RBC Capital Markets has made two changes to their top 30 global stock ideas. In the third quarter of 2023, the top 30 list had a total return of -5.0% in USD terms, compared to the MSCI World Index’s decline of 3.4%. The best-performing stocks on the list were Diamondback Energy, Canadian Natural Resources, and CrowdStrike Holdings.
Year-to-date, the top 30 list has delivered a total return of 15.1%, outperforming the benchmark. Since the inception of the quarterly list at the end of 2019, the top 30 has delivered a total return of 41.8%, also outperforming the benchmark.
RBC Capital Markets has made changes to the list in the Industrials and Real Estate sectors. Union Pacific has replaced Canadian Pacific Kansas City as the top idea in Rail. RBC Capital Markets expects Union Pacific’s new CEO, Jim Vena, to drive a turnaround in the company’s operating performance. In the Real Estate sector, Americold Realty Trust has replaced Ventas. RBC Capital Markets believes that Americold is now delivering an improved operating outlook and a more attractive investment outlook.
Other stocks on the top 30 list include Albermarle Corp, Alimentation Couche-Tard, Alnylam Pharmaceuticals, American International Group, Anheuser-Busch InBev, Associated British Foods, Boston Scientific, Constellation Software, Element Fleet Management, Ferrari NV, Heico Corp, Illumina Inc, London Stock Exchange Group, Lonza Group AG, M&T Bank, Mastercard Inc, Meta Platforms, Palo Alto Networks, PG&E Corp, Restaurant Brands International, S&P Global, Siemens Aktiengesellschaft, Telus Corp, Veeva Systems, and Wesco International.
Source: RBC Capital Markets
BMO Capital Markets Paints Unencouraging Picture of Canadian Economy
BMO Capital Markets has published an outlook for the Canadian economy that suggests a struggle ahead. Over the past six months, real GDP has remained unchanged, which is concerning considering the rapid growth of the population. The recent action in the bond market has pushed borrowing rates higher, and the tightening cycle is expected to have a negative impact on real growth in the coming months.
Although employment numbers remain strong, with a 2.5% increase year-over-year, job vacancies are plummeting. In July alone, job vacancies were down 5.8%, and over the past year, they have decreased by 28%.
Canada’s population has seen a significant increase, with almost 1.2 million people added in the year through July 1st. This growth is the largest absolute increase on record, and in percentage terms, matches the largest yearly increase since the post-war boom in the 1950s. This population growth makes it challenging to bring down the economy as a whole.
In per capita terms, Canada’s real GDP is on track to decline by more than 2% year-over-year in the third quarter.
Source: BMO Capital Markets
Morgan Stanley Chief U.S. Equity More Confident Amid Recent Weakness
Morgan Stanley’s chief U.S. equity strategist has been bearish and wrong for most of 2023, but recent weakness has given him more confidence in his outlook. The second-quarter earnings season was disappointing, with day-after-reporting stock performance being one of the poorest in over a decade. Weakening earnings quality and negative year-on-year growth in many industry groups, combined with extended valuations, contributed to this performance.
From an equity standpoint, interest rates have become a more important determinant of performance, as the real rate/equity return correlation has fallen deeper into negative territory. This suggests that investors should pay attention to interest rates when considering equity investments.
So far this year, equity market internals have indicated a late-cycle backdrop, with high-quality factors outperforming. More recently, defensives have shown some signs of improvement, while cyclicals have lagged. Morgan Stanley advises investors to avoid rotating into early-cycle winners and instead focus on a barbell strategy of large-cap defensive growth/quality stocks and late-cycle cyclical winners like Energy and Industrials.
Source: Morgan Stanley
– RBC Capital Markets: Top 30 Global Stock Ideas Update
– BMO Capital Markets: Mapping Canada’s Economic Conditions – BMO Economics
– Marginal Revolution: Sentences to Ponder, Scientific Fraud Edition