REIT picks of award-winning fund managers as industrial real estate becomes a COVID-era investment darling

The full list of the 2020 Lipper Fund Award mutual fund and ETF winners

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

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Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: CEO invests over $2-million in this large-cap dividend stock

Number Cruncher: Seven North American-listed stocks benefiting from a rebounding energy sector

Number Cruncher: Nine top-performing funds that invest in REIT portfolios

Tesla surge adds to dominance of S&P 500′s biggest players

S&P 500 dividends seen dropping only 1% in 2020

Others (for everyone)

How Airbnb’s CEO succumbed to an IPO he resisted

Globe Advisor

What role should energy have in Canadians’ portfolios?

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation – a powerful tool to help you manage your clients’’ portfolios.

What’s up in the days ahead

David Berman will tell us why expected changes in the bond market’s yield curve suggests profitable times are ahead for investors in Canadian banks.

World market themes for the week ahead

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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Amazon doubles down on Anthropic, completing its planned $4B investment – TechCrunch

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Amazon invested a further $2.75 billion in growing AI power Anthropic on Wednesday, following through on the option it left open last September. The $1.25 billion it invested at the time must be producing results, or perhaps they’ve realized that there are no other horses available to back.

The September deal put $1.25 billion into the company in exchange for a minority stake, and certain tit-for-tat agreements like Anthropic continuing to use AWS for its extensive computation needs.

Amazon reportedly had until the end of the first quarter to decide whether to increase its investment to a maximum of $4 billion, and here we are just before the deadline, and the company has decided to throw in the maximum amount.

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Anthropic’s AI models are one of very few that compete at the highest levels of capability (however you define it) yet are available at scale for enterprises to deploy internally or in user-facing applications. OpenAI’s GPT series and Google’s Gemini are the others up there, but upstarts like Mistral may soon threaten that fragile triumvirate.

Lacking the capability to develop adequate models on their own for whatever reason, companies like Amazon and Microsoft have had to act vicariously through others, primarily OpenAI and Anthropic. The two have reaped immense benefits by allying with one or the other of these moneyed rivals, and as yet have not seen many downsides.

What we can take from Amazon’s decision to invest the maximum after (one must assume) getting a pretty close look at how they make the AI sausage over there is, really, pretty scant.

It makes too much strategic sense for these companies, which possess enormous war chests saved up for exactly this purpose (outspending rivals when they can’t out-innovate them), to pour cash into the AI sector. Right now the AI world is a bit like a roulette table, with OpenAI and Anthropic representing black and red. No one really knows where the ball will land, least of all the companies that couldn’t predict or create this technology themselves. But if your bitter enemy puts their chips down on red, it only makes sense for you to bet on black.

Especially if you can bet on black at a discount — which is what Amazon got here, since it could invest at Anthropic’s September valuation, which is most certainly lower than it is today.

That said, if things were looking sketchy over there — the way they must have looked at Inflection before Microsoft pounced on it — Amazon could have backed out or just invested less than the full supplemental $2.75 billion. But that might have sent a confusing signal no one wants getting out there, least of all existing multibillion-dollar investors.

We know Anthropic has a plan, and this year we’ll find out what Amazon, Apple, Microsoft and other multinational interests think they can do to monetize this supposedly revolutionary technology.

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Canada to tighten foreign investment rules for AI, other sectors

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Canada will require foreign companies to warn the government in advance before making investments or acquisitions in artificial intelligence, quantum computing and space technology, Bloomberg News reported on Tuesday, citing an interview with Innovation Minister Francois-Philippe Champagne.

The move will aid the government in conducting a national-security review before transactions get too far advanced and would-be investors may be restricted in their access to target companies’ user data or other property while the inquiry is taking place, the report said.


Click to play video: 'Canadians concerned about risk of AI generated fraud'
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Canadians concerned about risk of AI generated fraud

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The tougher rules will also apply to investments in critical minerals and potentially other sectors, Champagne said to Bloomberg.

Earlier this month, Champagne said Canada will crack down on foreign investment in the interactive digital media sector to stop state-sponsored actors from endangering national security.

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