Jamie Murray's Top Picks
Jamie Murray, portfolio manager, Murray Wealth Group
FOCUS: Global equities
We see many data points that indicate markets will return to balance and provide a more constructive investment climate such as falling commodity prices, topping long-term bond yields, normalized price-to-earnings ratios and improving supply chains.
The U.S. Federal Reserve has moved quickly to raise rates and combined with the start of quantitative tightening, future increases will come at a more measured pace. While some sectors like housing and technology will see slowing activity after a flood of capital over the past two years, many industries remain supply constrained and need to play catch up, such as transportation, health care, energy and aerospace. This is leading to bifurcated results with some companies (like oil) posting record results and others (Walmart, Intel) posting their worst quarter in decades. We believe normalization will occur over the next 12 months, which should lower volatility. We continue to see geopolitical risk as the largest driver of market risk. It's always a great unknown but higher now than in the past decade.
In our Global Equity Growth Fund, we remain positioned in long-term growth stocks, with strong balance sheets that can weather an economic slowdown, take market share and emerge stronger in a recovery. Our Income Growth portfolio features high-yielding companies that should be able to increase their yields over the long term. We remain confident in the ability of both funds to deliver strong returns.
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Blackstone is the go-to name in private equity. The company still managed to raise $340 billion dollars over the past year despite the volatility in financial markets. The company has historically done well on its investments and should find a healthy amount of new opportunities with the current market dislocation. The company also has built a formidable position in industrial and U.S. residential real estate that should benefit from strong rental rate increases given deteriorating housing affordability caused by higher interest rates. Operating leverage is strong with revenue doubling over the past five years despite just a 30 per cent increase in headcount. The company pays a variable dividend as its cash flow depends on investment realizations but it should yield 4-5 per cent over time.
BP is a global oil and gas company. After years of mismanagement, we believe the company is finally on the right track to see a re-rating of its shares. Like many of its peers, the company is focused on debt reduction and returning cash to shareholders. In the past year alone, BP has reduced net debt by US$10B to US$22B, repurchased six per cent of shares outstanding and recently announced a 10 per cent dividend increase. The shares trade at a material discount to other supermajors like Exxon, Chevron and Shell but given the strong energy markets, it provides a higher re-rating potential.
The leader in robotic-assisted surgery, Intuitive grew revenue at 12 per cent compounded over the past decade while generating strong free cash flow. The company has over 4,500 surgeons trained to operate its Da Vinci robot and generates the majority of its revenue from recurring instrument sales as more procedures take place. Intuitive has a big head start over competitors, a lead that is only building as new programs from JNJ and Medtronic face development challenges. We think the robotic surgery market is just scratching the surface of its potential and Intuitive will see strong growth from expanding use cases, geographies and procedure volumes.
PAST PICKS: October 25, 2021
Zalando SE ADR (ZLNDY OTC) –
- Then: $46.45
- Now: $15.78
- Return: -66%
- Total Return: -66%
Dollar Tree (DLTR NASD)
- Then: $105.02
- Now: $168.60
- Return: 61%
- Total Return: 61%
Enbridge (ENB TSX) Then: $52.86
- Now: $55.78
- Return: 6%
- Total Return: 11%
Total Return Average: 2%