Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO analyst Jeremy McCrea has a novel method for uncovering value in the domestic oil patch,
“Each year, the best-performing E&P stocks are typically those that had a large multiple expansion. When we discuss multiples, we are referencing an EV/ PDP (Proved Developed Producing) ratio, which essentially describes what an investor believes a company’s undrilled inventory/land is worth (taking a company’s EV less PDP). By looking at only this undrilled land value, we can isolate a key component of a company’s EV and the most arbitrary value from a consensus/investor point of view. The change in ‘perception’ of how investors view/value this undrilled land is historically one of the bigger drivers for multiple change. The best/notable wells each month give an early indication of where this multiple could be changing … Veren (Montney): Veren continues to see strong performance from its 4-well West Gold Creek Montney pad … Baytex (Duvernay): We have seen some impressive Duvernay wells from Paramount lately and based on some technical debriefs, this geological fairway looks to continue up into BTE’s Duvernay land … Obsidian (Bluesky): The “waffle design” wells continue to flow strongly and rank in the top 5 of industry ‘bitumen’ wells - a rather difficult achievement … Surge (Frobisher): Surge continues to show very strong Frobisher wells, with the most recent well topping our chart - the 3-3 well producing an astonishing 633 bbls/d over 31 days. We also highlight Rubellite, Headwater, and Advantage”
***
There has been a lot of talk about Nvidia’s earnings report being a macro rather than micro data point – more important than monthly payroll numbers - because the company has become so massive.
With this is mind, I’ll ignore my usual policy of not featuring individual stocks in this post and relate Citi analyst Atif Malik’s view of Nvidia’s results,
“NVDA reported “beat and raise” results with Jul-Q sales of $30B towards high-end of $29-$30B and Oct-Q guide of $32.5B at the mid-point of $32-33B expectations. Management sounded confident in Blackwell ramp with production in the Oct-Q and several billion sales in the Jan-Q. However, the impact of higher H200/HBM [ previous generation GPUs] mix lowers gross margins in the next two quarters. Net-net, our Jan-Q EPS is unchanged (Street likely comes down on lower gross margins) and we maintain above consensus FY26/27 EPS. We expect the stock to likely remain range bound through the next two quarters before Blackwell driven Y/Y sales and gross margin inflection in the Apr-Q. CES Jan is the next major catalyst for the stock. AI adoption remains in 3rd/4th innings as enterprise AI demand takes off with AI agents. NVDA sees 10-20x more data compute long-term. Maintain buy and $150 TP on consistent ~35x P/E times CY25 EPS”
***
Scotiabank strategist Jean-Michel Gauthier tracks the winning investment strategies on both sides of the border,
“The style leadership is quite different in Canada. Our Top 30 Value portfolio is the sole style in positive territory this month, on the back of solid Financials/Real Estate leadership (two cheapest sectors in Canada). If top ranked Growth, Momentum, and Quality are still outperforming their bottom ranked peers, they’ve been lagging the TSX by a wide margin. Leadership has been a tad more mixed up north, on account of the mix of sectors leading (Gold miners, Financials, Tech, and interest-rate sensitive) … [In the U.S.] our top rank Value names in our SQoRE model are giving back some of their July outperformance as well relative to bottom ranked ones, making it the worst out of our four tracked styles. Bottom Value (i.e. tech) has surged from its July end lows. Growth, Momentum, and Quality are all performing strongly, on a long only and a long/short basis. Quality in particular is benefitting from a more risk-off mood in the market (Staples, Healthcare, Utilities, and Real Estate are the top performing sectors MTD)”
***
Diversion: “Toronto workers have longest commutes in Canada: StatsCan” – CBC
MARKET FACTORS: Three reasons the rich are still getting richer