Top virtual reality stock picks as the metaverse expands

view original post

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

BofA Securities chief investment strategist Michael Hartnett published his favourite macroeconomic-based trades as part of his weekly report on investor asset flows, in very succinct form,

“Long US$, long quality/defensives, long oil/energy, long MOVE & VIX [ the bond and equity market volatility indices respectively] , short copper, short SOX, short PE/broker dealers; ‘liquidity’… Long EAFE, long financials, long small cap value; ‘contrarian’ … Long small cap value … Long EM, long China credit, long CRE/CMBS, short Nasdaq, short banks.”

Mr. Hartnett has been increasingly bearish in recent weeks, for added context.

“@SBarlow_ROB BofA ‘s favorite macro trades (Hartnett)” – (research excerpt) Twitter

***

BMO economist Sal Guatieri notes that U.S. consumer prices are rising much faster than wages, a trend that threatens consumption levels,

“It’s rare for U.S. consumer prices to outrun wages, but that’s exactly the case now. If workers can’t catch up, the net impact will be weaker demand, though elevated savings will cushion the blow for many families. The draining of purchasing power likely explains why consumer confidence measures have faded since the spring. The big question now is whether wages will accelerate, and risk fanning a wage-price spiral.”

“@SBarlow_ROB BMO: “It’s rare for U.S. consumer prices to outrun wages, but that’s exactly the case now”” – (research excerpt) Twitter

***

Citi strategist Jamie Fahy published some interesting views on U.S. inflation, bond yields and future growth,

“Red hot inflation increases the risk that the Fed will have to move faster to tighten monetary policy. Political pressures are increasing regarding this. Of course, the paradox is that monetary policy cannot directly constrain supply-side inflation, only indirectly via weakening demand. In essence this is what we believe is being priced in the rates curve. So, do long-term yields move higher on Fed tightening or lower on weaker growth in 2022 and beyond? We think likely the latter. As such, we exit our front-end steepener, but are emboldened in our long USD positions. FX is not trading real yield dynamics, it is trading front-end differentials. On this metric, the Fed is ahead of the ECB and BoJ.”

“@SBarlow_ROB Citi: “the paradox is that monetary policy cannot directly constrain supply-side inflation”” – (research excerpt) Twitter

***

Virtual reality seems like one of those sectors that is always poised to break out and never does. This may change with the new emphasis on the metaverse, and Morgan Stanley has some stock ideas,

“Virtual Reality – Proven and Scaling: The technology is proven and the B2C market is in the early innings of exponential growth. A rising number of B2B use cases has seen emerging private players scale at 8x sales YoY. A number of companies, including Facebook, are looking to dominate much of the VR stack as a Metaverse gateway product … We foresee a base case VR hardware market size of $60bn by 2030 and >$250bn by 2040 with the lion’s share in B2C where the “killer apps” are beginning to emerge … VR is established and the market shares tell a clear story – Facebook is leading in B2C; ByteDance’s recently acquired Pico dominates in Asia. Currently, investors ascribe negligible upside to VR and AR projects – understandably given past precedent. If Apple enters the market in 2022, this will change. We assess the entire supply chain but above all, our analysts see 8 companies with free upside options: Entain, EssilorLuxottica, Samsung SDI, Teamviewer, Ubisoft, Universal Music, Vodafone, Xiaomi.”

“@SBarlow_ROB MS: “stocks with free options’ on Virtual reality, in case the metaverse drives big demand” – (research excerpt) Twitter

***

Column: “REIT yields much less attractive relative to bonds” – Inside the Market

Diversion: “Which coffee chain drink has as much sugar as 2 scoops of ice cream?” – CBC

Tweet of the Day:

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.