Bruce Murray, CEO of The Murray Wealth Group
Focus: North American growth stocks


MARKET OUTLOOK

At The Murray Wealth Group, we believe the outlook for the markets remain constructive overall and investors should continue to hold and invest more at these lower market levels. The global economic picture is still quite bright, with real GDP growth currently forecast at over 3 per cent. This healthy rate of growth, which is being led by the world’s largest economies, will support a bullish market. China’s economy, while slowing under the American tariff war, is still growing at rates of over 5 per cent and will exceed the output of the entire EU this year. We expect a resolution to the U.S.-China trade tensions before Trump leaves the White House. Meanwhile, the U.S. is growing at rates approaching 4 per cent GDP, and Europe and Japan are experiencing growth rates at the higher end of recent years. Canada is expected to slip below 2 per cent for the rest of this decade.

Against this backdrop, the outlook for earnings is strong, but will slow into the 5 to 7 per cent range in 2019 as we annualize the lower tax rates in the U.S.

The globe’s major central banks have all signaled that higher rates will continue to be brought in as we reverse quantitative easing. But with inflationary pressures remaining low and with the market’s reaction over the last six weeks, we’re not overly concerned that there will be a need to squeeze the economy hard enough to cause a recession, at least not in the U.S. and most of Europe.

A number of factors will discourage investment in Canada. The consumer remains over levered and there are concerns of higher taxes and a slowdown in the housing sector (both of which appear inevitable). Lastly, internal trade barriers will confine the exporting of oil, Canada’s largest export.

We continue to find lots of stocks with solid growth prospects available at attractive prices.

TOP PICKS

Bruce Murray's Top Picks

Bruce Murray of The Murray Wealth Group shares his top picks: Alphabet, Qualcomm and Linamar.

ALPHABET (GOOGL.O)
Added to position on Oct. 12 at $1095.40.

Google is the largest holding in our Global Equity Growth Fund. The company should continue to generate 20 per cent revenue growth through 2020, with growing free cash flow of over $30 billion per year. The company’s demonstrated ability to grow revenue through its core properties give us confidence that growth can remain strong through the next decade and should trade at a higher multiple than 23 times 2019 earnings per share (EPS). Additional growth drivers include Waymo and Google Cloud, two services that could provide billions in annual revenue and remain in early innings of their development.

QUALCOMM (QCOM.O)
We initiated a small position in our Income growth Portfolio on Monday at $54.62.

Qualcomm is wireless semiconductor and equipment market. The company is the major holder of patents for CDMA technology, upon which most cell networks rely. The company was subject to a failed takeover attempt by Broadcom and has been involved in a patent dispute with Apple. We don’t expect a resolution near term, but we believe Qualcomm has a strong case. The company has upside from 5G rollouts over the next decade and has a 4.5 per cent dividend yield well supported through $5 billion of free cash flow every year. The shares trade at 13 times price-to-earnings ratio and we believe they could trade back into the high $60s with a turn in sentiment.

LINAMAR (LNR.TO)
Last added on Aug. 10 at $54.10

Linamar is a global manufacturing company with exposure to the automotive, industrial and agriculture market. The company has an excellent history of growth, with EPS growing from $3.50 in 2013 to $9 this year. Sentiment around the company is very weak with the demise of the auto industry a frequent speculation although Linamar has been diversifying its earnings base (two large acquisitions completed with no equity dilution in recent years) and continues to win market share. The company has also made inroads in the electric vehicle market and further business wins in this sector could bolster confidence. The shares trade at a very attractive multiple of 5 times 2019 EPS with a 14 per cent free cash flow yield.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
GOOG Y Y Y
QCOM Y Y Y
LNR Y Y Y

 

PAST PICKS: DEC. 11, 2017

Bruce Murray's Past Picks

Bruce Murray of The Murray Wealth Group reviews his past picks: AstraZeneca, Enbridge Income Fund and Medical Facilities.

ASTRAZENECA (AZN.N) 

We continue to hold pharma stocks doing well. AstraZeneca has had several FDA approvals over the past year, which will reinforce sales. Its yield is still an attractive 3.5 per cent.

  • Then: $33.12
  • Now: $41.40
  • Return: 25%
  • Total return: 30%

ENBRIDGE INCOME FUND (ENF.TO)
Acquired by Enbridge on Nov. 12, 2018 for 0.70 shares.

Enbridge Income Fund consolidated into its parent company. Enbridge remains depressed, trading at $42 to $43 with a 6.3 per cent dividend yield and management still indicating a 10 per cent yearly dividend growth projection for the next two to three years. The market price indicates some skepticism though, which is an opportunity.

  • Then: $29.24
  • Now: $42.61
  • Return: 5%
  • Total return: 12%

MEDICAL FACILITIES (DR.TO)

An undiscovered company with a dividend yield of 7.8 per cent, Medical Facilities operates surgical clinics in several U.S. states. It’s looking to grow by acquiring more facilities, largely from retiring doctors selling their practices.

  • Then: $13.54
  • Now: $15.29
  • Return: 13%
  • Total return: 21%

Total return average: 21%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
AZN Y Y Y
ENF Y Y Y
DR Y Y Y

 

FUND PROFILE

MWG Global Equity Growth Fund
Performance as of: Oct. 31, 2018

  • 1 month: -8.4% fund, -6.84% index
  • 1 year: 3.75% fund, 7.34% index
  • 3 year: 8.92% fund, 12.88% index

Index: S&P 500 TR.
Returns provided are net of fees.

TOP 5 HOLDINGS AND WEIGHTINGS

  1. Alphabet: 5.72%
  2. TD Bank: 4.36%
  3. Facebook: 4.21%
  4. Microsoft: 4.09%
  5. Celgene: 3.89%

WEBSITE: tmwg.com