June 16, 2017 

Written and compiled by Mark Bunting, Publisher, Capital Ideas Research

MARKETS

We kick things off with a blockbuster deal. Amazon (AMZN-O) is clearly serious about food as it's buying Whole Foods (WFM-N) for $42 a share, a 27% premium to Thursday's close, or $13.7 billion in cash. 

Wall Street was set for a higher start, retreating from previous session’s losses inflicted mainly by weakness in tech shares and investor concern over health of the economy.

U.S. housing starts in May dropped 5.5%, the third straight month of declines and weakest number since September. 

Trading may be more volatile than usual today as June stock and index futures and options expire, otherwise known as quadruple witching.

The TSX ended Thursday's session at a six-month low. 

European shares rose as financial stocks recovered with sentiment helped by a Greek debt deal that further eased political worries in the euro zone.

The Bank of Japan’s (BOJ) decision to leave interest rates unchanged helped the Nikkei 225 index hit a one week high, while pushing the yen lower. The BOJ kept monetary policy steady and upgraded its assessment of private consumption for the first time in six months, signalling its confidence in an export-driven economic recovery that is gaining momentum.

Elsewhere in Asia, markets recorded broad gains.

CURRENCIES

The Canadian dollar is higher by a third of a per cent to $0.7559 U.S. 

The U.S. dollar is slightly lower against a basket of currencies.  

COMMODITIES

Oil is rebounding to $44.82 a barrel but prices have fallen for four straight weeks to a seven-month low, the longest run since 2015. 

Gold is readying at $1,257.50. 

STOCKS THAT MAY MOVE 

Prometic Life Sciences Inc. (PLI-T) is raising $53 million in a bought deal offering through underwriters who are buying 31.3 million shares at $1.70 each.

Capstone Mining Corp. (CS-T) is selling its Kutcho development project to Desert Star Resources Ltd. (DSR-V) for $28.8 million in cash and common shares of Desert Star. Capstone will own nearly 10% of Desert Star's shares. 

Fairfax Financial Holdings Ltd. (FFH-T) sold 3.1 million shares of Tembec Inc. (TMB-T) at an average price of $4.30 a share, representing about 3.1% of the company's shares. Fairfax still holds 14.2% of the company.

Alphabet (GOOGL-O; GOOG-O) The EU is set to fine Google $1 billion for anti-competitive practices. In other words, a drop in the bucket for the tech behemoth. 

Apple (AAPL-O) has hired two television executives from Sony as the company pushes deeper into video content production. 

BHP (BHP-N) The mining giant named successful packaging executive Ken MacKenzie as its chairman, handing him the job of tackling activist shareholder calls to dump its oil business and overhaul the board. 

Nestlé SA is considering selling its U.S. confectionery business, maker of such products as the Butterfinger and Baby Ruth candy bars, which makes about $900 million annually in revenue. This as packaged-food giants struggle to boost growth and accommodate changing consumer tastes.

DuPont (DD-N) and Dow Chemical Co (DOW-N) The companies have won U.S. antitrust approval to merge on condition that the they sell certain crop protection products and other assets. 

Walt Disney (DIS-N) The company celebrates the first anniversary of its $5.5 billion theme park in Shanghai on Friday, a key plank of the entertainment giant's push into the world's second-largest economy Disney's box office takings there have tripled over the last two years and Shanghai Disneyland has seen more than 10 million guests in its first year, setting it on track for faster profits than Disney reaped from parks in Paris and Hong Kong, both loss-making for most of the years they have been open.

CANADIAN ANALYSTS' CALLS

This is an overview of some of today's analyst research. We'll have more details on many of these reports in the next Digest.

INITIATIONS

Otis Gold (OOO-V) PI Financial starts coverage on this exploration company with a mine in Idaho at Buy with a price target of $0.60, which implies more than a double from the current price.

Valeant (VRX-T; VRX-N) Cantor Fitzgerald starts coverage with an Overweight rating.

DHX Media (DHX.B-T) BMO Nesbitt Burns starts coverage with a Market Perform and $7 target. 

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Teck Resources (TECK.B-T; TECK-N) RBC reduces price target to $38 (Canadian) from $39, which implies 77% upside potential return, maintains Outperform. 

"After the updated guidance and lower coal revenue expected in Q2/2017, we have lowered our price target to $38.00 but maintain our Outperform recommendation. We still believe Teck's balance sheet remains strong and we expect significant free cash flow at conservative price scenario." 

Canadian National Railway (CNR-T) CIBC raises the price target to $111 from $105, maintains Neutral rating following the company's investor day. Raymond James boosts the target to $115 from $112, maintains Outperform.

Brookfield Infrastructure Partners (BIP.UN-T; BIP-N) Credit Suisse upgrades to Outperform, lifts target to $44 (U.S.) from $40. 

Enbridge (ENB-T) GMP FirstEnergy reduces the price target to $61.25 from $64, implying a 16% return including the 4% yield, maintains Buy after a company update. 

U.S. ANALYSTS' CALLS

Teva (TEVA-N) Mizuho upgrades to Neutral from Underperform.

Kansas City Southern (KSU-N) Credit Suisse upgrades to Outperform, boosts target to $116 from $90. 

Booz Allen Hamilton (BAH-N) is down 15% pre-market on reports the Department of Justice is probing its accounting. Vertical Research and Raymond James have downgraded the stock. BAH calls itself a management, technology, consulting and engineering company. 

Kroger (KR-N) RBC reduces price target to $34 (U.S.) from $37, which implies 40% upside, reiterates Outperform after the company increased its cost forecast which RBC found "alarming" but says the risk/reward on the grocer's stock remains favourable. J.P. Morgan cuts target to $24 from $34.

Accenture Plc (CAN-N) Morgan Stanley raises target price to $132 from $125 saying that the company is well positioned for better performance in the second half of 2017 after four quarters of constant currency revenue deceleration.

Nike Inc (NKE-N) JP Morgan downgrades to Neutral from  Overweight and cuts target price to $58 from $61 expecting the North America top-line picture to worsen before showing any improvement. Nike yesterday announced job cuts and a reorganization. 

INSIDER SELLING

Kinaxis (KXS-T) This cloud computing company has been a huge winner since going public in 2014 and two two executives of the company have cashed out their holdings, according to Ted Dixon of INK Research. 

On June 8, Sarah Sedgeman, chief knowledge officer, exercised her options and sold 12,500 shares at an average price of $88. She sold the remaining 385 shares in her portfolio the next day, eliminating her ownership position.

On June 6, David Kelly, executive vice-president of professional services, exercised his options and sold 12,500 shares at an average price of slightly more than $88, eliminating his portfolio’s position.

DEALS

Wal-Mart (WMT-N) Not quite a deal of Amazonian proportions but the world's largest retailer is buying Bonobos for $310 million. 

WHAT WE'RE READING

Why Amazon can move higher to $1,100. barrons.com/articles/how-amazon-shares-can-get-to-1-100-1497556141?mod=BOL_hp_highlight_4

The smart money is refusing to buy big tech right now. marketwatch.com/story/the-smart-money-is-refusing-to-buy-big-tech-stocks-now-2017-06-15

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