Jamie Murray, portfolio manager and head of research at The Murray Wealth Group
FOCUS: North American and global equities
MARKET OUTLOOK:
Any slowdown in the U.S. economy from higher interest rates appears to be fading. Gross domestic product (GDP) for the fourth quarter of 2023 grew at a 3.3 per cent pace, according to U.S. Commerce Department data released in late January. As well, real-time measures of GDP indicate that this trend is continuing in the first quarter of 2024, with the Atlanta U.S. Federal Reserve GDPNow tracker indicating a 3.4 per cent expansion based on January data releases.
This pace is well above Wall Street economists’ models. We believe there are several reasons for the strength, starting with a rebounding technology sector, a resilient U.S. housing market and declining inflation. With stocks at all-time highs, some investors may hesitate to put new money to work in the market. Given the tailwinds of lower inflation, increasing transaction activity and anticipated growth in earnings, we believe markets are heading higher. After all, markets at all-time highs are a feature of bull markets.
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TOP PICKS:
3i Group ADR (TGOPY OTCMKTS London)
3i Group is a U.K. private equity company with holdings in 39 investments across the consumer, healthcare and industrial technology sectors. Key to our investment and the company’s future shareholder returns is its largest investment, which is in a retailer named Action. Action is a European low-cost leader with some of the best retail metrics in the world, namely extensive store growth (and opportunity for more), high inventory turnover and strong margins. 3i owns 55 per cent of Action, but has been steadily acquiring further ownership from other shareholders. Its investment in Action represents the majority of its share value (likely ~75 per cent).
AstraZeneca (AZN NASD)
Outside of the GLP-1 stocks (Ely Lilly and Novo), AstraZeneca should have the highest revenue growth rate for pharmaceuticals through 2030 and it trades at a very attractive multiple for those growth prospects. The company has built out a phenomenal oncology division and is a leader in next-generation smart chemotherapy drugs that target malignant cells based on immunologic markers. As well, its rare disease and cardiovascular segments should generate strong cash flow through this period. The company will put forth early results for its own GLP-1 entrant in 2024 through its commercial agreement with Eccogene.
Manulife (MFC TSX)
Manulife is solving the problems of the past decade by selling underperforming assets at a decent price while its core business continues to perform well. Insurance sales in Canada are performing well, while Asia continues to recover from the COVID-19 pandemic. Problematic assets such as long-term care and variable annuity are proving to be saleable at decent multiples which should lead to a higher quality base of business as they are offloaded. Despite the 25 per cent move over the past year, we believe that shares have more upside as it continues to execute its strategy.
PAST PICKS JANUARY 25, 2023
Amazon (AMZN NASD)
Then: US$97.18
Now: US$167.50
Return: 72 per cent
Total Return: 72 per cent
RTX (RTX NYSE)
Then: US$100.01
Now: US$92.00
Return: -8 per cent
Total Return: -6 per cent
Whitecap Resources (WCP TSX)
Then: $11.08
Now: $8.75
Return: -21 per cent
Total Return: -15 per cent
Total Return Average: 21 per cent
DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
---|---|---|---|
AMZN NASD | Y | Y | Y |
RTX NYSE | Y | Y | Y |
WCP TSX | Y | Y | Y |