Jamie Murray, portfolio manager and head of research at the Murray Wealth Group
Focus: North American equities
MARKET OUTLOOK
The investment adage “time in the market is more important than timing the market," proved prescient in June as another shopworn statement, “Sell in May and go away,” would have resulted in missing out on a strong rebound in equities. It was an impressive performance following a dismal May that included an unsuccessful Uber IPO, technology antitrust concerns, heightened trade concerns and a breakdown in technical indicators. We think the market can grind higher, with no major headwinds set to derail the economy and remain fully invested in equities in both of our funds.
TOP PICKS
ALPHABET (GOOG.O)
Sometimes the market can overthink a stock. We believe that is what is happening with Alphabet, a company supremely positioned in internet media through its search engine, YouTube and Google Maps. Investors instead focus on small percentage misses in short-term growth and margin metrics as well as ongoing antitrust overhangs. Antitrust has circled this company for a decade and likely will for a decade more. That hasn’t stopped Alphabet from tripling its share price when looking at its pre-Financial Crisis price. The company has a very solid earnings stream, revenue and free cash flow growth of 20 per cent and a US$100-billion war chest. On a valuation basis, it trades below most consumer staples companies despite growing five times as fast.
ELI LILLY (LLY.N)
The pharmaceutical company has a broad portfolio of existing drugs and a full pipeline, with a couple of potential blockbuster drugs in diabetes and cardiovascular disease although recent drug trial results have lowered expectations, creating a nice entry point. The company will have strong earnings growth compared to the group and if its major drug trials are successful, Eli Lilly would have a runway of growth ahead for the decade. The shares trade at a premium to the market due to the company’s better growth prospects. It will need to deliver on its pipeline to maintain its valuation.
CHEMTRADE LOGISTICS (CHE_u.TO)
Chemtrade appears to have a path to lower leverage with solid end markets for its chemicals and better operational execution. The company’s balance sheet took a hit when a legacy lawsuit turned out to be much more problematic than initially expected, costing the company upwards of $100M. We think this is fully reflected and with a couple of years of good execution, there is big upside to the stock as leverage is reduced and balance sheet optionality improves. The shares yield 12% and would likely trade closer to an 8% yield with an improved balance sheet.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GOOG | Y | Y | Y |
| LLY | Y | Y | Y |
| CHE-U | Y | Y | Y |
PAST PICKS: MAY 4, 2018
TELEFLEX (TFX.N)
- Then: $271.09
- Now: $332.73
- Return: 23%
- Total return: 24%
ROYAL CARIBBEAN CRUISES (RCL.N)
- Then: $107.36
- Now: $111.89
- Return: 4%
- Total return: 7%
BROADCOM (AVGO.O)
- Then: $230.52
- Now: $274.96
- Return: 19%
- Total return: 25%
Total return average: 19%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TFX | Y | Y | Y |
| RCL | Y | Y | Y |
| AVGO | Y | Y | Y |
WEBSITE: https://murraywealthgroup.com/
LINKEDIN: The Murray Wealth Group
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