How to invest for the rise of Gen Z. Plus, the stock picks of award-winning fund managers, and what BMO is predicting for the TSX in 2021 – The Globe and Mail

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BofA Securities recently published a series of reports on the economic and market effects of Generation Z, the cohort born between 1996 and 2016, providing a number of promising investment themes and some truly surprising data points.

Working life is set to begin for those born in the early years of Gen Z, so BofA’s survey of 15,000 people sought to gain insight into changing consumption habits. Gen Z will account for an estimated 27 per cent of global income, or US$33-trillion, by 2030, out-earning Millennials the following year.

The survey results highlighted a demographic group almost constantly online, spending more than 10 hours per day on their phones. Arguably, the best investment opportunity that arises from this are stocks with exposure to online payments – Gen Z prefers to pay by phone over every other method, with credit cards a distant third place.

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Only half of U.S. teens have a driver’s license – a definite cause for concern for automakers – and less than 50 per cent consume alcohol and more than half restrict meat intake in some way.

Media consumption appears to be the sector where the most change is set to occur. Only 25 per cent of Gen Z watch broadcast television ever, compared with 45 per cent for Millennials. Only a quarter of Gen Z watch traditional sports, and that makes the future of broadcast TV even more dire.

More than half of Gen Z reported playing three hours or more of video games per week, and followed eSports. They prefer user generated video content services like TikTok over professional productions available on Netflix and Amazon Prime.

The research report listed a number of stocks set to benefit from all of these trends. Ubisoft Entertainment SA for video gaming and eSports, Ascential PLC for online payments, are two examples.

I used to roll my eyes at these generational change research reports, but I don’t anymore. Yes, the changes take place over long time periods and often the investment ideas aren’t immediately actionable. The analysts can get it wrong, choosing to emphasize the wrong trends. In hindsight, however, the major economic trends predicted as Millennials entered the work force were the rise of social media and streaming content, and as investments, those trends worked out extremely well.

— Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

BRP Inc. (DOO-T) Just last month, the stock was trading at a record higher. However, since Pfizer Inc. released positive clinical trial data for its coronavirus vaccine on Nov. 9, BRP’s share price has tumbled 16 per cent. The recent pullback reflects concerns by investors that once there is a coronavirus vaccine, the heightened demand for BRP’s products will drop off as demand was pulled forward. But the stock is now oversold and pullbacks in the share price may represent buying opportunities, according to our equities analyst Jennifer Dowty, who provides this profile of the company. (for subscribers)

Enthusiast Gaming Holding Inc. (EGLX-T) Shares in the TSX gaming stock have surged over the past week following a quarterly earnings report that blew past analysts’ forecasts. Now, it’s about to make its Nasdaq debut, attracting even more investor attention. Brenda Bouw tells us more. (for subscribers)

The Rundown

BMO predicts big gains ahead for the TSX and S&P 500

BMO Capital Markets’ chief investment strategist Brian Belski, one of the Street’s more reliably bullish prognosticators, doesn’t believe skyrocketing COVID-19 cases and spreading lockdowns will get in the way of the equity market’s upward trajectory. On Thursday, he released his 2021 market outlook, setting a year-end S&P 500 target of 4,200 – a more than 17-per-cent rise from current levels. For the S&P/TSX Composite index, he set a target of 19,500, a rise of more than 15 per cent that would bring it to record highs. Darcy Keith reports on Mr. Belski’s rationale and his new sector recommendations. (for subscribers)

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Gap between vaccine hopes and pandemic reality poses market hazard

As winter approaches, U.S. equity investors are weighing brightening prospects for a COVID-19 vaccine against a resurgence of the pandemic across the United States. Several market strategists have predicted significant gains in U.S. stocks in 2021, as long as Congress passes further fiscal stimulus and a vaccine becomes widely available in the first half. But the path for stocks could be bumpy while investors await those developments, they said. April Joyner of Reuters reports. (for everyone)

Also see: An overlooked key risk for markets: U.S. gridlock will hamper stimulus

These dividend mutual funds for DIY investors stack up well against a popular ETF

It’s worth keeping an open mind about mutual funds. Occasionally, they put up a strong fight against ETFs. Rob Carrick provides some examples. (for subscribers)

Value investing’s return may only be just beginning – and these growth stocks have the most to lose

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Value stocks started to outperform their high-flying growth counterparts earlier this month when Pfizer revealed positive results on its COVID-19 vaccine. Savita Subramanian, U.S. quantitative analyst at Bank of America, believes this rotation away from tech and into stocks trading at a much cheaper price relative to earnings has only just begun, in what would be a massive change from recent market trends. She provided a list of large cap U.S. growth stocks most at risk of steep declines if market leadership changes from growth to value. Scott Barlow reports (for subscribers)

Another bitcoin bubble? This time it’s different, backers hope

With bitcoin surging to the cusp of its 2017 record high, backers are hoping fewer frenzied retail investors means less chance of a crash this time around. But with little mainstream usage as a form of payment and global uncertainty clouding financial markets, bitcoin is still far from a safe bet, analysts said. Tom Wilson and Anna Irrera of Reuters report. (for subscribers)

The 2020 Lipper fund manager awards (for everyone)

Three top dividend stock picks from the portfolio of an award-winning fund manager

Three small-cap stock picks from Mawer’s $2.5-billion fund manager Jeff Mo

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Are bonds done? Not according to these award-winning fixed income fund managers who are generating strong returns this year

Top REIT picks of award-winning fund managers as industrial real estate becomes a COVID-era investment darling

The full list of the 2020 Lipper Fund Award mutual fund and ETF winners

Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

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Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: CEO invests over $2-million in this large-cap dividend stock

Number Cruncher: Seven North American-listed stocks benefiting from a rebounding energy sector

Number Cruncher: Nine top-performing funds that invest in REIT portfolios

Tesla surge adds to dominance of S&P 500′s biggest players

S&P 500 dividends seen dropping only 1% in 2020

Others (for everyone)

How Airbnb’s CEO succumbed to an IPO he resisted

Globe Advisor

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What’s up in the days ahead

David Berman will tell us why expected changes in the bond market’s yield curve suggests profitable times are ahead for investors in Canadian banks.

World market themes for the week ahead

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Compiled by Globe Investor Staff

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