Several Canadian companies feature on RBC analyst’s updated list of top global energy stock ideas

Daily digest of research and analysis by Globe and Mail market strategist Scott Barlow

RBC energy analyst Greg Pardy updated his best insights in the global energy sector,

“In May, the RBC Global Energy Best Ideas list rose 9.0% versus the iShares S&P Global Energy Sector (IXC) ETF up 14.0% and a hybrid benchmark (75% IXC , 25% JXI – iShares Global Utilities ETF) up 11.3. %. Since its inception in February 2013, the RBC Global Energy Best Ideas list is up 137.1% compared to the S&P Global Energy Sector ETF which is up 25.4%”

The stocks listed are ConocoPhillips, Canadian Natural Resources Ltd., Enerplus Corp., Santos Ltd., Tourmaline Oil Corp., ARC Resources Ltd., Range Resources Corp., California Resources Corp., Tamarack Valley Energy Ltd., Ranger Oil Corp., Brigham Minerals Inc., Schlumberger Ltd., Secure Energy Services Inc., Cheniere Energy Inc., Altagas Ltd., Energy Transfer LP, Targa Resources Corp., The AES Corp., Algonquin Power & Utilities Corp., Drax Group PLC and HF Sinclair Corp.

“RBC GLOBAL ENERGY BEST IDEAS LIST” – (table) Twitter

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UK-based Citi strategist Jamie Fahy joins the chorus of bearish views on global risk assets,

“There are signs of slowing inflation momentum. But we don’t think that means the end of rates and equity sell-offs. Yields haven’t peaked — Even when inflation peaks, if inflation’s starting point is well above target, returns can take longer than 12 months to peak This was most evident in 1974 and 1980, even with the economy watching the barrel of oil a recession… the downside is always the path of least resistance. [quantitative tightening] has not yet reached full throttle, and our risk metrics show that a large left tail [bear case scenario based on distribution of outcome analysis] is probable. Global economic data momentum and global earnings revisions are both negative. Our backtests show that these negative regimes exhibit much higher levels of realized volatility, much lower expected returns and, more worryingly, much greater left-wing risk. With central bank placement difficult to conceive in a high inflation environment, we are sellers of rallies rather than buyers of declines.

“Citi: ‘The downside is always the path of least resistance'” – (research excerpt) Twitter

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BMO Chief Economist Doug Porter puts disappointing data on Canada’s GDP growth into context,

“While headline real GDP was weaker than initial estimates for the first quarter at a pace of 3.1%, this masked a continued increase in nominal spending. The deflator having reached an annual rate of 12.2% in the quarter, nominal GDP jumped 15.7% Aside from the savagery of the past two years, this would rank as the fastest nominal growth in 40 years, and was actually stronger than expected (even with the lack of real GDP.) As the chart suggests, nominal GDP therefore not only recouped all of the pandemic-related losses, but it far exceeded the underlying pre-pandemic trend line. In contrast, real GDP rose less than 1% in the first quarter from pre-pandemic levels, so still well below trend.This boom in nominal income has, in turn, spurred all sorts of measures nominal, such as government revenue, corporate profits ises and household incomes. Unfortunately, the split in nominal GDP is increasingly heading towards higher prices rather than higher volumes. For example, over the past four quarters, nominal GDP has increased by 11.9%, split between an 8.7% increase in the price deflator and a 2.9% increase in real GDP. »

“BMO: “With the deflator rising at an annual rate of 12.2% in the quarter, nominal GDP jumped to 15.7%. Aside from the savagery of the past two years, this would constitute the fastest nominal growth in 40 years” – (research excerpt) Twitter

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Derivation: “Canada’s fertility rate hits record low in 2020: StatCan” – CTV

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