Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The research team at BMO Capital Markets published their Best of BMO quarterly report featuring the top stock ideas arising from the work of both analysts, strategists and economists.
There are some changes.
U.S. energy analyst Phillip Jungworth replaced Baker Hughes Company with ConocoPhillips. John McNulty moved to Dupont over Axalta Coating Systems and Raj Ray replaced Centamin with Endeavour Mining. G Mining Ventures was picked over Osisko Mining and West Fraser Timber replaces Beacon Roofing Supply. In industrials, Devin Dodge moved to Brrokfield infrastructure form Waste Connections and John Gibson now likes RB Global over CES Energy Solutions. Tamy Chen picked Alimentation Couche-Tard instead of the previous quarter’s Maple Leaf Foods, Simeon Siegel picked Bath and Body Works, replacing Nike, and Darling Ingredients was chosen over Pilgrim’s Pride.
The list as it stands is now Cenovus Energy, ConocoPhillips, NuVista Energy, Calibre Mining Corp., Cameco, Capstone Copper, Constellium, Corteva Agriscience, DuPont, Endeavour Mining, G Mining Ventures Corp., Torex Gold Resources, West Fraser Timber, Brookfield Infrastructure, Canadian Pacific Kansas City Ltd., RB Global, Alimentation Couche-Tard, Bath & Body Works, Camping World Holdings, Darling Ingredients, Domino’s Pizza, Premium Brands Holdings, Stride Inc. and Walmart Inc.
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Scotiabank analyst Jason Bouvier identifies the domestic oil companies that can still generate cash flow with lower oil prices and reiterated top picks,
“In response to the falling price of oil and crack spreads we have re-visited our breakeven analysis and sensitivities. Industry continues to be very healthy (maybe best we have seen in 25+ years), but falling commodity prices are clearly eating into FCF and ultimately shareholder returns. The average 2025 breakeven (sustaining capex + dividends) price of ~$50/bbl implies a >$15/bbl margin of safety at current prices … Although falling commodity prices are not good, breakevens continue to be robust with many companies able to fund their sustaining capital requirements with WTI at $40-$45/bbl and dividends at $45-$50/bbl … Leading the way [on efficiency gains] is likely to be SU, driven by cost wins such as autonomous trucks, reduced maintenance, improved turnaround execution, and enhanced logistics …We continue to like CVE and IMO, but both are hurt by falling cracks and weaker oil prices (higher sensitivity than SU on downstream and similar levels to others on WTI). E&Ps in general have seen an erosion in FCF levels, but unlikely to materially impact activity levels, positioning the royalty companies (PSK and FRU) well. We are also warming up to both MEG and SU”
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Wells Fargo strategist Christopher Harvey made two interesting observations in a research report this morning, one involving more struggles for the U.S. consumer and another about a potential investor “free lunch”,
“Kroger Joins the Chorus. Supermarket operator Kroger’s CEO: “The reduction of excess savings, higher interest rates, and inflation are pressuring customers’ ability to spend... We’re now seeing other [than budget-conscious] customer segments beginning to make changes... Customers are purchasing lower-price cuts of meat, buying less, and focusing on essentials...” These comments (except for the meat part) echo the “income bracket creep” described by Dollar Tree we highlighted last week … 2024′s Low Risk = High Reward. While the Momentum factor has grabbed most of the YTD headlines, we note that Low-Volatility has generated impressive returns”
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Diversion: “Chatbots can persuade people to stop believing in conspiracy theories” – M.I.T. Technology Review