BofA takes a unique approach to its top 10 stock picks. Plus, discount brokerages to start charging customers for mutual fund trades – The Globe and Mail

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BofA Securities analyst Stephen Suttmeier published a report Wednesday using an approach that, while I’ve never seen it done in research, mirrors my own investing methodology.

Mr. Suttmeier is a technical analyst, using price action and trading volume to predict the future course of stock prices. In the report, he starts with BofA’s top 10 investment ideas for the first quarter of 2022, chosen by analysts using fundamental criteria (valuations, profitability, and the like), and applies technical analysis to uncover the selected stocks with the best technical setup now.

The full list of picks is Carrier Global Corp., Citigroup, CNH Industrial N.V., CrowdStrike Holdings Inc., Lamb Weston Holdings Inc., Occidental Petroleum Corp., Rexford Industrial Realty Inc., ViacomCBS Inc. and Xcel Energy Inc. There is one short idea, Autozone Inc.

Mr. Suttmeier chose Carrier, CNH Industrial and Occidental Petroleum as the best short term opportunities. In the first case, he sees strong underlying technical support for the stock at US$51 (it’s currently trading near $52.50) and the potential for a breakout above $57 – the top of its recent trading range.

Agricultural machinery provider CNH Industrial ended Tuesday’s trading at US$16. The stock price recently pushed through previous resistance levels near US$13 and BofA believes that it could break to over US$20 after re-testing US$13.

Occidental Petroleum, currently trading at US$35, bounced higher twice after hitting the US$10 level in 2020. This is called a double bottom which usually signals a floor for the share price. Mr. Suttmeier sees the potential for a break higher to above US$37, and possibly US$40 in the coming weeks.

A couple decades ago, I would jokingly equate technical analysis to astrology, but I have developed more faith in it over time. This is not to say I would ever buy a stock based on price action alone without knowing the company in detail.

BofA’s top 10 ideas list is a good starting point for further research but at this point I don’t know any of the companies well enough to assess the selections. I will point out, however, that combining fundamental and technical analysis has proven a successful trading and investment strategy.

— Scott Barlow, Globe and Mail market strategist

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The Rundown

Discount brokerages to start charging customers for mutual fund trades

Do-it-yourself investors will soon have to pay fees for mutual fund trades on certain discount brokerages, as companies prepare to recoup losses from regulatory changes that will no longer allow online trading platforms to sell mutual funds with embedded charges known as trailing commissions. Clare O’Hara has all the details.

Unprofitable companies and expensive growth stocks lurk in the Manulife dividend funds

The names of the Manulife Dividend Income Fund and its sibling, Manulife Dividend Income Plus Fund, suggest stability: Mature companies generating boatloads of cash and passing it along to shareholders who want regular income from their investments. But the funds’ portfolios suggest something else entirely: A look under the hood reveals many holdings that pay no dividend, are unprofitable, have exceptionally high valuations, or some combination of the three characteristics. David Milstead uncovers what’s going on.

What CIBC’s Benjamin Tal is predicting for stocks, housing, inflation, and interest rates in 2022

Jennifer Dowty speaks with Benjamin Tal, deputy chief economist at CIBC World Markets, for his 2022 perspectives on monetary policy, inflation, the hot housing market and more, as well as his stock market predictions.

Rise in real bond yields may slow but not stop stock market bulls

This month’s sudden spike in inflation-adjusted bond yields has jolted TINA, the thesis that “there is no alternative” to stocks, yet if history is any guide, equities should withstand this rise in real interest rates or even flourish. Sujata Rao and Danilo Masoni of Reuters report.

Also see: Retail investors swoop in when stocks falter

Canadian investors, get ready for more special dividend payouts in the weeks ahead

Investors could see more special dividend payouts in the weeks ahead as companies brimming with cash amid a market runup look to reward their shareholders. But while special dividends are often welcomed as a surprise bonus, some investors warn the one-off cash payments don’t necessarily reflect the long-term health of a company and its growth potential. Brenda Bouw reports.

Macro and technical headwinds accrue for bitcoin

A weak start to 2022 and a host of looming macro and technical headwinds are setting cryptocurrencies up for a rough ride in the weeks to come. The biggest of them, bitcoin, has not managed to hold above the $50,000 mark since its Dec. 4 crash and is down 12% this year. Far from being the hedge against inflation or the uncorrelated alternative asset it was sometimes plugged as, bitcoin has suffered disproportionately, losing 40% from its peak in November, as the Federal Reserve and other major central banks spelt out plans to raise rates and remove monetary stimulus. Some market players are bracing for more market losses to come.

After U.S. bank stock surge, options traders brace for earnings-fuelled volatility

U.S. bank stocks have rallied in recent weeks, but a pick-up in hedging on a key financial sector exchange-traded fund may be a sign that investors are wary of earnings season volatility. Saqib Iqbal Ahmed of Reuters reports.

Also see: Wells Fargo shares race ahead as investors bet on turnaround story

Bridgewater’s Ray Dalio advises being underweight cash due to inflation environment

U.S. investor Ray Dalio, founder of the world’s largest hedge fund, says investors need to be mindful of the current inflationary environment and stop viewing cash as a safe investment. Xie Yu of Reuters reports.

Others (for subscribers)

Here are the stocks you looked up the most on Globe Investor in 2021

‘Value matters’: Stifel unveils its top stock picks for the first quarter of 2022

Acumen Capital picks its top 10 ‘Special Situations Ideas’ for 2022

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

The most accurate Canadian stock analysts of 2021

Wednesday’s Insider Report: Executive buys this restructured REIT yielding 5.3% with a conservative 54% payout ratio

Tuesday’s Insider Report: Director invests over $470,000 in this small-cap energy stock

Scott Barlow’s top links: RBC’s top picks in Canadian REITs

Number Cruncher: Eight Big Pharma firms that stack up on consistently solid earnings

Number Cruncher: Revisiting bank valuations in a rising rate environment

John Heinzl: Explaining the traps in last week’s investing quiz

Globe Advisor

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Ask Globe Investor

Question: As a non-resident investor I was surprised to find myself barred from ownership of Canadian mutual funds. What is the rationale behind this rule? What would be your advice on how to diversify risk in a portfolio now dominated by a small number of individual stocks? – Robert F.

Answer: The rationale is that mutual fund companies aren’t licenced to sell to non-Canadian investors. Neither are U.S. companies licenced to sell in Canada, which is why many big U.S. companies have opened Canadian branches, with their own suite of funds. Examples include Fidelity and Invesco.

The best way to diversify your portfolio in your situation is to buy ETFs, which trade on stock exchanges and are not restricted by the citizenship of an investor.

–Gordon Pape

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