UBS AG has ramped up its expectations for commodity prices next year amid firm macroeconomic data emanating from China and as the U.S. Fed prepares to unveil the expected sequel next month to its quantitative easing program. The revised targets may provide some reassurance that a promising year is ahead for Canada's resource heavy TSX.
Expectations of QE2 have already caused the U.S. dollar to weaken and commodity prices to rise in U.S. dollar terms. Two highly likely outcomes of QE2 will be inflation and further exchange rate weakness in real terms, UBS commented in a report titled "Commodities in the grip of monetary policy." Given this risk of sustained U.S. dollar weakness, UBS said the "chances for higher commodity prices on a broad scale have improved considerably" for next year. A limping U.S. dollar is likely to spur investor interest in real assets and wealth protection, and UBS particularly likes the precious metals, since they can be purchased physically.
UBS expects growth to re-accelerate meaningfully in Asia during the first half of 2011, so it suggests investors build up broad commodity exposure at the end of 2010. Its previous advice was to build up longs at the start of 2011.
Upside: UBS price forecast changes are highlighted below:
Cogeco Cable Inc. is undervalued, making for an idea time for investors to revisit the stock, says CIBC World Markets Inc.
Cogeco reported better-than-expected quarterly results this week, with earnings per share of 81 cents surpassing the Street view of 52 cents. The company maintained its guidance for fiscal 2011 and raised its dividend by 21 per cent - an action that suggests any merger and acquisition activity won't come in the near term, said CIBC analyst Robert Bek.
Upside: CIBC hiked its target on Cogeco by $5 to $45 and raised its recommendation to "sector outperformer" from "sector performer."
Methanex Corp. , which reported better-than-expected adjusted earnings per share of about 11 cents this week, is poised to benefit from a tighter methanol market, said Paul D'Amico of TD Newcrest. "Although we are encouraged by the earnings leverage ahead, we believe the current stock price represents fair value so our hold rating is unchanged," said Mr. D'Amico.
Upside: TD Newcrest hiked its target on the stock by $5 to $30.