Jamie Murray, head of research at the Murray Wealth Group

Focus: North American equities

MARKET OUTLOOK

Equity markets have rebounded strongly from their lows in December and many market indicators have returned to levels that accommodate further gains. Interest rates have declined sharply and the Federal Reserve is moving to pause its rate hike cycle, commodity prices are low and inflation is non-existent. The volatility index has declined back into the mid-teens which indicates normal expectations of volatility going forward. Earnings estimates have fallen in coincident with the fourth quarter sell-off and conservative company guidance is setting the stage for earnings to beat expectations. We remain bullish on the prospects for U.S. equities.

TOP PICKS

ARITZIA (ATZ.TO)

Aritzia is a Canadian fashion retailer with 67 stores in Canada and 24 stores in the United States. The company designs and sells in-house brands which somewhat insulates from fashion obsolescence as it can pivot towards fashion trends. The company has a long runway of growth in the U.S. and we believe it has a strong competitive advantage with its proven design expertise, high quality location base and strong information systems. The company is repurchasing six per cent of its shares out as its controlling shareholder leaves the position. While a temporary overhang, the removal of a large selling shareholder removes the risk and should benefit the shares moving forward.

SPIN MASTER (TOY.TO)

Spin Master is a high growth toy and entertainment company. The company is extremely innovative with unique product lines and has a very entrepreneurial culture. The whole toy industry is in disarray following the Toys R US bankruptcy in the U.S. however it should start to normalize in 2019 with other retailers like Walmart and Target picking up slack. The company is also managing through declines in some key products however its 2019 product portfolio should cause some re-rating in the shares. We believe this is a compelling entry into a premier company.

NETFLIX (NFLX.O)

Netflix continues to generate content at an astounding rate. Users should value an increasing abundance of content which provides for incremental price increases while attracting new users. We have seen traditional media companies already fail at building an over-the-top delivery and only a handful of companies can compete with Netflix (such as Disney, US Cable, Amazon and Google). In two to three years Netflix should reach breakeven on a cash flow perspective, at which point a tsunami of free cash flow should start to pour in. Netflix still has many other growth avenues unexplored such as gaming, social, interactive and music.

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ATZ Y N Y
TOY Y N Y
NFLX Y N Y

PAST PICKS: DEC. 27, 2018

NIKE (NKE.N)

  • Then: $73.67
  • Now: $85.80
  • Return: 16%
  • Total return: 16%

APPLE (AAPL.O)

  • Then: $156.15
  • Now: $174.33
  • Return: 12%
  • Total return: 12%

BP (BP.N)

  • Then: $37.73
  • Now: $42.52
  • Return: 13%
  • Total return: 14%

Total return average: 14%

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
NKE Y N Y
AAPL Y N Y
BP Y N Y

FUND PROFILE

Global Growth Funds

Performance as of: Jan. 31, 2019

1 month: 8.8% fund, 8.7% index

1 year: 6.1% fund, 0.5% index

3 years: 12.4% fund, 10.8% index

INDEX: TSX

Returns are net of fees, distributions and annualized.

TOP 5 HOLDINGS

  1. Alphabet: 6.0%
  2. Facebook: 4.7%
  3. TD Bank: 4.4%
  4. Celgene: 4.3%
  5. Constellation Brands: 4.1%

WEBSITE: murraywealthgroup.com