Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
RBC predicts big stock gains in 2021 – but it comes with a catch
RBC Capital Markets’ equity team has issued a 2021 target for the S&P 500 of 4,100, Darcy Keith writes. That would represent a healthy full-year gain of 9 per cent, and no doubt help propel other global market indexes, including Canada’s TSX, to extend their recent record highs. Still, it would translate into a more moderate return than 2020′s 16-per-cent gain, and RBC cautions that there’s likely to be a pullback in equity values before seeing those types of levels – and it may happen soon.
Sector-wise for the S&P 500, RBC is most bullish on financials, materials and energy – stocks which Canada’s stock market is full of. It believes investors should underweight REITs, consumer staples, and communication services. Read more here.
Rob Carrick: Consider this alternative to dividend ETFs – it certainly worked better in 2020
Where dividend investing looks weak is in exchange-traded funds focusing on dividend stocks, Rob Carrick writes. These funds have been blown away by broad market ETFs that track the S&P/TSX Composite Index or similar. This isn’t an indictment of dividend investing or dividend ETFs, but rather a reality check for anyone who believes in the inherent superiority of dividend investing. If you’re after a total return based on both dividends and share-price gains, a broad market ETF may work better than a dividend ETF. Read more here.
Gordon Pape: How investors can take advantage of big changes in REITs
There are some fundamental changes taking place in the REIT industry, and savvy investors can take advantage of them, Gordon Pape writes. That’s the message from Samuel Sahn, managing director of portfolio management and public real estate investments at Hazelview Investments.
While many real estate investment trusts have been hit hard by the economic impact of the pandemic, others are profiting from the shift in consumer behaviour to online shopping in the past year. What this means for REITs is rapidly growing demand for well-located distribution centres. Sahn has identified three Canadian-based REITs that are among the leaders in taking advantage of this trend. Read more here.
More from Gordon Pape: It’s time to take another look at this vehicle manufacturer
As renewable energy stocks soar, some see stretched valuations
Canadian renewable energy stocks have been on a tear for the past 10 months, rising to record highs, David Berman writes. Now investors are faced with a difficult question: How should they navigate a sector that is already reflecting a lot of optimism?
Some observers believe that the recent rally is no obstacle to further gains, as long as investors maintain a longer-term horizon. Scotiabank analyst Justin Strong looked at valuations among Canadian renewable energy stocks by comparing enterprise value (market value of the shares plus debt and cash) with EBITDA (earnings before interest, taxes, depreciation and amortization). He found that the sector looks okay when one compares the current value of the companies with future profits several years ahead. Read more here.
More from David Berman: Can the environmentally conscious buy pipeline shares?
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The dividend investor’s dilemma: Should you use a TFSA, RRSP, RRIF or taxable account?
It’s a logistical question for the well-stocked dividend investor, Rob Carrick writes: What kind of account are you using for the shares you own? Picking the right account is about optimizing your results to reduce tax on your dividend income. Our guide to choosing the right account for dividend investing is Wilmot George, a certified financial planner and vice-president of tax, retirement and estate planning at CI Investments.
He says there’s a general rule that less tax-efficient investments should be held in registered accounts, and more tax-efficient investments in taxable accounts. Where dividend income lies on the efficiency scale depends a lot on your income level. Read more here on the advantages and disadvantages of each type of account.
What investors need to know for the week ahead
Several large companies will be releasing their latest financial results in the week ahead, including Apple, Microsoft, Facebook, Tesla, Metro, Canadian National Railway, Canadian Pacific Railway, Starbucks, McDonald’s, Mastercard, Visa, American Express, Johnson & Johnson, Eli Lilly AT&T, Boeing, Altria, Rogers Communications, American Airlines and Southwest Airlines.
The U.S. Federal Reserve will make its next rate announcement on Wednesday, followed by chairman Jerome Powell’s press briefing. Economic data on tap this week include: Canadian manufacturing sales for December (Monday); U.S. durable goods orders for December (Wednesday); Canada’s building permits plus U.S. wholesale and retail inventories along with new home sales for December (Thursday); Canada’s monthly real GDP for November and U.S. personal spending and income for December (Friday).