Jamie Murray, portfolio manager and head of research at Murray Wealth Group

FOCUS: North American stocks

MARKET OUTLOOK:

We remain constructive on the market as economies re-open and vaccinations roll out. Household finances remain very healthy, and we should see record consumer spending in North America through 2021 to the benefit of retailers, services and leisure providers. Technology continues its secular growth and we continue to like the space in 2021, despite some concerns around the effects of the re-opening on the e-commerce space (our top 4 holdings in our global growth fund are mega-cap technology). We believe the recent deflation of potential bubble activity in emerging tech sectors such as EVs, hydrogen, NFTs/crypto and SPACs is healthy for investor sentiment. Valuations remain elevated given the strong recovery expected in sectors like industrials, retail and consumer services, but we see little risk to mid-term earnings post-reopening.

TOP PICKS:

Netflix (NFLX NASD)

Netflix is a de-risked story following its recent earnings report with the lapping of its massive subscriber adds from the first half of 2020 and lowered expectations for the second quarter of 2021. The company continues to massively outspend its competitors on streaming content, leveraging its global reach over regional competitors. The company is now self-funding with revenue growth of 15 per cent expected for the next two years. Most of this revenue will flow into an ever-expanding content budget or to shareholders in the form of buybacks due to its high incremental margins. Longer term, Netflix will continue to push pricing and expand internationally, which will drive revenue growth for years.

Aritzia (ATZ TSX)

The stars are aligned for Aritzia to meaningfully accelerate its U.S. expansion with a number of high-quality retail assets available at attractive prices. The company has already proved its model in the largest, most competitive cities like New York and Los Angeles, thus we expect continued success across American cities. The company typically sees e-commerce results improve in markets where a store opens, as its omnichannel value proposition is more compelling. That’s important; Aritzia realizes the unlimited shelf space of online stores means it can expand its fashion selection into new verticals with a goal of doubling its SKU count. Net-net, we expect accelerating revenue growth and return on equity, a powerful combination.

Gibson Energy (GEI TSX)

We believe the risk-reward on Gibson is skewed to the upside. Its infrastructure storage assets are underpinned by large oil sands producers, with optionality on future production growth and a base cash flow level that supports the dividend. Cash flow from its marketing division has dried up with a lack of arbitrage opportunities, but commodity prices are historically volatile and this sentiment could change on a dime. Finally, the balance sheet is clean with a debt/EBITDA ratio of 2.8x below its target range, providing opportunities for acquisitions or buybacks.

PAST PICKS: April 17, 2020

Microsoft (MSFT NASD)

• Then: $178.00
• Now: $261.28
• Return: 46%
• Total return: 47%

Intuitive Surgical (ISRG NASD)

• Then: $526.33
• Now: $867.05
• Return: 65%
• Total return: 65%

Airbus SE (EADSY OTC)

• Then: $15.54
• Now: $30.24
• Return: 95%
• Total return: 95%

Total return average: 69%

TWITTER: @murray_wealth

PERSONAL TWITTER: @MWG_Jamie

WEBSITE: murraywealthgroup.com