Canaccord Genuity Morning Coffee on Portfolio Strategy: Looking Up
Tweet Send to a Friend
Canaccord Genuity Morning Coffee on Portfolio Strategy: Looking up.
In Canaccord Genuity U.S. Portfolio Strategist Tony Dwyer’s most recent publication, he notes that what drives his longer-term fundamental equity market opinion is the direction of earnings, which is driven by economic activity and whether companies have access to money in order to grow. Dwyer says recessions happen when companies need money and don’t have any access to it, and therefore have to cut back production, employment and inventories. He remains fundamentally bullish because Corporate America has historic access to money in order to grow and that is VERY different than prior periods when he adopted a negative market opinion. In Dwyer’s opinion, there are basically three ways companies get money to grow. They can: 1) earn it; 2) borrow it from a bank; and/or 3) get it from investors, usually through the credit markets. The trend of all three is showing GREATER access to money: 1) Earnings and free cash flow continue to reach new highs. Despite the fear of weaker EPS going into Q1/12, Top and bottom-line earnings again surprised to the upside with S&P 500 operating EPS up 8.1% vs. the year earlier period. On April 1, this was only expected to be up 3.2%; 2) Bank lending standards and loan demand continue to improve. While the fear of a meltdown in Europe and slower economic growth in China weighs on investor minds, it is important to remember that in the U.S. bank lending has benefited from the yield curve remaining historically steep, which has allowed for easier lending standards and lower funding costs; and 3) Corporate credit new issuance hit record in Q1/12. Despite the record corporate credit new issuance, spread of Investment Grade and High Yield debt to the 10-year U.S. Treasury yield continues to stay around historic mean despite the drop to a new low yield for the 10-year U.S. Treasury. In addition, Moody’s BAA Corporate Yield Index remains near a historic low despite the recent uptick. Dwyer notes that the need for duration and yield by the pension funds continues to drive strong demand for corporate credit, and is giving companies the needed funds to grow, increase dividends, or buy back stock.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
In Canaccord Genuity U.S. Portfolio Strategist Tony Dwyer’s most recent publication, he notes that what drives his longer-term fundamental equity market opinion is the direction of earnings, which is driven by economic activity and whether companies have access to money in order to grow. Dwyer says recessions happen when companies need money and don’t have any access to it, and therefore have to cut back production, employment and inventories. He remains fundamentally bullish because Corporate America has historic access to money in order to grow and that is VERY different than prior periods when he adopted a negative market opinion. In Dwyer’s opinion, there are basically three ways companies get money to grow. They can: 1) earn it; 2) borrow it from a bank; and/or 3) get it from investors, usually through the credit markets. The trend of all three is showing GREATER access to money: 1) Earnings and free cash flow continue to reach new highs. Despite the fear of weaker EPS going into Q1/12, Top and bottom-line earnings again surprised to the upside with S&P 500 operating EPS up 8.1% vs. the year earlier period. On April 1, this was only expected to be up 3.2%; 2) Bank lending standards and loan demand continue to improve. While the fear of a meltdown in Europe and slower economic growth in China weighs on investor minds, it is important to remember that in the U.S. bank lending has benefited from the yield curve remaining historically steep, which has allowed for easier lending standards and lower funding costs; and 3) Corporate credit new issuance hit record in Q1/12. Despite the record corporate credit new issuance, spread of Investment Grade and High Yield debt to the 10-year U.S. Treasury yield continues to stay around historic mean despite the drop to a new low yield for the 10-year U.S. Treasury. In addition, Moody’s BAA Corporate Yield Index remains near a historic low despite the recent uptick. Dwyer notes that the need for duration and yield by the pension funds continues to drive strong demand for corporate credit, and is giving companies the needed funds to grow, increase dividends, or buy back stock.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
You May Also Be Interested In
- Bulls and Bears Do Battle in Aeropostale (ARO); Turnaround Intact?
- Jefferies Lifts Numbers on Diana Shipping (DSX) Post Q1
- Needham & Company Lifts Numbers on Marvell (MRVL) on Solid Results
Create E-mail Alert Related Categories
Analyst Comments, Economic Data, Trader TalkRelated Entities
Standard & Poor's, Dividend, Earnings
Login with Facebook
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
