BMO chief strategist Brian Belski emphasized January’s strong relative performance by the TSX,
“January saw the largest monthly outperformance of Canadian equities vs. the US since August 2010 and the best January relative return since 2009. While there was certainly a sell-off in the Technology sector and surge in Energy stocks - which clearly favours Canadian equities - the key underlying trend from our perspective was a valuation correction driven largely by receding earnings expectations. In fact, the top two quintiles composed of the highest valuation stocks in the TSX have seen their 2022 EPS estimates revised lower on average by 1.9% and 1.5%, respectively, over the last three months. On the other hand, the bottom two quintiles - the lowest valuation stocks - have seen their 2022 EPS estimates revised higher on average by 6.3% and 1.5%, respectively, over the last three months. Indeed, the market is struggling with the transition back to a more normalized growth environment which has seen the higher valuation areas of the market struggle as expectations adjust. As such, a stabilization in earnings expectations from the current lofty levels is likely key to a rebound for these names, in our opinion. Overall while there is certainly more room for the “cheaper” valuation trade to continue to outperform, particularly in the near term, we caution investors to remain selective and focus on growth at a reasonable price. "
Mr. Belski published his top picks for growth at a reasonable price stocks at the end of January. The (at the time) outperform rated stocks on the list are Rogers Communications Inc. , Quebecor inc., BRP Inc., Linamar Corp., Magna International Inc., Sleep Country Canada Holdings, Canadian National Resources, Cenovus Energy Inc. Parex Resources Inc., Suncor Energy Inc., Tourmaline Oil Corp., TC Energy Corp., Bank of Nova Scotia, CI Financial, CIBC, Canadian Western Bank, Equitable Group, Manulife Financial, National Bank, Sun Life Financial, Air Canada, CAE, Evertz Technologies Ltd., CGI Inc., Kinaxis Inc., Open Text Corp., B2Gold Corp., Equinox Gold Corp., New Gold Inc., Nutrien Ltd., Teck Resources Ltd., Altagas Ltd., and CT REIT