Featured Research

Energy

2022 year-end engineering price forecasts: Five key takeaways for investors
Key reserve evaluators have substantially upped their year-end 2022 commodity price forecasts. Given the large price increases across the board in both oil and gas, we should see higher reserve values and reserve volumes that will lead to better F&D figures and ultimately profitability figures. This should show how the sector has become much more profitable than years past — a legacy that likely still hampers new investors coming into the sector. 

Financial Services

Banking 2023 outlook
With many of our positive catalysts from 2021-2022 played out, we believe 2023 will be volatile for bank stocks, with the best performers being those who can withstand headwinds for the industry. We continue to generally see greater upside potential in smaller banks, largely driven by stronger organic loan growth potential, less regulatory risk, the potential for M&A activity and lower valuation levels.

Personal lines outlook 2023
We believe most personal lines insurers should be positioned to report improving results over the next 24 months, reflecting substantial rate increases that we expect to continue through 2023. We expect the hard reinsurance market to result in increased retentions and premium costs for personal lines insurers over the next 18 months. We believe regional personal lines insurers with unfavorable loss history could be the most affected at renewals.

Healthcare

Biotech sector outlook 2023: Natural selection as sector evolves for new macro world
The biotech sector during 2022 experienced a continuation of the difficult market conditions that defined 2021. While the market better digested the excesses of the prior liquidity cycle during 2022, remnants of poorly executed clinical development continued to negatively impact stock movement, and made the overall ‘hit rate’ of active biotech investing the worst period in the past 15 years. As we look ahead to 2023, we see several larger biopharma companies as ‘when’ not ‘if’ mergers, and think that the incremental uptick in smaller cap deal-making will continue to strengthen. We expect better access to capital markets during 2023, but would expect the pace of activity to be measured with selectivity on asset quality.

2023 outlook for healthcare services, medical technology, diagnostics, and specialty pharmaceuticals
Our report examines the year that was and, more importantly, the year that will be in 2023 as it pertains to our non-biotech healthcare coverage universe. For 2023, we expect select providers to benefit from improvements in labor headwinds, but the pace of recovery is to be determined. Managed care now faces tough comparable results, and we see the potential for policy headwinds to be greater in 2023. For products businesses we expect supply chain challenges to improve but perhaps not totally normalize.

Industrial

Infrastructure & Construction – What’s in Store for 2023?
Broadly speaking, our infrastructure and construction stocks are entering a possible recession (or soft landing) in generally good shape. They have diversified their revenue streams by discipline, end-market and geography, and many can count on stronger balance sheets to see them through tougher times. Our outlook offers high conviction ideas for each of the sub-groups we cover, including construction, engineering and machinery.

Institutional Equity Strategy

ESG Monthly: ESG‐focused exchange traded funds ring in the new year with peaks in assets under management
Our ESG monthlies examine the ESG‐ and sustainability‐related content of our equity research, including public policy issues, national regulatory frameworks and all company‐specific ESG-related insights. In addition, the reports detail the top ESG stock picks from our analysts and our equity strategy team.

The big book of correlations: What data matters, what does not and how the answer changes over time
Our comprehensive report analyzes the correlation of various economic and financial market variables to equity indexes, sectors and bonds over the past 25 years. The goal is to provide fundamental investors with insight into the relative importance of different economic and financial market data in predicting movements in U.S. and global benchmark equity and bond indexes over time, as well as relative performance of sectors and styles under various economic conditions.

2022 Census Bureau data suggests interstate population movements continued at 2X normal levels in 2022, while immigration fully recovered. Population growth remains sub-par.
Our report parses the data from the New Vintage Population Estimates for 2022. Population movements between states was about twice as severe, annually, in mid-2020 to mid-2022 than the average of 2010-2019. Essentially, COVID largely accelerated pre-existing trends of migration between states. Population growth accelerated across the southern U.S., while most of the Mountain West states saw lower inflow.

Public Policy

Global trends: Let’s take a look ahead, approaching the one‐year mark of the Russia‐Ukraine war
Our visual report looks at where we are, what we’re watching in the year ahead, potential scenarios for how the conflict unfolds from here, and how the war has impacted the global economic/market outlook. We also detail our current path forward projections, with the most likely scenario a prolonged conflict with spikes in volatility.

Do we need to worry about the debt limit?
Republicans, especially in the House, want fiscal reforms. They believe D.C. is broken, and voters have elected them to reduce government spending, reform entitlements and reduce the national debt. A counterargument to the brinkmanship is the potential for the House Democrats to pick off a handful of Republican votes and pass a clean debt limit increase, or the Biden Administration ignoring the debt limit and claiming the constitution requires the payment of the debt.

