TSX:BMO - Post Discussion
Post by
zack50 on Feb 18, 2022 8:45am
The 3 "Fs"... Fed-Fundamentals-Flow
Scotia Capital analyst Meny Grauman remains “very bullish” on Canadian bank stocks “based on three factors: the Fed, Fundamentals and Flows.” In research note previewing first-quarter earnings season for the sector titled The Three ‘Fs’ of Bank Investing, he explained:
The Fed: First and foremost we start with the macro environment that continues to be favorable for banks. Above-trend GDP growth, a benign credit environment, a still strong domestic mortgage market, and the clear prospect of rising rates are all positives for the shares.
Fundamentals: The banks may be trading at the high end of their historical trading range based on forward consensus P/E multiples, but we continue to believe that earnings estimates have room to move higher both this year and next year.
Flows: Finally, we highlight the impact of fund flows, which in our view is another factor keeping the rally in Canadian bank stocks going and keeping a floor under valuations. As investors increasingly anticipate rising rates on both sides of the border we are seeing a clear shift from growth stocks, especially technology stocks, into value stocks like banks.”
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