Bruce Murray's Top Picks: March 8, 2022

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Bruce Murray's Top Picks

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Bruce Murray, CEO and CIO, The Murray Wealth Group

FOCUS: North American growth stocks

MARKET OUTLOOK:

As 2022 arrived, with new COVID shutdowns exacerbating an economy suffering from shortages of many commodities as well as consumer and industrial products, fears of inflation moved beyond “transitory” to something more when the Russian invasion of the Ukraine upped the level of concern significantly. Sanctions on Russia will up global energy and many other commodity prices to painful levels for consumers and perhaps politicians.

The markets will rapidly adjust to this event as we have seen the stocks of energy and other commodity stocks appreciate markedly in the past week. While Canadian consumers face higher prices, Canadian GDP will benefit as our commodity producers will have the opportunity to replace Russian and Belorussian volumes.

Our belief is that markets are entering a range where solid long-term opportunities for purchases have arisen. Industrial stocks look very attractive with opportunities to fill unmet demand at high margins. European defense budgets are going to rise, and we therefore see opportunities for stocks in this sector.

Technology stocks offer very solid long-term opportunities, while prices have come down, the growth outlook has not changed that much. We continue to hold large positions in our Global Growth Fund.

S&P earnings growth is forecast at about 8 per cent in 2022 with energy, Industrials, discretionary and technology outperforming. Inflationary concerns may offset this growth with lower valuations, but we believe this is largely behind us.

Canada is in a good position for rising commodity prices. This happened in the 1970’s with the rise of Japan, in the 2000’s with China and it appears the 2020’s with the rise of India and other emerging nations combined with a need for the commodities required for the move to electrification. Now Putin has thrown in a massive opportunity in energy.

TOP PICKS:

Bruce Murray's Top Picks

Bruce Murray, CEO of The Murray Wealth Group, discusses his top picks: Chemtrade Logistics Inc, Meta, and Linamar.

Chemtrade Logistics Income Fund (CHE.UN TSX)

As stated earlier, we believe commodities will do well. Under new management, CHE is undergoing a turnaround which should be aided by higher activity in the oil patch. The company provides a number of value-added and basic chemicals. Higher sulfuric acid sales to the oil patch may provide upside. At current prices, the units yield 8 per cent and there could be 40-60 per cent upside based on analyst target prices.

Meta (FB NASD)

Has been crushed on their fourth-quarter announcement of lower advertising opportunities with Apple users, viewer losses to TikTok and big expenditures launching Reels and the Metaverse. All this considered, FB still offers advertisers best in class performance. The stock is exceptionally cheap at 12X 2023 EPS for a company growing revenues above 15 per cent p.a.

Linamar (LNR TSX)

Mispriced stock. In Q3 2021, the company grew its content per vehicle globally by 10 per cent. It is well positioned to capture market share in EV’s. Its agriculture division makes combines which will sell well in the North American markets given the higher grain prices following the Ukrainian invasion. We think the stock is worth over $100.