Healthcare policy 2023: Like 2022, but flipped on its head
Our report provides a fairly comprehensive overview of what we expect in 2023 and a recap of what occurred in 2022. While 2022 brought the most substantive legislative actions in healthcare since the Affordable Care Act, we expect 2023 to be largely the opposite of 2022 as the focus transitions to regulatory actions with not much expected from a politically divided Congress.

Real Estate

Canadian real estate 2023 outlook – pricing dislocation provides opportunity
We expect 2023 may provide a relatively better backdrop for the Canadian REIT sector to generate positive total returns, supported by a recovery in P/AFFO and P/NAV multiples. The gap between unit prices and underlying property values has widened in 2022, as Canadian REIT/REOCs are now trading at a 17% average discount to estimated NAVs. While the public valuation pullback reflects greater near-term economic, interest rate and political risks, recent history suggests to us that these public pricing dislocations to the direct property market can provide fairly good longer-term buy signals.

2023 Outlook: After being cancelled in 2022, REITS positioned for a comeback
In 2022, real estate was a notable underperformer, which we believe was due to excessive fear over the impact of higher interest rates after substantial outperformance in 2021. Ultimately, we expect 10-year Treasury yields to decline meaningfully in 2023 along with inflation as recessionary conditions become more apparent, and for AFFO levels to be more resilient than what investors seem to expect. This combination of sustainable AFFO levels and historically inexpensive valuations makes real estate the best risk to reward in 2023 based on our base-case economic scenario (lower inflation, lower rates, modest recession).

2023 Housing Outlook Hard landing ahead, but next upcycle building steam
A hard landing for housing is still the most likely path forward in 2023, as the Fed’s determination to tame inflation will create a “difficult correction” for home prices. In addition, multiple issues cloud the outlook for apartment operators in 2023. Single-family rental REITs, on the other hand, appear well positioned as demand for rent-ready homes remains very robust entering 2023.

Technology & Communications

Cautiously optimistic on semiconductors
Nearly 85% of SOX index components saw an average 30% estimate cut during the past six months, suggesting the worst is now behind most semiconductor stocks. The year‐to‐date rally in SOX makes sense but raises questions about how much more outperformance is left. History shows semiconductors typically outperform for multiple quarters during cyclical upturns. While valuations look a bit stretched, we expect upward estimate revisions to start in 2H23 as inventories normalize, setting the stage for continued outperformance.

Data infrastructure: Seizing power – reducing energy intensity and CO2/GHG emissions helps the bottom line
Energy efficiency is now top priority for network operators, hyper-scalers and enterprise IT operations. We see “performance-per-watt” as the productivity KPI that will differentiate vendors through optimization of both hardware and software. We also believe the need to reduce energy intensity is an underappreciated trend driving network upgrades and growth for the data infrastructure sector that is largely uncorrelated with the macro-economy.

4Q tech check: Fulfilling prior demand, kicking the can on new spending
Our 4Q conversations with technology channel partners were generally disappointing as the quarter started a funnel of funded projects that were pushed from 3Q that should have resulted in accelerating growth trends. Deals continued to push out of 4Q, and demand for “net new” projects remains soft. Pockets of strength included networking and transactional “hand to mouth” type of projects (desktops, peripherals).

2023 outlook and annual overview of telecom, cable, data centers and content delivery networks
Our annual industry incorporates changes in the sector, including the current state and outlook for each of our areas of coverage, the regulatory landscape and our current view of the future of the subgroups that we cover. We have attempted to balance the report as a basic introduction into the different networks, business models and technologies involved for those new to the sector, while incorporating broader near-term developments and trends the pandemic appears to have permanently brought to the forefront.

Transportation

Global airlines outlook 2023: Will the winter of discontent lead to a spring of hope and renewal?
This report takes a comprehensive look at global trends and important considerations for the passenger airline sector heading into 2023, along with brief company specific profiles. Since June, our forecasts reflect a 1H23 demand contraction without a meaningful pullback in fuel price along with elevated cost pressures from still recovering networks and, in the U.S., significant wage inflation with most airlines in our coverage still generating earnings.

Power only on the rise: What it is, why it matters this downturn, and how to play
This report examines the rise of “Power-Only” networks across our truckload/brokerage coverage as we suspect Power-Only could prove one of the most secular themes within trucking over the next few years. Specifically, this report discusses what we view as the inherent value proposition to shippers and owner operators, unit economics, key players, multi-year industry implications and broader overview of drop trailer business within the for-hire trucking market.