Daily roundup of research aqnd analysis from The Globe and Mail’s market strategist Scott Barlow
“Element Fleet is our No. 1 high-conviction best idea. We still view the shares as undervalued, despite better share price performance in Q2/24. Over the next five years, we think EFN can generate an almost +15% EPS CAGR, +25% dividend CAGR, and ~3% share buybacks per year, which would see ROE increase from 15% to almost 25%. With the shares trading at 15.5x P/E and 7.6% FCF yield , we view EFN as undervalued … No. 2 best idea: Brookfield Asset Management .
“Per Bloomberg, only 44% of SPX firms have beat sales consensus, well below the typical ~60% rate … Small caps: Similar to large-caps, SML firms are also beating less frequently on the topline … EPS beat rates for both SML and SPX firms are in-line with recent history. • Per Factset, SPX y/y EPS growth to date is +9.8% compared to the +8.9% forecast at the start of earnings season. SPX earnings are coming in 4-5% ahead of consensus, below the 6.5% average over the past year and the 8.
Diageo PLC, owners of the Johnnie Walker whiskey, Guinness, Tanqueray and Captain Morgan brands, among many others in the alcohol industry, continued the trend of weak consumer spending with disappointing quarterly numbers reported overnight.BofA Securities equity and quant strategist Ohsung Kwon thinks it’s show me the money time for AI-exposed stocks,
“inflation started the rotation, so it’s inflation that could end the rotation. As long as inflation and rates are in check, we believe the setup remains favorable for cyclicals. Our call on cyclicals is also predicated on growth holding up. But even if growth concerns escalate, potential de-grossing will be more negative for Tech than cyclicals, in our view. People would sell what they own and Momentum stocks are ~30% overweight by long onlies.
The consumer-related comments from Wells Fargo above, combined with a U.S. PMI Manufacturing survey that remains below 50 , makes me suspicious about economic growth holding up.“Rate sensitive sectors of the equity market have been under assault since the tightening cycle began in early 2022. Since January of that year , TSX real estate is down roughly 20%, while utilities are off more than 10%. The broad index has managed to advance nearly 10% over that period.
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