Daily roundup of research and analysis from The Globe and Mailâ€™s market strategist Scott Barlow
RBC co-head of global energy research Kurt Hallead has published his list of top stock picks in Positioning For A New Era of Growth. The list emphasizes that winners will come from both conventional and renewable energy companies (my emphasis),
â€œEnergy Transition Plays: We believe BKR, SLB, FTI and WG are best positioned to make the initial pivot to the Hydrogen Ecosystem and transition to broad based Energy Technology and Service companies. Legacy Energy Cycle Plays: We continue to favor companies with strong balance sheets and FCF generation. For US listed companies, we would focus on HAL, WHD and WTTR. For Europe, we like HTG given its exposure to North America, and in Canada, we see attractive opportunities in EFX, PD and SCL.â€
Iâ€™ve been reading a lot about hydrogen plays and might write a full column next week. Credit Suisse is very bullish on the global industrial gases sector Air Liquide is their top pick- with a compelling investment thesis.
â€œ@SBarlow_ROB RBC: Top picks in global energy for 2021 feature conventional and renewable playsâ€™ â€“ (research excerpt) Twitter
Credit Suisseâ€™s prominent global equity strategist Andrew Garthwaite has a well-argued view that inflation pressures are set to rise far more than most investors believe,
â€œThe drivers of our higher inflation expectations are: i) our aggregate policy indicator is currently looser than it was at the peak of the GFC and is set to remain abnormally loose for longer â€¦ ii) high money supply growth (which leads inflation by two to three years) implies 4%+ inflation in three yearsâ€™ time; iii) reversing or diminishing dis-inflationary forces (de-globalisation, rising oil prices, less impact from disruptive technology); iv) demographics â€“ not only is labour supply becoming more limited relative to labour demand, but also by 2025 the UN forecasts that those born after 1980 will account for a larger share of the G7 population than those born before â€¦ If US President-elect Joe Bidenâ€™s proposed $15 per hour minimum wage policy is implemented, this could add 5% to US labour costs, on our estimates; v) an extended period of negative real rates (for 5-10 years), above all, seems to be the only sustainable outcome to deal with extreme excess government leverage â€¦ We believe Japanese secular deflation [in the 1990s] is an exception caused by a 80% fall in equity and house prices from peak to trough, a fall in nominal wages (owing to labour regulation that made retrenchment harder) and very reactive policy.â€
Mr. Garthwaite cites commodities, financials and real estate as the primary winners in an inflationary environment.
â€œ@SBarlow_ROB A lot to chew on here from CS: â€œwe continue to believe the US 10- year breakeven will reach c3% by end-2022â€ â€“ (research excerpt) Twitter
The copper price climbed above US$8000 per ton overnight for the first time since 2013. The red metal is benefitting from the economic recovery in Asia but also the transition to electric power,
â€œA growing number of analysts and investors view copperâ€™s recent rally as the first leg of a â€œgreen-tintedâ€ bull market that could carry the metal past the record high of more than $10,000 a tonne that it reached in early 2011â€¦ The rally will receive further fuel, investors say, from a surge in demand for copper to wire the green economy: electric vehicles need around four times more wiring than those with combustion engines, while solar panels and wind farms need as much as five times that needed for fossil fuel power generation, according to industry estimates. Analysts predict a supply crunch unless new mines are discovered and developed quicklyâ€
â€œCopper bulls bet green agenda will push metal on towards record highâ€ â€“ Financial Times (paywall)
Diversion: â€œThe Best Shots From Movies in 2020â€- The Ringer
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