Top stock picks benefitting from ESG investment inflows and the global economic recovery

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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Morgan Stanley’s monthly update on electric vehicle sales contains promising details,

“Global BEV [battery electric vehicle] sales (exc. hybrids and plug ins): 272,054, up 226% year-over-year, and down 27% vs last month’s 373,974 BEV sales … Ford sold 2,550 units of the Mustang Mach E globally in the month of April and it was the 4th highest selling BEV model in the US, behind Tesla’s MY and M3 and the Chevrolet Bolt … US BEV Sales: Up 276% Y/Y to 29,314 in Apr-21 vs 7,796 last year and 53,125 last month.”

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This sounds like electric vehicles are taking over the market, but, even with the sharp year-over-year growth, they still account for less than 2.0 per cent of total U.S. vehicle sales.

“@SBarlow_ROB Electric vehicle sales up big yoy but still account for less than 2% of U.S. total vehicle sales (MS)” –(research excerpt) Twitter

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The rollout of 5G telecommunications offers opportunity in semiconductor stocks according to BofA Securities,

“We examine the state of the 5G infra and handset market and highlight top vendors – MRVL (Marvell), ADI (Analog Devices), QCOM (Qualcomm), TER (Teradyne), QRVO (Qorvo), AVGO (Broadcom) – as attractive catch-up candidates in end-demand and stock performance. In our view: (1) we are still early in the 5G cycle, with less than half of base stations and only 20% of smartphones upgraded; (2) 5G could be the ultimate “reopening” theme, as consumers venture out and demand faster cellular broadband coverage and capacity versus last year’s dependence on Wi-Fi; (3) broader-based demand with US/Europe picking up the slack left by China slowdowns; (4) catch-up potential in 5G-exposed stocks that are up only 5% YTD on average, well below the 12% YTD return in the SOX [semiconductor stock] index”

“@SBarlow_ROB BoA likes 5G-exposed semis for the second half of 2021” – (research excerpt) Twitter

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Credit Suisse U.S. quantitative strategist Patrick Palfrey outlined the recent underperformance of ESG portfolios,

“Since Pfizer’s vaccine announcement (Nov. 9), more cyclical sectors such as Financials, Energy and Discretionary have outperformed, as have lower quality, value-oriented, economically sensitive stocks. Unfortunately, companies with a high ESG score have lagged in this period, following five years of outperformance. This underperformance is the result of ESG’s pronounced high quality bias… While the average ESG stock has underperformed more recently, this is not the case for every name in the high ESG universe. Importantly, our work finds that more economically-sensitive companies within this pool have substantially stronger performance”

Mr. Palfrey provided a 3-member list of economically-sensitive stocks with high ESG ratings to weather the storm. Companies in the list most likely to interest Canadian investors include Cummins Inc., Rockwell Automation Inc., Gap Inc., Morgan Stanley, Applied Materials Inc., and NVIDIA Corp.

“@SBarlow_ROB CS: U.S. cyclical stocks with high ESG scores” – (full table) Twitter

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Newsletter: “Retail sector most at risk as wage inflation looms” – Globe Investor

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Diversion: “A Kurt Cobain self-portrait is going up for auction. And it won’t go cheap.” – A Journal of Musical Things

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