Jefferies’ 22 highest conviction U.S. stock picks

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

BMO senior economist Robert Kavcic notes that equity yields are higher than bond yields by the largest margin in 60 years,

“One striking consequence of this downturn has been the dive in long-term bond yields below equity dividend yields in North America. In fact, the spread between the dividend yield on the S&P 500 and the 10-year Treasury yield is currently 1.5 ppts (percentage points) —based on month-end data, that’s the widest spread since the late-1950s. In Canada, the dividend yield on the TSX is an even chunkier 3 ppts above 10-year GoCs, with some traditional dividend stalwarts yielding more than 5%. Thinking of it another way (and this is an illustration, not a recommendation), an investor could borrow at today’s mortgage rates to buy a basket of Canadian dividend stocks, and be roughly cash-flow neutral even before any tax advantages are considered … [But] Economic risk and ultra-low bond yields make the current dividend yield cloudy as a macro signal for investors. This is probably an environment where choosing carefully (for payout sustainability and growth) is the best approach”

“@SBarlow_ROB BMO: "the spread between the dividend yield on the S&P 500 and the 10-year Treasury yield is currently 1.5 ppts—based on month-end data, that’s the widest spread since the late-1950s. In Canada ... “ – (research excerpt) Twitter

“High and higher: Why lofty stock valuations are set to keep going up” – Barlow, Inside the Market (March 22)

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Citi U.S. equity strategist Tobias Levkovich’s weekly report covers the issues he believes are most important for investors now,

“Our fundamental concerns underscore tighter [commercial and industrial] lending standards (which lead business activity by nine months), 38 million lost jobs that will take a long time to recover, elections related uncertainty plus unpredictable health issues. The good news on COVID-19 treatments and potential vaccines is very much welcome but could be fully priced in since timing for plentiful dosage supplies (if all goes well) could be nine months or more away. By August, robust supplemental unemployment benefits will end (and are unlikely to be renewed so generously) … We submit that the significant concentration in IT, Media & Entertainment, Internet Retailing may be a problem, not a benefit, at this juncture since it accounts for nearly 40% of the index market cap which historically is unsustainable. With too many small companies shutting their doors permanently and millions not getting back to work quickly, even subscription based models are at risk of missing estimates.”

“@SBarlow_ROB C: "the significant concentration in IT, Media & Entertainment, Internet Retailing may be a problem not a benefit at this juncture" – (research excerpt) Twitter

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Jefferies Research has updated its top stock picks list which they call “Franchise Pick List”. The team describe the criteria as “highest-conviction, buy-rated stocks within US Research. Special consideration is given to stocks with differentiated analysis.”

In alphabetical order, the stocks are Activision Blizzard, Bio-Rad labs, Biomarin Pharmaceuticals , Blackstone Group A, Casey’s General , Chevron Corp., Eldorado Resorts , Gentex Corp., Alphabet Inc. , Haemonetics Corp., Hasbro Inc., Huntsman Corp., Kennametal Inc., Lowe’s Cos, Martin Marietta Metals , Marathon Petroleum, Motorola Solutions , Rio Tinto, Ringcentral A, Raytheon Technologies , TJX Co.s and Texas Instruments."

“@SBarlow_ROB Jefferies' "Franchise Top Picks" – (table) Twitter

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Diversion: “Bill Murray on Golfing With Michael Jordan, ‘Ghostbusters’ Stories, Improv in Chicago, and Comparing Sports to Moviemaking” – The Ringer (podcast)

Tweet of the Day: “@jsblokland ICYMI! 10-year rolling #commodity returns are the lowest since 1924!” – Twitter

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